The Illinois legislature passed the Video Gaming Act in 2009 as a way to help fund a billion capital program lawmakers approved that year. After legal delays, the first state-sanctioned terminals went online in Illinois bars, restaurants, truck stops and fraternal and veterans organizations in September 2012. Now, nearly five years later, there are 26,589 machines in 6,604 establishments–one terminal for every 481 residents.
Gamblers have played a total of $44.4 billion on machines, with $882 million going to the state and $176 million to municipalities. The state collects a 30 percent tax on net terminal income, with 25 percent going to the state and the other 5 percent to the local municipality. The remaining 70 percent of the income is split evenly between the host businesses and the machine operators.
Under the law, the minimum game payout is 80 percent. Individual bets are capped at $2, with a maximum $500 payout per bet. Each establishment must have a liquor license, and can install up to five video gaming machines.
Michael Gelatka, executive board member and recent president of the Illinois Gaming Machine Operators Association and owner of G3 Gaming, said, “We think it has been one of the greatest small-business stimulators, probably in decades, in the state of Illinois. It’s bringing additional revenue streams for over 6,000 establishments across the state and revenue for small towns across the state that never had the ability to generate that revenue in the past.”
State Rep. Lou Lang, a sponsor of the original video gaming bill, added, “We helped fund a huge infrastructure bill that created a lot of jobs, we expanded small businesses throughout the state of Illinois that also created jobs and we brought in some needed revenue for the state of Illinois. I think, despite the fact that some are not huge fans of the concept, it generally seems like it has been a success.”
Recently there’s been an increase in “gaming parlors,” small businesses that take over empty storefronts and offer video gambling machines, often appealing directly to women. The games even can be found in floral shops and laundromats. Lang said, “What they’re doing is perfectly legal, but it was never the intent to expand gaming to places that are not bars and restaurants, per se.”
But the proliferation of video gambling terminals in Illinois finally has started to slow down. Between September 2012 and June 30, 2014, an average of 838 new terminals were activated each month, according to the Commission on Government Forecasting and Accountability. In fiscal 2015 that number dropped to 272 per month and hit 263 machines per month in fiscal 2016.
That could be good news for Illinois casinos, which have been affected by the video gambling machines. At the end of 2012, Illinois’ 10 casinos brought in $1.63 billion in total adjusted gross receipts, with 16,157,869 admissions, according to the Illinois Gaming Board. In 2016, the casinos collected $1.41 billion and admissions declined to 12,344,698. Tom Swoik, executive director of the Illinois Casino Gaming Association, which represents the state’s riverboat gaming industry, said, “I think video gaming is significantly worse than what we were expected. It’s just so much more convenient. I have friends in Springfield who would go to Peoria once or twice a month for the casino. Now they’re just going to the local bar.”
Swoik noted the decline in casino revenue also has caused a drop in education funding. Currently Illinois casinos pay a graduated tax on of 15 percent, increasing to 50 percent if a casino’s adjusted gross receipts exceed $200 million.
Recently casino operators have begun buying out potential competitors. For example, Clairvest Group, an investor in Rivers Casino in Des Plaines, purchased a minority stake in Accel Entertainment Gaming, operators of video gambling machines at more than 1,200 businesses. Penn National Gaming, which operates three Illinois casinos, purchased Prairie State Gaming, which manages machines at more than 270 businesses.
Still, supporters of the games believe there’s room for more—especially in the 175 Illinois communities that opted to prohibit the machines. That includes Chicago, where Mayor Rahm Emanuel has publicly opposed allowing video gambling machines in the city.
The industry is watching a lawsuit filed this spring in Cook County against the Illinois Gaming Board by Illinois Cafe & Services Company and Laredo Hospitality Ventures, which operate more than 100 video gaming parlors in Illinois. The suit challenges provisions in the law requiring businesses to pay half of their video gambling machine profits after taxes to terminal operators, and prohibits them from buying their own machines. The Illinois Gaming Machine Operators Association claims the suit is without merit.
