The COVID-19 pandemic has delayed brick-and-mortar sports gaming in the District of Columbia, which could cost the District millions in tax revenue for 2020 and 2021.
According to June 3 budget oversight hearing testimony by Beth Bresnahan, executive director of the Office of Lottery and Gaming (OLG), the Office of Revenue Analysis "removed [from revised revenue estimates] the $1.4 million in tax revenue projected to be collected in Fiscal Year 2020 from privately operated sportsbooks soon to be licensed and regulated by the Lottery, and decreased the projected Fiscal Year 2021 tax collection from $1.9 million to $942,000."
The District did a soft launch of GambetDC, its online sports wagering platform, on May 28, and by June 3 $11,295 had already been wagered on soccer, mixed martial arts, darts, and football futures, according to the OLG.
The brick-and-mortar retail component of GambetDC was slated to be open by fall but was pushed back to summer 2021 after the pandemic prevented field technicians from replacing or upgrading equipment at brick-and-mortar stores, Bresnahan said in her testimony.
However, the downtime gave the OLG time to work on its iLottery platform of web and mobile games, allowing it to move the "go-live" date up from summer 2021 to October 2020.
“Given the logistical challenges we are facing in getting into our existing retail locations to upgrade the equipment necessary to support lottery retail sports betting . . . it made most sense to swap the implementation schedules so we weren’t dormant in adding new revenue generators to our game portfolio,” Bresnahan told Tax Notes in an email.
The pandemic-related sports cancellations and decreased foot traffic from stay-at-home orders have also affected the lottery’s bottom line. According to Bresnahan's testimony, the lottery's projected transfer for fiscal 2020 was decreased from $56.2 million to $34.1 million — a decrease of $12.5 million in traditional lottery sales and a removal of the $9.6 million projected from sports wagering. The fiscal 2021 projected transfer was decreased from $69.7 million to $51.3 million.
The District's sports betting platform has seen bumps in the road to implementation. The D.C. Council voted to legalize and tax sports betting in December 2018 and awarded a sole-source contract to operate the sports betting platform to Intralot, the District’s lottery provider, in February 2019. The no-bid contract was challenged in court by a sports betting app developer and was upheld by a D.C. Superior Court judge in December 2019. The developer is appealing that decision.
Social distancing orders and virus fears have pushed many industries to reconfigure and assess their online revenue potential, and gaming has been no different.
“Any state that has a brick-and-mortar gaming industry has to be looking at allowing that industry to pivot online,” John Pappas, spokesman for online gaming association iDEA Growth, told Tax Notes. “What we’ve seen is a handful of states that have allowed this are actually producing revenue during this time. . . . When you look at sports betting, online sports betting comprises 80 percent of all wagers placed through the internet or mobile device.”
Online gaming revenues have been bright spots in the three states where online casinos are allowed — New Jersey, Pennsylvania, and Delaware.
Land-based casino revenue for these three states dropped from $1.1 billion to $264 million, when comparing January and February with March and April gaming revenues, according to iDEA Growth research. During that same period, online revenue increased from $140 million to $213 million.