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May 5, 2023

Sports-betting operator Rush Street Interactive explains CT pullout

Mark Pazniokas | CT Mirror Glitter fell after Gov. Ned Lamont celebrated the launch of sports betting by making a bet at Foxwoods on Sept. 30, 2021. Online gambling launched weeks later.

Rush Street Interactive, the Chicago-based company that the Connecticut Lottery Corp. hired to operate its online and in-person sports-betting program in 2021, said during an earnings call Thursday afternoon that it’s exiting the state’s market because it was not profitable enough.

Rush Street and Connecticut Lottery announced in March that the partnership was “winding down,” but did not state a reason.

“We are very determined to build profitability in a manner that makes sense for our shareholders,” Richard Schwartz, CEO of Rush Street, told investors Thursday. “Towards that end, we announced a joint agreement to wind down our online and in-person sports betting partnership with the Connecticut Lottery.”

Schwartz said there are no separation-related payments for either side.

Connecticut Lottery is looking for a new operator for its sport-betting program, and Rush Street has agreed to continue operating it until a replacement is found – likely during the second half of 2023, Schwartz said during the call.

Schwartz faced several questions from analysts about the Connecticut pullout. He said that leaving Connecticut will reduce the company’s revenue in the short-term, but will have a “long-term positive impact on profitability.”

“We thought long and hard about this decision,” Schwartz said. “Ultimately, we are staying true to our strategy in any market: we have to see appropriate return on investment. As the Connecticut market unfolded, it became clear that it was not the right fit for RSI, and our capital and resources could be used more efficiently elsewhere.”

An analyst from Wells Fargo asked whether Rush Street plans to exit any of the other 14 states in which it currently operates.

“I would say that we are constantly evaluating existing markets, new markets,” Schwartz said. “And when we decide there's a change necessary, we will be happy to let everybody know.”

Another analyst asked about rumors that Rush Street had a “fairly significant minimum guarantee” in its agreement with Connecticut Lottery.

Under the 10-year deal, Rush Street guaranteed a $170 million minimum revenue share from online and retail sports betting for the Connecticut Lottery. The payments to the state were contingent upon “how many retail locations were up and running, along with other factors,” Schwartz said. 

It’s unclear whether those terms will apply to the next operator, Schwartz said.

During the first quarter of 2023, Rush Street reported a net loss of $24.5 million, compared to a net loss of $52.3 million during the first quarter of 2022.

Revenue was $162.4 million during the first quarter of 2023, an increase of 20%, compared to $134.9 million during the first quarter of 2022.

Sports betting in Connecticut was legalized in May 2021 and went live that fall.

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