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It's not often that Oregon State Police detectives travel overseas, and even less likely that they would end up visiting two cities in Bulgaria.
But, as WW reported briefly earlier this week, the Oregon Lottery in April dispatched OSP detectives to Sofia and Plovdiv, Bulgaria to interview key staff of SBTech, a company registered in Malta that provides gambling services of various kinds around the world. (The company's offices and staff are in the two Bulgarian cities.)
Nearly a year ago, WW first reported that the Oregon Lottery was gearing up for the widespread legalization of sports betting after a May 2018 U.S. Supreme Court decision that paved the way for that opportunity.
Even as that opportunity arose, however, customer demographics threatened the revenue stream that makes the Oregon Lottery the state's second largest source of revenue after personal income taxes. Younger Oregonians are far less likely to play video lottery or the traditional games on which the agency depends.
Those two factors—the possibility of legal sports betting and the looming decline of the current revenue stream—put pressure on the agency to get aggressive.
Earlier this year, the Oregon Lottery asked three companies—SBTech, Scientific Games and Playtech BGT Sports—to make proposals for how they would supply a platform for sports betting on mobile devices.
Documents WW obtained under a public records request show that on March 20, the lottery gave notice that in intended to award the contract for sports and mobile services to SBTech.
On March 25, the Washington D.C. office of the Perkins Coie law firm filed a protest of that notice to award on behalf of its client, Las Vegas-based Scientific Games.
"The awardee, SBTech, is a company with very little operational experience in the United States," Perkins Coie wrote. "Based on information that [Scientific Games] has learned from the Lottery since receiving the notice of intent to award, SBTech's technical approach and cost proposal seemed not to distinguish SBTech dramatically from [Scientific Games]—a company with considerably more experience in the United States' regulatory environment. [Scientific Games] further understands that the 'lengthy' background investigation into SBTech is being performed concurrently with the RFP award process."
In fact, lottery officials had not completed their investigation of SBTech when they issued their intention to award the contract to the company.
Lottery spokesman Matt Shelby says that was intentional.
"One thing we did differently this time around was start the background investigation on all three bidders, before we selected a preferred," Shelby says. "This allowed us to shorten the time frame between notice of intent to award and actual contract negotiation because we had a head start on the background."
Earlier this month, Darin Goodwiler, the assistant director of security for the lottery, said SBTech passed an extensive background check. In a May 1 letter to Oregon Lottery Director Barry Pack, Goodwiler also noted that three other states—New Jersey, Mississippi, and Pennsylvania—had already checked SBTech out and approved them to do business in those states. "The investigation revealed no information which would preclude the Oregon State Lottery Commission from contracting with SBTech," Goodwiler concluded.
Shelby says that although the agency has a long relationship with Scientific Games, SBTech offers different expertise.
"The major reason Lottery selected SBTech was because they are a sports bet vendor, not a lottery vendor, and their expertise shows in product design and focus on player experience," Shelby says. "The other two vendors were Lottery vendors that also provide sports betting. SBTech is very player centric and innovative, they know where the betting market is going and the distinctive competitive features. We felt SBTech's platform allows us to best compete with black market operators."
The Oregon Senate on May 23 passed Senate Bill 1049, a bill intended to reduce the near-term costs of the Public Employee Retirement System. Before passage, that bill was amended to dedicate revenue from sports gambling to help pay down the $27 billion unfunded PERS liability. That bill is now in the Oregon House.