Proposal For Competitive Sports Betting Scene In D.C. Creates Tax Concerns
Most sportsbook operators would invite a more competitive market for wagering in the country's capital - however a couple of beware about the price of admission.
Members of the Council of the District of Columbia held a public hearing on Monday for B25-0753, also understood as the Sports Wagering Amendment Act of 2024. No vote was taken on the costs, however lots of statement was offered to the council members who will assist choose its fate.
The legislation, if passed, would modify the existing law around sports betting in Washington, D.C., to create a more competitive market for mobile betting.
A few of the discussion on Monday centered on the proposed expense of the new market, which would basically double, even for already-opened brick-and-mortar centers such as the Caesars Sportsbook at Capital One Arena.
"In this case, we're speaking about increasing the license fee and the tax rate, which is [a] double whammy on us," stated Dan Shapiro, senior vice president and primary advancement officer of Caesars Digital. "It's all a mathematics equation for us, and you're altering the dynamic here."
Classing it up
At the moment, FanDuel is the only online sportsbook operator authorized to act throughout many of the district, acting as a subcontractor to Intralot, which contracted with the D.C. Lottery. Other operators, such as BetMGM and Sportsbook, are restricted to expert sports places such as Capital One Arena and the two blocks around them.
Councilmember Kenyan McDuffie's Sports Wagering Amendment Act would alter the status quo by allowing existing operators to take bets throughout almost the whole of the district, with exceptions for the two blocks around pro sports locations and federal government home. It would also create a new license class to allow professional sports teams to partner with online sportsbook operators for district-wide wagering.
The increased competition for mobile wagering is something the likes of DraftKings and Fanatics welcome. Caesars does too, but the legislation's designs on taxation are offering the operator time out.
McDuffie's bill proposes that so-called "Class A" operators, such as Caesars, would go from paying 10% of their regular monthly gross video gaming revenue to 20%. Class A operators would likewise see their licensing costs bumped to $1 million initially and after that $500,000 for renewals after 5 years, double the present expense.
Meanwhile, the new "Class C" operators, partnered with the teams, would be charged 30% of their revenue, in addition to a $2-million application charge and a $1-million renewal fee for the five-year licenses.
It's all relative
The cost could be particularly excessive for some operators since D.C. is a smaller market to start with, boasting fewer than one million residents. In Kansas, a much larger jurisdiction, the tax rate for sportsbook operators is 10%, and there are no licensing charges beyond the cost of background and suitability examinations.
Caesars is not opposed to the 20% tax rate for mobile sports wagering income. It's the prospect of paying the very same for retail revenue, especially after sinking $10 million into its physical sportsbook, that the bookmaker doesn't like. The business said it paid $735,000 in sports wagering tax in 2023, and it declares its profit from the venue did not come close to matching that amount.
Meanwhile, Shapiro said the Caesars Sportsbook at Capital One Arena is already losing some business to FanDuel.
"We want our customers to be able to bet with Caesars anywhere they are in the district, not simply need to go to FanDuel, for example," Shapiro stated. "There is an impact and that's why we require to reduce it, both on being able to complete on mobile but also keeping our tax rate where it is."
For the time being, FanDuel, the leader in online sports betting in the U.S., has the run of many of D.C. The operator, which launched online sports wagering in D.C. in mid-April, was brought in to renew a stagnating mobile sports betting circumstance, as GambetDC, the lottery game's Intralot-backed platform, was a frustration.
FanDuel currently pays a higher price than what McDuffie's bill proposes. The operator is needed to turn over 40% of gross gaming income and has ensured a payment of at least $5 million in its first complete year of operation, followed by $10 million afterwards, according to the D.C. Lottery.
That stated, the district's Office of Lottery and Gaming (OLG) claims the shift to FanDuel for mobile betting is getting outcomes. That consists of more than $5.8 million in handle and practically $1 million in gross revenue created in FanDuel's first week of operation, boosts of 295% and 256% compared to Gambet a year earlier.
"The FanDuel change has already brought back more than 15,000 active users to the District that were putting their bets in surrounding states and has increased the typical wager by nearly 6 times the GambetDC average," stated Frank Suarez, executive director of the OLG, in written statement.
Doing the mathematics
But the lottery workplace, like Caesars, also has concerns about the proposed tax structure of the brand-new competitive market, especially since FanDuel is locked into a rate 10 to 20 portion points greater than its prospective rivals.
Suarez, pointing out Office of Revenue Analysis quotes, stated FanDuel is projected to produce $42.2 million more in income over 4 years compared to a prior GambetDC-only projection. The competitive market proposed by McDuffie's costs was estimated to offer the district with $26.88 million over the same 4 years.
"Although there might be a minor incremental increase in general mobile and online manage with the addition of Class A and Class C operators, overall sports wagering earnings for the District will decline if the tax rates stay as proposed in the Bill," Suarez composed. "The quantity of additional manage and increased license fees produced by Class A and Class C operators will not be adequate to make up for the reduction from a 40% share of GGR to the lower 20% and 30% tax rates.