The DC Lottery Should Regulate, Not Compete for Sports Betting
Washington, DC has recently entered the sports betting fray by introducing a bill that would allow retail and online sports betting as an option for DC residents and visitors, bringing this popular activity into the light of regulation. While sports betting is sure to be a profitable endeavor if correctly implemented, the latest proposal by DC Councilman Evans gives the DC Lottery a de-facto monopoly on online sports betting and puts the lottery in the untenable position of being both regulator and operator. The Lottery is a smart choice to regulate sports betting companies doing business in DC but it shouldn’t simultaneously compete with these companies directly. Councilman Evans should be applauded for his forward-thinking embrace of sports betting, but to maximize revenue and job growth, this bill should allow free market competition in online sports betting and allow the Lottery to concentrate solely on their regulatory duties.
Online sports betting is far and away the preferred method of sports bettors, and the area where most of the DC revenue will come from. It’s easy, it’s convenient, and it allows access to real-time betting and a wider array of options than a physical sports book. Nevada and New Jersey have both seen extraordinary growth in the number of online sportsbooks, and from a revenue perspective, online will easily eclipse physical sportsbooks in New Jersey in 2018. For those areas that don’t have legal sports betting yet, there is a teeming offshore market of online sportsbook operators numbering in the dozens, if not hundreds. All of this illustrates why DC must allow an open and competitive online marketplace – consumers demand choice, and if they can’t find a legal outlet they like, they will readily turn to an offshore provider. Sportsbooks have different specialties, different types of bets and different approaches to cater to their niche – there is no such thing as one-size-fits-all in the online world of sports betting. If DC tries to force acceptance of a singular and somewhat generic state-run Lottery platform it will fail to resonate with consumers and they will take their recreational dollars elsewhere. We’ve seen this happen in Delaware, where their Lottery-run sports betting platform has produced a mere fraction of projected revenue.
In addition to giving the Lottery the monopoly on online sports betting, Councilman Evans’ bill lets the Lottery decide most aspects of how privately-held sports betting operators can do business in the District. By allowing the Lottery to regulate aspects of private enterprise while competing in the same market, DC is running an unnecessary risk of unintended consequences. Take a look at Pennsylvania, where their state Lottery is now being sued by a majority of the state’s casinos for offering an online lottery product that looks an awful lot like a slot machine, thus violating the terms of their operating agreement. DC should be wary of creating a similarly conflicted situation by pitting private industry against a state agency. The specter of big government malfeasance may be too big to avoid even if the Lottery acts in all fairness to its competitors – if companies don’t think they will get a fair shake they may choose to concentrate their investments elsewhere or more readily resort to litigation.
Rather than repeat the mistakes made by Delaware and Pennsylvania, the DC Lottery should focus exclusively on creating a safe and consumer-friendly regulatory environment that will attract investment and maximize taxable revenue. DC should take a cue from New Jersey, where in only a few short months free market forces have created a thriving online sports betting industry consisting of eight online sportsbooks, creating impressive job growth in the state and consistent revenue in the form of gaming taxes. In New Jersey, the Division of Gaming Enforcement gets to focus solely on the important job of regulating the market participants, and the state gets to sit back and collect taxes and licensing fees while private companies compete for sports betting customers’ business.
The DC Lottery had a hand in crafting this legislation, which is certainly appropriate, but the legislative process is about subjecting a proposal to scrutiny and gathering different viewpoints to find the policy best suited to achieve the stated purpose. To be clear, the new-found liberty to conduct legal sports betting should be a means to bring sports betting out of the shadows, drive business growth, and generate tax revenue for the worthy causes Councilman Evans has proposed. A state-run sports betting monopoly simply won’t accomplish any of these goals.