When the D.C. Council signed off on legalizing sports betting in 2018, one of the main drivers was the potential for tax revenue for city coffers. But new data is showing that while revenue is starting to come in, it’s only a fraction of what was initially estimated.

In documents submitted to the council as part of the annual performance oversight process, the D.C. Lottery — which operates GambetDC, the only sports-betting app that works citywide — said it’s expecting to bring in just shy of $1.5 million in revenue for the city in 2022, one-tenth of the $20 million city officials once estimated.

And lottery officials conceded that the app — which launched in 2020 — made no money at all in 2021, and actually ran a $4 million deficit because of marketing costs. (An estimate in Feb. 2021 put expected revenue at $6.2 million.) Privately operated brick-and-mortar sportsbooks in D.C., on the other hand, are expected to over-perform initial revenue estimates — and have remitted more to the city in taxes.

The revelations come amidst continuing challenges for the GambetDC app, including an embarrassing  technical mishap that kept it offline for Apple users during the Super Bowl. It’s also again shining a bright light on the method the city chose when it legalized sports betting, when it gave its current lottery operator, Intralot, a $215 million sole-source contract to develop and run the only sports-betting app that works across D.C.

But despite obvious frustration and pointed questions Thursday from D.C. Councilmember Kenyan McDuffie (D-Ward 5) about whether the city should consider allowing private sports-betting apps like FanDuel and DraftKings to operate in the District — the model Virginia opted for last year — lottery officials insist that there is promise in what the city has, though lawmakers will have to accept that the initial revenue estimates they were sold were overinflated.

“The model is a good one. Right now, compared to some of the other models, it’s set up to give you the most return on revenue,” said Frank Suarez, the director of the D.C. Lottery. “The way the model is structured is solid and it helps the District… drive local business and the economy. And so it is a solid model. We have to be very realistic abut the expectations of the revenue. We know a lot more know than we used to.”

In a presentation, Suarez said that having D.C. control the only citywide sports-betting app (brick-and-mortar sportsbooks can operate apps, but only within a two-block radius of their facilities) actually gives the city a bigger cut of each bet that’s made, relative to what private operators pay in taxes. But Suarez also told McDuffie that the initial revenue estimates provided by D.C.’s chief financial officer to the council — which predated his arrival in D.C. in August 2021 — were far too high given the city’s population.

“The prior estimates were set with very limited data,” he said, noting that few states had legalized sports betting at the time D.C. did. “Now that we are further into legalization… you can look and see that for the District to get anywhere close to what the original [estimate was] we would have to multiply our population by ten times when you look at any jurisdiction making those numbers. That’s why you’re seeing such a big difference with our new estimates, because they are grounded in the learning we have and what we’re seeing across the country.”

Still, McDuffie noted that brick-and-mortar sportsbooks like William Hill at the Capital One Arena were beating revenue expectations. Suarez attributed that to their retail locations, which he said was proving to be a better option for D.C. (The D.C. Lottery now has its own retail locations for sports betting.) “We’re seeing retail to be the much bigger part of the business here,” he said.

Suarez conceded that the GambetDC app has “underperformed” and “can improve its experience.” And he added that the Super Bowl mishap — which was attributed to a mistake in how Intralot submitted an app update to Apple — had caused the app significant “reputational damage,” not to manage likely missed revenue opportunities for the city. (GambetDC had 30,000 registered users as of February, more than half of which use Apple devices.)

In a letter to McDuffie last month, Suarez called the Super Bowl mishap a “colossal error on one of the biggest days for sports betting in the country,” and said the D.C. Lottery is currently in negotiations with Intralot for some type of compensation. An email to Intralot on Thursday went unanswered as of the time of this article’s publication.

Suarez said that interface updates to the GambetDC that will be ready by the summer should improve the user experience. He also said he plans to more aggressively market the app to win back users, and that the payout for winning bets has been increased to better compete with private sportsbooks. “It’s on an upward trajectory,” he said of GambetDC.

But McDuffie kept pressing Suarez on whether it would be better to simply let other sports-betting apps into D.C.

“You have some jurisdictions where it’s all government operated, and you have some where it’s not. We’re the only one that’s mixed. I don’t have enough information to tell you that one is better than the other,” responded Suarez. “I’m always a proponent of more information. I want to do the research… I want to see the data. A study is fine if we want to analyze a different model that could work better.”