Illinois Governor J.B. Pritzker delayed singing a comprehensive gambling bill passed by the legislature a few weeks ago. Pritzker signed the bill as part of a $45 billion package dubbed “Rebuild Illinois,” that also includes new roads, bridges and infrastructure improvements.
Now that the bill is officially law, steps will begin to move forward with sports betting or other provisions of the 816-page gaming bill–including slots at O’Hare International and Chicago Midway International airports, casino-style gaming at horseracing tracks and six new casinos, including one in downtown Chicago.
As a result, the gaming board can now begin writing regulations for sports betting—which means it should be able to launch by football season.
Meanwhile, slots vendors are gearing up for new business as the legislation would allow the six new casinos and the state’s 10 existing casinos to offer a total of 30,000 new positions. Association of Gaming Equipment Manufacturers Executive Director Marcus Prater said, “These type of expansion opportunities don’t come along too often anymore. As suppliers, we’re certainly pleased.”
However, SunTrust Robinson Humphrey Analyst Barry Jonas said, “We’re seeing a lot of skepticism around the financial return from operations currently in the market and those not in the market. A lot of operators are hesitant to add on additional positions, add tables or slot machines, given the returns there.”
Jonas estimated about 15,000 to 20,000 positions would be added “assuming all the new casinos get built.” Those new units could generate $79 million to $224 million in earnings, with Scientific Games and IGT bringing in $20 million to $56 million of that total, Jonas said.
Taxes also will be a major consideration under the new gaming law, Jonas added. Currently casino revenue is taxed on a graduated scale; last year the state’s 10 casinos paid an effective tax rate of 33.8 percent, including state and local wagering and admission taxes, according to the Illinois Commission on Government Forecasting and Accountability. The new Chicago casino is expected to pay a 66 percent effective tax rate, with the proceeds divided between the city and the state, according to a SunTrust report. By comparison, Nevada’s tax on gross gaming revenue is just 3.5 percent to 6.75 percent.
Jonas stated that under the new gaming law sports betting applicants must pay $20 million for online licenses, then a tax of 5 percent of the adjusted gross revenue from the prior year, capped at $10 million; gross gaming revenue would be taxed at 15 percent.
Operators could face even higher taxes, Jonas said. The state tax rate on video gambling is 30 percent, but under the new bill that will increase by 3 percentage points starting July 1 and another 1 percentage point next year.
Of the 10 casinos currently operating in Illinois, seven are regional properties owned by Nevada-based companies Caesars Entertainment Corp., Boyd Gaming Corp., Penn National Gaming Inc. and Eldorado Resorts Inc.
Penn National Vice President of Public Affairs and Government Relations Jeff Morris said the company still is analyzing the bill. “This is the most massive gaming expansion package we’ve ever seen, all happening in a state that is already saturated from a gaming standpoint.”
Boyd Gaming, Caesars, Wynn Resorts Ltd. and Red Rock Resorts and Eldorado have not commented on Illinois plans. Las Vegas Sands Corp. spokesman Ron Reese said the company is “not currently exploring or considering any opportunities in Illinois.”
Former Nevada Governor Brian Sandoval, president of global gaming development at MGM Resorts International, said that company is reviewing the opportunities the new bill presents, with an emphasis on sports betting. “Illinois presents a new and dynamic market, and as a leader in gaming and sports betting, we will certainly consider our options there,” Sandoval said.
According to Jonas, slot manufacturers are expected to be the major beneficiaries of Illinois’ new gaming law. Scientific Games Executive Vice President and Group Chief Executive Derik Mooberry added, “We’re excited about it. It provides a lot of opportunities for us. We’ll be ready.” Scientific Games is one of the largest suppliers of slot machines and video gambling machines in Illinois, Mooberry said.
Phil O’Shaughnessy, vice president of global communications, trade shows and creative services at IGT, said the company also views the expansion as an opportunity.
“I think we’re well-positioned to have an opportunity for more IGT machines. We also recognize that the Chicago casinos will need to be established with an operator, and that will take time,” he said.
O’Shaughnessy added IGT has a presence in the Las Vegas and Reno airports, and most likely will place machines inside the Illinois airports, as allowed by the new gaming law.
Despite taxes and other considerations, the Chicago casino license will be highly sought-after by casino operators because of the city’s high volume of visitors—nearly 58 million in 2018 according to the city’s tourism bureau. Eilers & Krejcik Gaming Managing Director Chris Grove said, “Chicago provides a unique combination of population, significant economic opportunity and a proven interest in gambling, as evidenced by the regional market around Chicago. I think with the potential of the Chicago market, most, if not all, commercial operators are going to entertain the possibility.”
Grove added that casino operators interested in sports betting will find Illinois especially hard to ignore. “It’s one of the most recognized sports hubs in the United States. If you’re not in the Illinois market, your ability to compete in connected markets like Indiana and Iowa is compromised,” he said.
Another concern is gambling addiction. Illinois Council on Problem Gambling President Elizabeth Thielen said, “In other states where gambling has been expanded, typically you do see an uptick in problem gambling.” She noted the new gaming law sets aside money for problem gambling services. “It is really important that the money is used strategically to really look at researching what is the extent of the problem? Where are the gaps in services? Making sure that prevention as well as treatment and recovery support (are available) are all part of an overall plan. The more we can prevent or intervene early the more effective that funding will be.”
Across the state line in Indiana, Governor Eric Holcomb said he’s not concerned about a gaming expansion in Illinois. “I mean, this is an uber-competitive industry. It’s happening on all our borders, not just in Illinois. And obviously we had a productive legislative session, this past session, ourselves.”
In April, the Indiana legislature authorized relocating the Majestic Star casinos from Lake Michigan to a land-based site elsewhere in Gary. In addition, lawmakers allowed a new casino in Terre Haute and live dealers at the state’s horseracing tracks, lowered casino taxes and legalized sports betting. “We have to make sure that our industry is modernized and firing on all cylinders,” Holcomb said.
