In a rare gambling-related failure, the Oregon Lottery has admitted that its new sports betting app will lose money this year. The Scoreboard app came online in October in a rushed process that attempted to take advantage of the remainder of the NFL season, which had started over a month earlier. Several failures occurred, however, and the app badly missed revenue forecasts.
The failure has led to lawsuits, and at least a partial block of public records requests for the contract the Oregon Lottery signed with the overseas vendor of the app. Oregon Lottery officials still maintain that the app will become profitable in its second year.
In 2018, the Supreme Court ruled unconstitutional the federal law that prohibited states from legalizing sports gambling. Several states subsequently entered the sports betting market. Oregon had previously offered Sports Action through the lottery, but removed it in 2007 after the NCAA told the state that it could not host collegiate athletic tournaments while offering legalized gambling. Anxious to jump back into the market, Oregon lottery officials contracted with SBTech, an app developer registered in Malta and operating out of Bulgaria.
Oregon originally forecast $300 million in wagers in its first year. The results? Barely over half that amount — $178 million. In February, officials with the Oregon Lottery admitted that, instead of the projected $6.3 million net profit, the betting service would lose $5.3 million for its first fiscal year, ending June 2020.
Willamette Week reports:
At the Lottery Commission’s January meeting, agency officials warned commissioners that results were not as good as expected.
“Original projections have been revised downward to reflect evolving estimates around black market capture rate, lack of NCAA wagering, tax withholding, intrastate competition, margin and product technical issues,” officials said in a presentation slide.
This month, [Oregon Lottery Director Barry] Pack put firm numbers on that downward revision, leaving the agency’s sports-betting business $11.5 million short of where the lottery had once hoped to finish the year.
The reasons were plentiful. The rollout was repeatedly delayed, until it finally went live well after the start of the NFL season. Many users reported significant glitches in the first few weeks the app went live. The Oregon legislature has also not allowed the lottery to expand into college wagering.
The app also had much higher expenses than anticipated, prompting a public records request to review the contract with SBTech.
An Oregon judge has now ruled that SBTech must turn over the entire contract:
In 2019, the Lottery chose SBTech to build the Scoreboard app as the agency rushed to enter the sports betting business. As WW and The Oregonian have reported, the agency’s hasty procurement process raised a number of questions, including how the betting revenues would be split between SBTech and the state.
In response to a public records request for the contract with SBTech, the Lottery turned over part of the document but withheld a section that described how SBTech’s compensation would be calculated. The Oregonian asked the Oregon Department of Justice, which polices state agencies adherence to Oregon’s Public Records Law to weigh in. DOJ told the Lottery it must turn over the whole contract. But in January, SBTech sued to stop that from happening.
Leith’s ruling comes in response to SBTech’s lawsuit. The judge noted in his explanation of his decision that the Lottery’s unexpected losses on sports betting—first reported by WW last week—strengthen the rationale for disclosing how SBTech’s compensation is calculated.
Leave it to the State of Oregon to screw up a sure moneymaker like sports gambling. Time will tell if heads will roll at the Oregon Lottery.
Jeff Reynolds is the author of the book, “Behind the Curtain: Inside the Network of Progressive Billionaires and Their Campaign to Undermine Democracy,” available now at www.WhoOwnsTheDems.com. Jeff hosts a podcast at anchor.fm/BehindTheCurtain. You can follow him on Twitter @ChargerJeff.