Tensions between Washington DC regulators and the District’s lottery and sportsbook provider, Intralot, are reportedly heating up as regulators accuse the operator of failing to meet the terms of its contract to run DC’s sports wagering market.
Intralot initially cast aspersions toward one of GambetDC’s vendors, Veterans Service Corporation (VSC), in response, alleging that the company has not completed promised work. VSC also does business as Vital Services Contractors.
Weeks later, Intralot’s freshly-installed US CEO, Nikolaos Nikolakopoulos, walked back those accusations.
Untangling the web of facts and allegations swirling around DC’s controversial $215 million sports betting contract is a heavy lift.
However, recent reporting from Axios and longtime coverage at Washington City Paper (WCP) and the Washington Post covered much ground.
Below is an overview of what’s known so far.
Intralot and VSC First Partnered on DC Lottery
In 2019, Greek company Intralot won DC’s controversial sports betting contract to build GambetDC, the District’s legal online sportsbook.
This win extended Intralot’s relationship with the District of Columbia Office of Lottery and Gaming (OLG), which originated in 2010 when it won the right to operate DC’s lottery.
Around the same time, Intralot partnered with VSC, though the pairing seemed more of a necessity than a desire.
When an outside company wins a substantial DC contract, it must redirect a percentage (usually around 35%) to local businesses.
Marion Barry – DC’s mayor for all of the 1980s and most of the 1990s – spearheaded the Certified Business Enterprise (CBE) program to give DC businesses a leg up. By becoming a CBE, companies receive preference in District of Columbia procurement opportunities.
So, to be awarded the lottery contract, DC required Intralot to subcontract at least 35% of contract-related expenditures to CBEs.
However, according to WCP, VSC was not Intralot’s first partner choice.
WCP reported that Intralot initially sought to partner with a company run by Warren Williams Jr., a friend of then-mayor Adrian Fenty. Instead, DC council members held up a vote and forced contract changes.
Intralot ultimately partnered with VSC. Its owner, Emmanuel Bailey, had ties to former council chairman Vincent C. Gray. Gray later served as the District’s seventh mayor. He currently holds the position of Ward 7 Councilmember.
Intralot’s CEO at the time, Byron Boothe, told the Washington Times that a former council member turned lobbyist recommended Bailey. From there, Gray permitted the deal to move forward.
Despite investigations by the Office of the Inspector General and a federal grand jury, allegations of wrongdoing remain unsubstantiated.
However, a former employee who claimed that the city fired him for not engaging in efforts to oust Williams won a $3.5 million settlement in 2016.
DC Sports Betting Added in 2019
Fast-forward to 2019. Intralot wins the no-bid contract to operate DC Lottery’s in-house sportsbook, bringing subcontractor VSC along for the five-year ride.
Two years into the deal, regulators began questioning whether Intralot might be in violation of the agreement’s terms.
By September 2021, District of Columbia Auditor Kathleen Patterson released a report detailing the failings of DC sports gambling.
According to letters and emails recently obtained by a WCP Freedom of Information Act request, officials are concerned that Intralot is not subcontracting enough work to Bailey’s firm.
Intralot blamed its unacceptable results on VSC in those same documents, claiming the firm hasn’t lived up to its promises.
In a January 2023 letter to DC’s Department of Small & Local Business Development (DSLBD), Boothe (then CEO of Intralot’s US subsidiary) recounted the issue.
He said DC is:
effectively locking Intralot into subcontracts that require it to pay its vendors whether or not they provide adequate services.
He added that Intralot’s CBE vendors have little incentive to deliver high value to DC residents:
Surely, you can understand that no business can succeed with these unrealistic constraints.
While we do not believe that DSLBD’s intent is to reward any particular CBE (or individual) regardless of its performance (including paying them for doing nothing), that is the reality if DSLBD will not permit Intralot to either amend its CBE Agreements or to utilize vendors at their discretion.
As WCP pointed out, these communications mirror concerns that DC council members and watchdogs raised over the years. In particular, VSC’s size prompted suspicions that it was a front that would make VSC and Bailey millions without meeting contractual obligations.
If true, this would undermine lawmakers’ efforts to benefit the DC economy with its CBE requirements.
DC Lottery Must Decide to Extend or Rebid Contract
Notably, 13 days after Boothe’s letter reached DSLBD, deputy CEO and Intralot board member Nikos Nikolakopoulos followed with a retraction.
With a conciliatory tone, Nikolakopoulos offered to meet with DSLBD leaders. The following week, Intralot announced that Nikolakopoulos had replaced Boothe as US CEO.
Boothe remains with the company as an advisor and member of the board.
As the July 2024 end of the sports betting deal nears, the two sides remain in discussion. Still, the OLG must soon decide whether to renew the Intralot contract for another five years or rebid the work.
An OLG spokesperson told WCP that discussion of future procurement actions is not permitted.
Should they deem it necessary, DSLBD will have the right to fine Intralot once the contract ends. Conversely, it could grant a waiver to negate the CBE spending requirements.
According to WCP, it’s possible that the latter could be the more agreeable option for DC officials.
However, legal action is also possible, as indicated by the tone of inter-business communications.
The DC District Council could also end Intralot’s involvement early over GambetDC’s lackluster results. Despite earlier projections predicting $20 million in annual revenue, the app brought in just $2.7 million in 2022.
Former councilor Elissa Silverman had proposed ending the contract before losing her seat in 2022.
Silverman’s replacement, Kenyan R. McDuffie, agreed to a hearing on the bill. However, since Silverman left the council, there’s been no movement in that regard.
During a recent appearance on WAMU 88.5’s The Politics Hour, current council chair Phil Mendelson provided his two cents:
My personal point of view is that I’m disappointed at the continuing controversy over it not living up to expectations. And if it can’t live up to the expectations, then something needs to change.
In the meantime, VSC recently received a license to operate mobile sports betting in Maryland. According to WCP, Bailey cited his firm’s DC experience in VSC’s Maryland application.
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