The uncensored contract between Oregon Lottery and SBTech was made public earlier this month after the Malta-based company dropped its right to appeal in the wake of a circuit court order for the document to be released in its entirety.
SBTech provides the platform and additional operating services for the lottery’s online sports betting app, Scoreboard, which has not performed well since its launch in October of 2019.
Details of the unredacted contract reveal that SBTech earns a larger share of the state lottery’s sports betting revenue than was originally made public.
Oregon Lottery has lost nearly $2 million from its sports betting app, despite seeing nearly $6 million in net revenue. Payments to SBTech and other vendors over that period account for nearly half of that sum, according to the contract’s financial terms.
A February memo from Oregon Lottery states that Scoreboard will “have a loss of $5.3 million for the first nine months of FY2020.”
According to the Portland, OR, newspaper Willamette Week, a memo on the Oregon Lottery website, which has since been removed, suggested that SBTech would receive 9 to 11% of Scoreboard’s net profits, as detailed under the “Access Fees” section of the contract.
The memo, from a lottery official to the Oregon Lottery governing commission, went on to explain that SBTech’s profit share would rise to 12% in three years time.
However, the unredacted contract reveals that SBTech receives an additional sum detailed under the document’s “Managed Service Fees” section.
Under the terms of the contract, SBTech is due an additional 16% of net revenue, with a minimum monthly payment of $300,000 for the first six months and $350,000 afterwards.
After 36 months, the minimum managed service fee rises to 17%.
Court Battle Over Contract Disclosure
Scoreboard’s poor financial performance led two media outlets to request the release of the Oregon Lottery/SBTech contract under Oregon Public Records Law. The office of the department of justice granted the request.
However, the lottery released a heavily redacted version, with censored financial terms, after SBTech argued that full disclosure would expose trade secrets to its competitors.
Upon another petition from members of the media in early January, the Oregon office of the attorney general reviewed the redactions and ordered the lottery to disclose the contract in its entirety. SBTech filed a lawsuit to prevent the release.
An Oregon circuit court judge ruled on the lawsuit in late February, stating that the Oregon Uniform Trade Secrets Act does not apply to a public entity.
The court ordered the lottery to release the contract in its entirety after 30 days, giving SBTech time to file an appeal.
SBTech chose to decline the right to appeal, ending the court battle.
About the SBTech Contract
Oregon Lottery opened a bid for sports betting partner in April 2019. The commission approved the lottery’s choice of platform provider and awarded the contract to SBTech.
Las Vegas-based Scientific Games, one of the losing bidders, issued a challenge to the award, stating that SBTech was involved with illegal gambling operations overseas.
After state investigators determined that the claim had no merit, the contract was awarded to SBTech.
SBTech partners with operators in New Jersey, Pennsylvania, California and Mississippi, as well as additional states that are working to pass sports betting legislation, including Kentucky, Illinois, Florida, Louisiana, Ohio and Maine.
Daily fantasy sports and sports betting giant DraftKings acquired SBTech last year, with the merger expected to be completed in the next few months.
DraftKings has a sole partnership with the Washington, D.C., Lottery to run its sports betting operation, as well.
Scoreboard has suffered platform difficulties since its launch, including problems experienced by users trying to make deposits and a recent shutdown caused by a cyberattack on SBTech servers around the globe.
The app does not accept wagers on collegiate sporting events, at least in part due to Oregon Lottery’s sensitive history with the NCAA in regard to a sports betting parlay game that was discontinued in 2007.