Oregon To Pay $27m to Controversial Sports Betting Operator SBTech

  • Oregon had the ability to offer a limited form of sports betting even during the federal ban
  • This stopped in 2007 but the state will relaunch the activity in September 2019
  • After a selection process, they chose European sports betting vendor SBTech as its operator
  • There was controversy when competitor for the contract Scientific Games alleged that SBTech offers sports betting in regions where it is illegal and should be disqualified
  • Despite initially not releasing details of the financial agreement between the Lottery and SBTech, officials have now done so to quell concerns
  • SBTech will receive almost $27m in the first three years of sports betting
Oregon's chosen sports betting vendor, SBTech, has been mired in controversy
Oregon’s chosen sports betting vendor, SBTech, has been mired in controversy over the selection process and contract

Since the federal ban on sports betting came to an end in May 2018, Oregon has been looking to make it fully legal in the state. To date, most of the states to legalize sports betting have been in the east of the US. Therefore, this poses a good opportunity for Oregon to take advantage of a largely untapped market in the West.

Vendor selection process

At its monthly meeting in March 2019, the Oregon Lottery Commission outlined its plans to relaunch sports betting and it chose SBTech as its provider. The commission ran a market survey to see what it would need to look for in an operator.

This led to the commission compiling a shortlist of potential operators, including SG Digital and Playtech. Eventually, the commission went with SBTech for its expertise and ability to bring a “turn-key, sports-betting platform and sportsbook for digital and on-property wagering.”

The company is based in Europe but has operations in five US casinos. The most notable of these partnerships are in New Jersey, where it operates in the Resorts Atlantic City and the Golden Nugget Casino. As its main focus is on sports betting, the lottery believes SBTech is a better fit than those operators that are working in a number of different gambling markets. SBTech also constantly tries to innovate and push the envelope for player experience.

After a unanimous vote on March 13, SBTech got the green light. On March 18 the executive team at the Lottery Commission gave their approval and an official notice of intent about the decision went public on March 20. The negotiations between the two parties began shortly after, at the start of April.

Resulting controversy

After back and forth negotiations, Barry Pack, director of the Oregon Lottery, officially put pen to paper on a contract with SBTech Malta Ltd. This will see the company operate sports betting in the state under the oversight of the Lottery.

However, there has been a backlash to this decision. One of the other parties bidding for this contract is alleging that SBTech Malta is currently offering online gambling in areas where it is not legal.

A formal complaint in relation to this issue was made by Scientific Gaming, which is calling for SBTech’s disqualification as it operates in Turkey and Iran where sports betting is not legal. Scientific Gaming has produced evidence supporting this allegation to both the Oregon police and the Lottery Commission.

In response to the allegations, SB Tech issued a statement. It said: “To be very clear, SBTech does not operate in any black markets. If it did, it would not be licensed in the numerous jurisdictions it is currently licensed in. After a very comprehensive investigation (including an investigation into the falsehoods and misinformation circulated by SBTech’s competitor), the Oregon State Police gave SBTech the seal of approval.”

Contract redacted

The Oregon Lottery initially did not reveal much of the details of its final contract with SBTech. The media received a copy of the contract, but a number of key details were redacted by SBTech. Entire pages of the contract were blacked out, including the financial terms of the agreement.

There were also no details given with regards to the background check conducted on SBTech, only a summary of the investigation’s findings.

Now, a few weeks after the initial release of the contract, details of the financial terms have come to light. The Oregon Lottery is forecasting that it will have to pay SBTech around $26.8m in the coming three years. Sports betting is set to start in September 2019 in advance of the NFL season. In the first year, the Lottery is expecting to see revenues of $332.8m, rising to $722.3m by year three. This would see SBTech get a year one payment of $5.2m, $9.1m in year two and $12.5m in year three.

These payments are unchangeable costs and will be made from gaming revenue. Taxpayers will not be contributing towards them. Some of the money will go to subcontractors that SBTech employs. Lottery officials made these projections public after the public expressed concerns about SBTech’s role.

Mobile sports betting will be put in place straight away and by 2020 there will be sports betting kiosks in bars, restaurants and lottery retailers.

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