DC Sports Betting Committee Removes Royalty Fee as Bill Advances
Although the proposed sports betting bill is moving along, the pro sports leagues probably won’t be very happy with the most recent change. During a hearing on Wednesday, the Committee on Finance and Revenue rejected the proposed amendment to offer a royalty fee for the use of official league data, which is in line with other states that have already legalized sports betting.
DC’s Sports Betting Bill
Chairman Jack Evans filed Bill 22-944, called the Sports Wagering Lottery Amendment Act of 2018, in September and had a public forum in October. The hearing this Wednesday was the first time it had moved further along. The rejection to the proposed royalty fee got a unanimous verbal vote.
DC stakeholders seem to have a lot of support for the bill, including from the owner of the Washington Capitals and Wizards, Ted Leonsis. He even wants to allow betting inside the arenas. This might actually not be unreasonable since there are no casinos in the District. One of the amendments was to allow Capital One Arena and up to three other arenas to run sportsbooks on premises. To discourage competition, there would be a two-block exclusivity zone.
The bill itself would legalize and regulate sports betting within the District, under the authority of the lottery. Applications for a Class A (for specifically named facilities) operator license will cost $250,000 and if approved, the license will be good for five years. Renewals will cost $250,000 for another five years. Facilities that could apply for a Class A license are Capital One Arena, Audi Field, Nationals Park, St. Elizabeths East Entertainment and Sports Arena, and Robert F. Kennedy Memorial Stadium.
Class B operator licenses may be granted to an applicant that is not within a two-block radius of any of the Designated Facilities. Class B licenses will be good for five years and the application fee will be $50,000. Renewals will also be good for five years and will also cost $50,000.
As a condition of licensing, there will be some restrictions on who can place bets:
- operators may not place bets through their own facility;
- operators, officers, directors, employees of the operator, and any relatives who live within the same house as any of the previously mentioned individuals may not place bets with that operator’s facility;
- coaches, athletes, referees, owners, employees of sports governing bodies or member teams, and player and referee union personnel may not wager on any sporting events betting overseen by their sports governing body;
- individuals, groups, and entities with access to non-public confidential info held by the operator may not place wagers with that operator; and
- individuals, groups, and entities may not place bets as a proxy or agent for others.
There is also wording within the Bill that will allow individuals to set limits for betting and even to exclude themselves from betting within any of the facilities.
As for taxation, the Bill requires 10 percent of the gross sports wagering revenue be paid to the District of Columbia Treasurer from the preceding calendar month. Tax revenue will go towards gambling addiction, the Birth-to-Three for All DC Amendment Act of 2018, and the Neighborhood Safety and Engagement Fund.
The Sports Betting Hearing
In Evans’ introduction at the beginning of the hearing on Wednesday, he said,
“And then finally, language was removed from the committee print that would entitle the District lottery to use official sports leagues’ data, copyrights, and player images and likenesses. But also what has been added to this is the royalty fee. And I want to talk about that very quickly.”
The Royalty Fee
Changes made to the proposal would have given one-quarter of one percent of the gross sports wagering revenue to the leagues on specific sporting events. In return for this payment, the leagues would provide the sportsbooks within the District with league assets like official data.
At the hearing, Evans, who was also the chairman, said the idea of an integrity fee was “very controversial” among both legislators and stakeholders in other states. “People feel very strongly on both sides of this issue,” Evans said. “There is not one anywhere else in the country…Nobody has it.”
Councilmember Kenyan McDuffie wasn’t convinced that a royalty fee was called for:
“The arguments that I’ve heard, I’ve appreciated them. I can understand why they might want it, but I’m not convinced that we need to have it in this bill.”
Another member opposed, Councilmember Vincent Gray, said of the royalty fee:
“I actually want to see the removal of this royalty fee. It’s called – depending on who you talk to – an integrity fee, which seems to me ought to be inherent in these sports leagues’ operations anyway. And I’m assuming it is. So I just don’t understand why we have to invest another quarter percent of the revenue from this which, as you’ve indicated Mister Chairman, is not done anywhere else in America… This is not something I want to find a compromise on. I believe these sports leagues are very well-heeled. They do very well.”
Gray then moved to strike the section related to a royalty fee, and the committee voted to advance the bill as amended without the royalty fee section.
Specifics of Implementation
Another issue with the bill is that it would allow third-parties to make arrangements with local venues. This would be the first arrangement like this in the United States and isn’t without legal concerns. MGM is also making plans with Capital One Arena. Evans explained:
“MGM has gotten into an arrangement with Nats Park. That’s my understanding today. So when you go into the baseball field, the only app that will work on your phone is MGM’s. You have to use theirs when you’re in the baseball field.”
This means that any operator with a license could make a deal with a third party to offer sports betting technology, and thus exclude the Lottery from being involved in the activity. He said,
“If they go to Cafe Milano in Georgetown and make a deal with them, when you’re in Cafe Milano, you’ll have to use their app in Cafe Milano…Or Stoney’s Bar up the street… But, if you’re walking down the street in the city, or in your house, you gotta use our app.”
What Does this All Mean for the Sports Betting Landscape?
This hearing, and removal of integrity fees, is a huge step towards the implementation of sports betting in Washington DC. Furthermore, the bill has a few new caveats that other states have yet to explore. This could be a new step in the sports betting landscape. One thing is for certain, Washington DC has put another nail in the coffin of integrity fees throughout the nation. Future states mulling this possibility have to feel less pressure now that the Nation’s Capital has rejected this idea.
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