DC secures $6.5m settlement from Intralot over “sham” contract

Intralot and its subcontractor, Veterans Services Corporation (VSC), are to pay $6.5m between them in a settlement over allegations they defrauded the local government in Washington DC.

Intralot, which operates DC’s lottery, won the $215m contract in 2019 to provide mobile sports betting, before launching what turned out to be the much-maligned Gambet sportsbook app.

However, DC’s attorney general, Brian L Schwalb, announced yesterday, January 14, that a settlement had been reached with Intralot and VSC for “defrauding” DC, though the $6.5m payment isn’t an admission of guilt and both deny any wrongdoing.

Intralot will hand over $5m, while VSC will pay $1.5m as part of the settlement.

The Office of the Attorney General (OAG) said the duo deceived city officials through false representation in 2019 to win and secure payments under DC’s “multi-million-dollar, multi-year lottery and sports betting contract.”

Intralot hired DC-based VSC to adhere to the jurisdiction’s requirement that 35% of local small businesses are awarded large local government contracts.

The OAG went on to say Intralot and VSC “conspired” to land the DC Council’s approval of the “lucrative contract” on a sole-source basis, without the need for a competitive bidding process, by promising that VSC would carry out 51% of the work – all with its own resources – and receive an equivalent percentage of the revenue.

Yet the OAG now says its investigation found that promise was “false”; Intralot and VSC “secretly agreed” that in return for payments from VSC to Intralot, a subsidiary of Intralot that wasn’t VSC would provide most of the resources for the contract.

Once the contract had been secured, Intralot and VSC “teamed up under this covert agreement” to obtain millions of dollars “under false pretences” by misrepresenting that VSC performed the work that Intralot’s subsidiary actually did, the OAG stated.

VSC received the majority of the compensation “despite funneling much of it back to Intralot.”

According to the settlement agreement documents, VSC made or used false records and submitted fraudulent claims. VSC’s owner, Emmanuel Bailey, was also alleged to have been paid “hundreds of thousands of dollars per year for his participation” by Intralot.

Attorney general Brian L Schwalb said: “This is a warning to any company that tries to manipulate and exploit District contracting laws, especially laws intended to build the capacity of the local businesses vital to our economy.

“Intralot and VSC’s sports betting deal was a sham from the start – an elaborate scheme to secure a lucrative, high-profile opportunity on a sole-source basis while circumventing the District’s small business contracting laws.” 

In a statement supplied to EGR, Intralot said it had agreed to pay $5m to “resolve the matter”. The firm added: “This settlement is in no way an admission of guilt, liability, or wrongdoing, and the company believes its legal case is strong.” 

“Intralot has chosen to settle with the District in order to avoid the cost, time, and uncertainty associated with protracted litigation, in line with its ongoing focus on corporate governance, risk management, and operational excellence.” 

VSC told TV network NBC Washington that it categorically denies all the allegations and the sole reason it entered into a settlement agreement was to “avoid exorbitant legal fees associated with defending this frivolous case.”

As for Gambet, the product was shuttered in 2024. With uncompetitive lines compared to mobile sportsbooks in neighboring Virginia and Maryland, Gambet failed to generate meaningful revenue for DC coffers.

While Intralot still holds the contract to operate the lottery, DC is no longer a monopoly mobile sports betting market; FanDuel, DraftKings, BetMGM, Caesars Sportsbook, and Fanatics Sportsbook all now legally operate there. 

PENN Entertainment has also secured a market-access deal via Monumental Sports & Entertainment to launch its ESPN Bet brand in DC.