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If Delaware passed a law to open up the online sports betting market, it could put the state’s growing online casino product at risk.
Rush Street Interactive’s contract signed last August makes it the exclusive provider of online gaming products for the Delaware Lottery through its BetRivers app.
Speaking with PlayUSA at the National Council of Legislators from Gaming States conference last month, Delaware Lottery Director Helene Keeley explained that the contract centers around online casino, with sports betting tacked on.
“Our RFP was for iGaming with an option for sports,” Keeley said. “We weren’t 100% sure whether we were going to add sports until the vendors came in and presented. We have an iGaming contract with BetRivers.”
This year, the Delaware legislature considered a bill to open up the state’s online sports betting market to six additional operators. While HB365 didn’t advance out of the Appropriations Committee before the legislature adjourned in June, in large part due to lottery opposition, it could come up again next year.
“If I were BetRivers and the state passed this, I would say I want to look at our contract because it’s not feasible for us to operate like this,” Keeley said. “It’s such a drastic change to the way they’re operating now. They can sue us for breach of contract or they can come to us and say they want to renegotiate.”
Sports betting expansion could decrease lottery revenue
The Delaware legislature held a task force last year that determined the state should have an online sports lottery with multiple operators or skins.
The two co-chairs fo the task force, Reps. Franklin Cooke and William Bush, filed HB365. A fiscal report prepared by the Office of the Controller General estimated Delaware Lottery contributions to the general fund to decrease by about $3 million annually under the act.
That’s because the Delaware Lottery would regulate but not get revenue from the additional operators.
“In the constitution, it says that we, the lottery, are supposed to make as much money for the state as possible,” Keeley said. “There was a fiscal note attached to that bill that showed our lottery revenues for the state decrease under that bill that was introduced.”
Opening up the online sports betting market could lessen Delaware Lottery revenue much more substantially if it resulted Rush Street suing for breach of contract. Although, perhaps Rush Street would favor renegotiation to preserve the iGaming partnership.
Delaware online casino revenue in July set a state record for the second month in a row. Through BetRivers, Delaware iGaming revenue has exceeded $5 million the past two months.
Delaware Lottery director says state doesn’t need more operators
Delaware is the second-smallest state by size. Keeley believes a single operator is appropriate.
“We only have a million people in Delaware,” Keeley said. “I don’t think we need other online sports betting options. The model that we have fits into what our constitution says my responsibility is, which is to make the most money for the state as possible.”
There’s potential for Delaware to make more revenue. The task force report cited Eilers & Krejcik projections that the state could generate more than $9 million in annual tax revenue from a competitive market.
FanDuel, DraftKings and BetMGM showed interest at a legislative hearing. However, Keeley notes that they had their chance to go after the lottery license and did not apply.
“They didn’t bid on it,” Keeley said. “How is that fair to let them in now? If Delaware signs a deal with Cannon copier and Lexmark asked a couple questions during the process but didn’t put in a bid, then Lexmark wants to change the law to allow two copier companies to do business with the state rather than one, how is that fair?”
Keeley expects the online sports betting expansion effort to renew when the legislature returns in January.
To make online sports betting expansion work, the legislature must figure out how to allow additional operators while keeping lottery revenues stable and not hurting the state’s online casino momentum.
“If the legislature wants to circumvent our process that we had the legal authority to do, that’s what the legislature will do,” Keeley said. “Our job is to follow what the legislature passes. If that’s what they want to do then they can do that. We believe and this administration believes that what we currently have fits Delaware and fits into what our constitutional responsibilities are.”
