Testimony of John Pappas on behalf of iDEA Growth (iDevelopment and Economic Association) for The Committee on Finance and Revenue Public Hearing on Bill 23-25, the “Sports Wagering Procurement Practices Reform Exemption Act of 2019”
My name is John Pappas and I have been a resident of the District of Columbia for more than 20 years. I am here on behalf of iDEA Growth, a 501(c)(6) association which seeks to grow jobs and expand the online interactive gaming business in the United States. iDEA represents all sectors involved in the growing industry of internet gaming, sports betting and entertainment, and we share the goal of expanding American consumers’ access to secure and regulated online gaming. Thank you for the opportunity to testify on this subject.
1. Competition as a Healthy Business Model
As a trade group representing the interests of the internet gaming community, iDEA Growth promotes legislative models that foster healthy competition. Our experience with online sports betting, here in the United States and around the world, has demonstrated that competition is always good for the market, and without it the market has less chance to succeed. Any effective form of internet gaming, including sports betting relies on multiple operators competing with each other because this process stimulates innovative products and best of breed safeguards that create the most value for consumers and the jurisdiction that they operate in. Without competition there will be less investment in brand awareness, making it difficult to attract and retain customers. It has been proven, time and again, that sports betting markets with robust competition produce the most revenue for operators and tax revenue for governments.
Moreover, having only have one legal option for consumers means that unlicensed and unregulated websites based offshore will maintain their firm grip on the DC market. To help minimize the illegal market it should be a top priority for the City Council to demand competition, not promote a monopoly.
Despite the evidence that points to the efficacy of a competitive model, the City Council has already made the policy decision to give the DC Lottery the exclusive right to operate online sports betting. However, the DC Council was very wise to include a provision in the sports betting law that allows for DC Lottery to shift to a multiple vendor system should it be in the financial interest of the District. Undoubtably, competition for DC’s sports betting consumer would lead to more revenue for DC. So, today the Council should not be debating whether to fast track a sole source contract, rather it should be shifting gears to ensure that DC gets the most out of a fully competitive market place.
2. Setting Precedent and Best Practices for Other Jurisdictions
The bill being debated today bypasses the District of Columbia’s high standards for having a fair and open procurement process. Typically, a government would justify a “sole source” procurement because there is only one known source or only one single supplier can fulfill the requirements. This is clearly not the case for online sports betting. There are dozens of qualified companies that could and should be able to compete for the DC Lottery’s business. For instance, there are 10 online and mobile sports books that have been authorized in New Jersey, and that is expected to grow to 12 later this year.
Furthermore, in Rhode Island and Delaware, where, much like DC, the lottery controls all state-regulated gambling, there was a competitive bidding process to be the sports betting operator in those states. If DC chooses to bypass an open procurement process it would have the dubious distinction of being the only legal sports betting jurisdiction in the U.S. to sole source its contract.
By leading a transparent and open procurement, the process will be less vulnerable to criticism by opponents. Consumers, investors and community leaders will have more confidence in the process when it is beyond reproach and designed to place the interests of customers first.
3. Education on Options
The obvious benefit of an open procurement process means the DC Lottery will have access to the full scope of information available in order to make the best decisions for its online sports betting platform. By allowing diverse operators to present a range of options, the Lottery will be educated on all products available in the marketplace and the most up-to-date technology that can be implemented to fully protect the customers and the integrity of the games themselves.
Moreover, because of the unique demands of the DC law and the need to comply with federal law, it will be imperative that the DC Lottery contract with a provider that is equipped to meet these operational challenges. This can best be determined by a process that vets a multitude of competitors, rather than simply handing the contract over to a vendor without fully exploring the options.
When the City Council passed the sports betting bill in December it already took an unprecedented step to limit competition in the market. That decision is easily remedied by simply directing the DC Lottery to migrate to a multiple vendor system as is already allowable under the law. If the Council chooses to keep on its current path, then removing the requirement of a bidding process would be another major step toward eliminating competition. The District of Columbia is on the verge of enacting the least competitive sports betting market in the United States, which will fall far short of meeting the potential revenue to the District that the market could achieve.
On behalf of iDEA, I encourage the City Council to reject this proposal and opt for an open process that will benefit consumers and give DC the greatest opportunity for a return on revenue.