IGT has a stranglehold on gambling in Rhode Island

Signs of Progress In Rhode Island Gambling Services Dispute

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Conflict is still brewing between International Game Technology (IGT), the gaming service provider for the Rhode Island, and the owner of the state’s two casinos, Twin River Worldwide Holdings. At issue is the state’s proposal to extend IGT’s contract for a further 20 years without considering alternatives.

Much of the discussion so far has happened between closed doors, but the state will soon hear soon hear testimony from an independent contractor hired to study the issue. At the same time, there are indications that the two companies are in talks to try to find to an amicable resolution on their own.

If stakeholders can come together, the IGT saga could find a resolution in the coming weeks.

An uncomfortable relationship

Gambling in Rhode Island is a thorny situation in which three parties with different interests are forced into a joint operation. First, there is the lottery, run by the state. Next, there are the state’s two brick-and-mortar casinos, both owned by Twin River Worldwide Holdings.

The deal there is that Twin River isn’t really operating the casinos. Rather, it manages the physical properties and runs the associated hotels. The games themselves, however, fall under the jurisdiction of the RI Lottery. Dealers are employed by the lottery, rather than the casino, and the lottery even banks the games.

Matters became complicated when the lottery chose IGT as the primary vendor for its products. Among other things, the deal included guaranteed floor space for IGT’s terminals at Twin River properties. Today, IGT machines make up nearly 85% of the total at the two casinos. They are underperforming, however, leading to complaints from Twin River — as well as Everi and Scientific Games, who provide the remainder of the machines.

The Lottery ordered IGT to remove 360 of its worst-performing terminals in September, but these amount to less than 10% of the total.

Stingy sports deal may have deterred competing bids

IGT further ensconced itself in the state’s gambling industry when Gov. Gina Raimondo signed sports betting into law in the summer of 2018. The lottery again chose IGT as the vendor, setting up kiosks at both the Twin River locations. An online and mobile option was added in early 2019 but still requires in-person registration at one of those casinos.

The selection of IGT as vendor doesn’t seem all that controversial on the surface. A total of 18 companies expressed some degree of interest, but only IGT actually submitted a bid. It was therefore the winner by default.

However, the lack of competition likely stems from the fact that the terms under which Rhode Island legalized sports betting were unappealing.

The state keeps 51% of revenue, most notably, while the vendor gets only 32%. That may have been acceptable to IGT because its setup costs will presumably be lower due to its existing presence. For everyone else, the requirement to give up the lion’s share of its revenue make the effort and expense disproportionate to the tiny market.

Twin River comes out the loser there, however, as its share of the revenues is only the remaining 17%. In return for that paltry sum it had to give up more floor space to IGT, whose betting terminals are generally unwelcome due to poor performance.

No-bid contract causes controversy

Tensions increased further over the fall. IGT’s current contract with the state lottery is set to expire in 2023, but Raimondo and the state’s General Assembly offered an extension last fall. This would lock in the company’s services for a further 20 years.

That no-bid contract is worth $1 billion, and Twin River is crying foul over a provision which would guarantee IGTs right to dominate 85% of the floor space. It isn’t fighting alone, either. Gaming solution providers Scientific Games, Camelot, and Intralot have all joined Twin River in a consortium of opposition. Collectively, they’re petitioning the state to allow them to bid on all or part of the contract.

For its part, IGT insists that it is uniquely qualified to manage such a large contract and that Twin River lacks the necessary expertise. Perhaps more importantly from the point of view of legislators, it currently employs over 1,000 Rhode Islanders. The company has made it clear that it will move those jobs to its offices in Las Vegas or Rome if it does not get the contract.

That’s a lot of jobs for a state with a workforce of just 550,000.

Washington’s situation is a cautionary tale

A similar story is unfolding in Washington, D.C. The situation there involves the Greek company Intralot, which powers the D.C. Lottery and was subsequently handed a monopoly on online sports betting with no bid required. A lawsuit followed, brought by a local software developer who wanted to compete in the market.

That saga has been going on far longer than Rhode Island’s, and never seems much closer to being resolved. That said, the story has more wrinkles than Rhode Island’s at the moment. Intralot, for starters, claims to be subcontracting the work to a local company which allegedly has no actual employees.

However, we don’t know yet how deep the rabbit hole is going to go in Rhode Island. Washington’s plight illustrates the how important it could be to find a resolution in the legislature. If the courts are dragged into things, the state could find itself locked in a years-long quagmire.

Private discussions are underway

For now, things remain up in the air, but a local newspaper, the Providence Journal, spotted a conversation between top executives from IGT and Twin River. Reporters found IGT’s Jay Gendron and Twin River’s Marc Crisafulli sitting together outside Riamondo’s policy office.

We don’t know much at this point except that the conversation happened, and it’s part of an ongoing dialogue. Both men declined comment when asked by reporters what they discussed and their purpose in visiting the governor. Their respective companies acknowledged that talks are underway and that they’re exploring possibilities, but had little more to say than that.

Likewise, the governor herself declined to comment, as did House Speaker Nicholas Mattiello. Senate President Dominick Ruggerio acknowledged he’d spoken with Gendron and Crisafulli but didn’t elaborate.

An independent study will force movement

More should become clear this week, as an independent study of the contract is due on January 15. The study was commissioned by a bipartisan group from the House of Representatives, led by Mattiello and House Republican Leader Blake Filippi.

The company they chose to conduct the study is Christiansen Capital Advisors (CCA). CCA is a research firm with offices in Maine and New York, which specializes in studying the gambling industry. Its client list includes the likes of Harrah’s and Churchill Downs, along with multiple state legislatures and tribal gaming organizations.

The study’s aim is to cut through the competing claims of IGT and Twin River and establish a clear list of pros and cons for the contract. It was initially proposed by philanthropist and former Hasbro CEO Alan Hassenfelt. Hassenfelt in fact offered to fund the $159,100 cost himself in order to get the ball rolling. Given the size of the contract, that’s a reasonable investment if it helps legislators make the correct decision.

That price tag includes $6,000 in expenses for CCA’s experts to come to the state to present the study’s findings and testify. That, at least, should produce some movement on this story shortly — whether or not Twin River and IGT manage to come closer to seeing eye-to-eye on their own.

Photo: Boston Globe / Getty Images

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
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