Illinois ranks as the third-largest sports betting market in the U.S, and most of the production comes through online wagering. The state could do even better were it not for the fact that three new online-only sportsbooks failed to secure a license in a market where DraftKings, FanDuel and BetMGM dominate, according to the Chicago Tribune.
Four companies submitted applications in December with the Illinois Gaming Board for three online licenses still up for grabs, none tethered to a physical location like a casino. Three of the companies have since folded their hand or had it folded for them.
Tipico, an international sportsbook based in Malta, applied after the December 3 deadline was rejected by the gaming board.
Digital Gaming, a Florida-based company, withdrew its application after filing. The company did not respond to a request for comment.
Fubo Gaming, a new division of New York-based streaming service FuboTV, was notified in April that “it did not meet the minimum qualifications.”
“Fubo Gaming has been issued operating licenses by gaming regulators in other states, each following extensive background investigations into the company and its principals,” the company said in its April statement. “The basis for which the company has now been disqualified in Illinois did not preclude its licensure by these other states.”
That left Tekkorp/Caliente as the only remaining applicant, which turned out to be no slam dunk either.
In May, a Washington, D.C.-based nonprofit called Stop Predatory Gambling sent a letter to Gaming Board Administrator Marcus Fruchter expressing concern that Caliente Interactive is part of Grupo Caliente, a Mexican gaming company owned by Jorge Hank Rhon, the former mayor of Tijuana. The group raised decades-old allegations that Rhon participated in everything from money laundering and drug trafficking to the illegal transportation of endangered wildlife, asking the board to reconsider its decision to advance the license application.
Incidents cited by the group included Rhon’s 1995 arrest at the Mexico City airport after a customs inspection found suitcases filled with carved ivory and rare animal pelts that he had not declared. In 2011, Rhon was arrested by Mexican federal authorities after a raid on his Tijuana compound turned up 88 guns and nearly 10,000 rounds of ammunition. In both cases, charges were dropped.
“Caliente Interactive is not part of Grupo Caliente, nor is it owned in any way by Grupo Caliente or any individual or entity involved in the ownership of Grupo Caliente,” said Gilbert Brooks, an attorney representing the Tekkorp/Caliente bid.
Miller said the pending Tekkorp application is “being processed and investigated per the requirements” of the gaming board’s competitive selection code. But financial difficulties may render that decision moot.
In its September 13 proxy filing, Tekkorp said, “Capital market conditions have deteriorated significantly since the transaction was initially contemplated,” and the merger with Caliente “is no longer being pursued in the same manner.” While Tekkorp is exploring “alternate opportunities” with Caliente, there isn’t enough time to hammer out a new deal before an October 26 merger deadline, the company said.
While the state will likely reopen the competitive process for the online licenses after the Tekkorp application is resolved, near-term economic and competitive headwinds may produce a similar result, according to Chris Grove, a partner with Eilers & Krejcik Gaming.
Grove cited the high cost of capital amid tightening credit and the outsized market share being “hoovered up” by DraftKings and FanDuel as significant deterrents to potential Illinois applicants.
