The Illinois Senate passed a comprehensive gambling measure on June 2 and will send it to Governor J.B. Pritzker. He’s expected to sign it as the bill’s projected revenue will raise $217 million for his proposed budget and contribute to a $45 billion capital campaign, the first such plan n a decade.
Prior to the bill’s passage, Pritzker said, “Legalizing sports betting and expanding gaming will create jobs up and down the state, from Rockford to Chicago to Walker’s Bluff, where communities hungry for employment will see 10,000 new jobs.”
The 816-page bill merged state Rep. Bob Rita’s casino expansion bill with state Rep. Mike Zalewski’s sports betting bill under Senate Bill 690, sponsored by state Senator Terry Link. A teary Link stated, “I’ve only been doing this for 20 years to get this done, and it’s a little emotional.” Rita said, “This is a jobs bill. This is going to create jobs, and it’s going to create economic development.”
Zalewski, who was to adopt a low profile in the session’s final days due to a perceived conflict of interest, added, “Today is the culmination of a tremendous amount of hard work, determination and teamwork behind a vision for entertainment and economic opportunity in Illinois.”
Among its many provisions, the bill will legalize on-site, online and mobile sports wagering and authorize six additional casinos, including one in Chicago. Existing riverboat casinos will be allowed to increase gaming positions and move to land-based operations. Bars and taverns will be permitted to add video gambling positions and increase bet limits, and two additional racinos will be allowed for a total of five. Slots will be allowed at Chicago’s two airports, Midway and O’Hare. Overall and over time, the expansion will allow gaming positions to increase from 44,000 to 80,000–about four times the number in any neighboring state.
Telsey Advisory Group observed, “There is going to be a major impact from this legislation for years to come. While gaming will now have too many positions throughout the state, it will take back lost tax revenue to Indiana, Missouri and Iowa. The state did a good job of positioning the new casinos to keep the tax revenue in Illinois.”
Here’s an overview of this mega-legislation:
Sports Betting
Under the new law, sports facilities with 17,000 or more seats may apply for a master sports-wagering license, allowing them to offer at or within a 5-block radius of the venue. Sports betting licenses will range from $3.2 million to $20 million and will be available to brick-and-mortar facilities and online operators. Revenue will be taxed at 15 percent with an additional 2 percent tax on revenue generated in Chicago. In the first 18 months of sports betting, players would have to sign up in person to wager on professional and collegiate sports events; betting will not be allowed on Illinois college teams, no matter where they’re playing, nor on high school sports.
The National Basketball Association and Major League Baseball unsuccessfully lobbied in Illinois for an integrity fee. However, sports betting operators will be required to purchase official data from sports leagues regarding in-play or prop bets.
One contentious provision will block online platform providers DraftKings and FanDuel, and any other online-only operator, from launching under their own brand for 18 months; during that period they may partner with brick-and-mortar locations. Originally, Rivers Casino owner Neil Bluhm lobbied for lawmakers to create a 3-year “penalty box” for DraftKings and FanDuel, whom Bluhm said have been operating their daily fantasy sports businesses illegally in Illinois. The two companies pushed back and lawmakers ended up shortening the delay to 18 months. Also, the bill no longer specifically targets DraftKings and FanDuel. It will allow a maximum of three online licenses at a fee of $20 million each.
During debate, state Senator John Curran noted if Rivers Casino can use its own app and brand, “That gives Rivers a pretty big online advantage because the only way an online-only operator can use their own brand is to buy a casino or racetrack.” Link responded,” We’re trying to promote Illinois businesses above all others. We’re trying to make a level playing field for all legitimate companies in Illinois.”
DraftKings Chief Executive Officer Jason Robins tweeted, “While it is good to see sports betting bills passed, excluding DraftKings and FanDuel is like passing a ride sharing bill that excludes Uber and Lyft. Very disappointing that Illinois customers will not have the best options available to them for 18 months.” DraftKings threatened legal action if the 3-year ban remained.
Analyst Thomas Allen of Morgan Stanley said Illinois could become one of the biggest sports betting markets in the U.S. with $330 million in revenue by 2025,. However, he noted, casual players may be put off by the in-person registration requirement for the first 18 months.
At least one analyst, Global Market Advisors Director of Government Affairs Brendan Bussmann, said, “The process that Illinois has gone through in the last couple of days of providing a Christmas tree amendment to have revenue be the driver as opposed to sound policy is not the way to craft good sports betting legislation. Many of the aspects of the bill throughout the debate on sports betting have been a race to the bottom.”
The new law also establishes a lottery pilot program allowing sports lottery terminals to be placed at 5,000 lottery retail locations in the first two years after its effective date.
Chicago and Five New Casinos
The new bill authorizes a 4,000-position casino in Chicago which Mayor Lori Lightfoot hopes will help the city handle pension debts that could increase $1-$2 billion by 2023. While six local venues are eligible to offer sports betting—Wrigley Field, Guaranteed Rate Field, Soldier Field, United Center, Chicago Fire’s Seatgeek Stadium and Joliet Speedway—Lightfoot would not speculate about a Chicago casino location.
“The first step is to get a feasibility study up and going to make sure that the economic model, meaning the taxation structure that the general assembly has proposed, is actually going to be viable, meaning that we can have a product that we can market and get financed,” Lightfoot said. Pritzker said he’d prefer a location apart from the downtown business district and away from McCormick Place.
The bill also will allow slot machines at Midway and O’Hare airports. Lightfoot said, “We’re not going to turn O’Hare or any place else into a gambling den, neither at Midway. If you look through the particulars of the bill, what you’re going to find is that we have a significant amount of local control. So, we haven’t set the parameters yet. But there’s going to be a very high hurdle reached before we see any gaming at our airports.”
The new Chicago casino will be permitted 4,000 gaming position, and three new 2,000-position casinos will be allowed in Rockford, Danville and Waukegan; the Williamson County casino will be limited to 1,200. The county board or authority of the host municipality must certify that the license applicant has met certain criteria, such as negotiating with the host community in good faith and agreeing on the location. Each applicant will pay $15 million upon issuance of the license and three years later pay a reconciliation fee.
Rockford officials have lobbied hard for a casino, especially as the Ho-Chunk Nation moves forward on its proposed $560 million casino in Beloit, Wisconsin, 30 minutes away; the Bureau of Indian Affairs recently published a final environmental impact statement for that project. A new Danville casino also faces nearby competition from a proposed casino in Terre Haute, Indiana, a 1-hour drive away, where the Indiana legislature approved a new license pending Vigo County voters’ approval.
Greg Gibson, vice chairman of Spectacle Entertainment, which plans to compete for the license, said, “The success of Terre Haute and Danville will somewhat depend on which is opened first. It is certainly in the best interest of Vigo County and the state of Indiana to move this process along as quickly as possible.”
Spectacle Vice President and General Counsel John Keeler noted, “Illinois has been trying for 17 years to expand gaming. We knew this would happen eventually, but we were hoping for another two or three years. It just wasn’t in the cards.” Still, Ed Feigenbaum, editor of Indiana Gaming Insight, said Indiana could benefit from Illinois’ gambling saturation due to additional casinos and expanded video gambling.
Increased Gaming Positions
Illinois Gaming Association Executive Director Tom Swoik said, “This is a bill that will grow the number of gambling positions, but it’s not going to increase the number of gamblers.” The new law will permit the state’s 10 existing riverboat casinos to increase gaming positions from 1,200 to 2,000. But only two of the existing casinos offer the maximum of 1,200 positions; three have fewer than 1,000 positions.
The new law also will allow casinos to relocate to land, hopefully investing millions of dollars into new brick-and-mortar facilities. An official at Penn National Gaming, owner of three Illinois casinos, said the company has no plans to advantage of that provision. The fee would be $250,000.
The existing casinos will receive a dollar-for-dollar credit, not to exceed $2 million, for renovations or construction costs through 2023. All the construction work must be union contracts to be eligible for the tax credits.
Video gambling positions also will be allowed to expand, from five to six at restaurants, bars and veterans and fraternal organizations and from five to 10 at truck stops, which must be located within three miles of the freeway and have volume exceeding 50,000 gallons per month. Observers believe most of the state’s 6,500-plus video gambling locations will add at least one terminal.
A ProPublica Illinois and WBEZ study found video gambling already has cannibalized casino revenue. Between 2013 and 2017, state revenue from Illinois casinos declined 15 percent from $462 million to $393 million while income from video gambling machines grew nearly 900 percent, from $30 million to $300 million, according to state records.
However, a switch could occur whereby new casinos cannibalize revenue from video gambling. Swoik said, “I think people are underestimating the impact a new casino is going to have on small bars and restaurants. There’s likely to be a shift from the video gaming terminals to the casino.”
Betting limits also will increase from $2 to $4, and payouts can rise to $1,199 from $500. Also individual locations will be allowed to create jackpots up to $10,000. All of these changes will make video gambling locations even more competitive with casinos, observers said.
Lawmakers also increased the tax on video gambling net terminal income by 3 percent effective July 1, with an additional 1 percent kicking in a year later. Currently the rate is 30 percent, with 25 percent to the state and 5 percent to local governments.
A recent ProPublica Illinois-WBEZ story revealed several legislators and their family members had financial ties to the video gambling industry. AS a result, most of them recused themselves from the SB 690 vote.
Racetrack Casinos
After lobbying for two decades for casino-style gambling to boost their struggling industry, Illinois racetracks will be allowed to apply to the Illinois Gaming Board for a gaming license; the application fee will be $250,000 plus a fee of $30,000 per position. Gambling will be permitted within the grandstand building or a facility within 300 yards of it. Up to 1,200 gaming positions—slots and table games–will be allowed at Arlington and Hawthorne Park racetracks in Cook County and 900 at Fairmount Park in East St. Louis. A new harness racetrack proposed for Cook County will have 1,200 gaming positions. Historical racing will not be allowed.
A provision will authorize the board to retain and reallocate unused positions to the tracks that want them, even beyond the maximum limits. The tracks must pay a fee of $17,500 for those gaming positions.
The new law includes several amendments regarding capital contributions, proceeds contributed to purses and contributions to the Horsemen Associations. A 40-cent per-patron admission tax will be required. Also, the parimutuel tax rate will top out at 3.5 percent for handle that’s 175 percent or more above the 2011 average daily parimutuel handle. The law also prohibits appropriations from the various Illinois Breeders Trust Funds; bans incentives for races involving Illinois horses; and requires all tracks to make an annual contribution of $1 million to backstretch workers once gambling games are operational.
Sports bets will be allowed to be placed at Arlington’s betting windows; these wagers can be made year-round even after the live horseracing season ends.
Arlington Park President Tony Petrillo said he’s cautiously optimistic that casino-style gambling will help supplement declining purse revenues. However, he noted the economic impact may be different today than even a few years ago due to the increase in video gambling.
Problem gambling services
ProPublica and WBEZ ranked Illinois 28th out of 40 states in terms of funding for gambling addiction services. But under the new budget,
lawmakers increased that funding from about $800,000 a year to $6.8 million—an increase of 8.5 times.
The new law also includes a self-exclusion program for sports betting, allowing problem gamblers to ban themselves from wagering on games. The state has a similar program in place for casinos, but still lacks a self-exclusion list for video gambling. Anita Pindiur, executive director of the treatment center Way Back Inn, said, “It’s a significant increase in funding, but this is a massive expansion, and it’s not rolling out slowly. It’ll happen very fast. And that’s going to have an impact on people. We have to educate them on the signs of addiction, or they won’t know when there is a problem until it’s too late.”
Miscellaneous Provisions
- Beginning in 2020, free play up to 20 percent of adjusted gross revenue will be excluded from gross receipts. In March 2023, the Illinois Gaming Board will be required to report to the General Assembly on the impact of the free play provision for the years 2020-2022.
- The Board will be required to use multiple accredited testing labs, regardless of contractual obligations or discretion.
- The new law will strengthen the ethics controls on board members and revise the criteria regarding appointment to the board. A new section was added to prevent gifts or influence with the host communities of the new casinos.
- New applicants must demonstrate best efforts to reach a goal of 25 percent minority ownership and 5 percent women ownership.
Licensees must annually report achievement in diversity inclusion as a criteria license renewal.
