Illinois Sports Betting: Winners and Losers of Sweeping Bill

Illinois Sports Betting: Winners and Losers of Sweeping Bill

The most impactful sports betting bill of 2019 is one signature from coming into law. It path to legalization was seldom straightforward or simple – and it seems to be the same case for its future.

Illinois, the nation’s sixth-most populated state and home to some of the nation’s most popular sports teams, will formally legalize sports betting as soon as Gov. J.B. Pritzker signs a sweeping gaming expansion bill passed by lawmakers Sunday evening. A measure that repeatedly seemed to be on proverbial life support unexpectedly came together in the past few days, going from longshot to near certainty in a series of just a few hours.

The Land of Lincoln is set to take one of the largest slices of the estimated $150 billion U.S. sports betting market. The three largest states by population (California, Texas and Florida) are nowhere close to legal wagering, New York (No. 4) is mired in controversy stalling its legislative efforts and Pennsylvania (No. 5) is already taking bets.

That left Illinois as the biggest prize remaining in the national scramble to approve sports wagering at the state level.

Home to Chicago, the third-most populated city in the nation and the largest in a state to approve sports betting, gaming interests have eagerly lobbied lawmakers to open up legal gaming – and prioritize their entity in the process.

Those competing interests include:

  • A series of horse tracks with a long history in the state
  • 10 casinos, which generate hundreds of millions of dollars in bets annually
  • One of the nation’s most lucrative state-run lotteries
  • Several of America’s most prestigious professional sports teams
  • One of the most active online markets through daily fantasy providers

Not surprisingly, this prevented an easy solution to try to appease all parties – or any.

After multiple hearings and more than a year of debate in Springfield and across the state, Illinois sports betting seemed doomed as the legislative calendar neared its conclusion for 2019. Days before the session’s end, Rep. Michael Zalewski, who had spearheaded legislation in the statehouse, recused himself from further discussion over conflicts of interest with his law firm.

This seemed to doom its prospects. But unexpectedly, lawmakers agreed to extend the 2019 session. Now quarterbacked by Rep. Bob Rita, another outspoken gaming backer, Illinois cobbled together an unexpected bipartisan consensus on gambling palatable enough to pass through the House and Senate while garnering Pritzker’s approval.

But the bill, which legalized sports betting as part of a massive overall gaming expansion, didn’t come without imperfections. Here are the parties that fared best when the dust settled – and those that had hoped for something more.

Winners in the Illinois Sports Betting Bill

Blackhawks fans like those here in the United Center may soon be able to place bets

Though its already drawn the ire of online purveyors (see “Loser in Illinois Sports Betting” below), most of the state’s established gaming and sporting interests got much of what they wanted with this bill.

State Horse Tracks

Long a staple of Illinois gaming, the state’s horse racing industry has fallen in influence, revenue and attendance for more than a decade. The remaining tracks fought for sports betting as a way to reverse the trend, and now the new law permits them to open Illinois sportsbooks on site, and to create online and mobile wagering options as well.

Sports betting will not be a panacea, but along with increased casino gaming opportunities, it gives horse tracks another way to compete in the increasingly crowded gaming sphere. The bill also gives the tracks lower licensing fees than some other entities, as well as a quicker time frame to launch betting, two caveats that should help the tracks further stand out in the state’s nascent sports betting market.

Illinois Casinos

The state’s 10 casinos will also be able to take online and in-person bets, helping them compete with Indiana and Iowa facilities that will do so as early as this year. This is a key asset for Illinois facilities in the ever-growing Midwest casino expansion race.

Illinois visitors and residents will also have new casino options. Chicago was approved for a long sought-after commercial casino, and several more gaming facilities will not be permitted in the city’s suburbs. An influx in casinos has sometimes cannibalized revenues in other states, so it will be interesting to see how this will impact sports betting figures, and the flow of gaming dollars overall.

Illinois Professional Sports Teams

Some of the nation’s most iconic sports venues will now be permitted to host sportsbooks. Illinois is the second jurisdiction, following Washington D.C., to outline a specific clause that allows sporting venues to take bets from within their own properties.

It’s worth noting the bill allows, but doesn’t require, these venues to do so. Iconic Wrigley Field, and its infamous tenants, MLB’s Chicago Cubs, may not take bets due to complex family dynamics. The team is owned by the Rickett’s family, which includes Nebraska Gov. Pete Ricketts, an outspoken gambling opponent.

The Illinois State Lottery

If sports betting options at state horse tracks, casinos and sporting venues weren’t enough, the state lottery will also provide sports bets. A somewhat late addition to the bill, the lottery will likely be able to take wagers at its more than 2,500 video terminals across the state.

This is first subject to the tests of a “pilot program” to evaluate ways to regulate the system, but it seems the lottery too is well on its way to offering sports bets.

Losers in Illinois Sports Betting Bill

Like the Chicago Fire in this picture, online bettors were losers in the bill

Bettors will have plenty of options to place a bet in person in the coming months. Online bettors might not have it as easy.

Though online and mobile options will be available in the Land of Lincoln, possibly before the end of the Cubs’ (or even the White Sox) 2019 seasons, this bill wasn’t as kind to internet-based purveyors as similar measures in other states.

Daily Fantasy Sites

Daily fantasy sites were perhaps the biggest bogeymen to many of the land-based gaming facilities like the horse tracks and casinos, who feared they would cut into their revenues. Online wagers via DraftKings and FanDuel have accounted for the majority of New Jersey’s total handle, so it’s not surprising they drew much of the ire from the land-based entities.

This pitch worked in Springfield, where lawmakers favored the legacy gaming establishments over the up-and-comer DFS sites. Earlier drafts of the legislation would have put third-party online purveyors (specifically DraftKings and FanDuel) in a “penalty box” as part of a “bad actor” clause for operating in the state even though these games weren’t legalized.

This ultimately didn’t materialize, but the legislation is not friendly to the daily fantasy operators.

The bill only permits three outside, third-party online vendors to operate in the state if they aren’t affiliated directly with a casino, track, sporting venue or lottery. Though other states have allowed third-party vendors to promote their brands through partnerships with the land-based entities, the Illinois bill specifically prevents that.

Though DraftKings and FanDuel are leading candidates to land one of the three online licenses, they are far from locks. Illinois is a coveted market, and its likely most larger third-party sports betting sites will apply as well.

Larger is a key word as initial licensing fees will likely prohibit any less viable sites from applying. The state will charge $20 million for the third-party vendors to operate, the highest initial fee in the nation. This too is not-so-subtly designed to push down the DFS sites to bolster the legacy venues.

Additionally, the three online betting purveyors can’t procure licenses to take bets until a minimum of 530 days after the first sports betting license is issued. This too is designed to give the tracks and casinos a (sizeable) head start in the sports betting race.

Armchair Quarterbacks (and Bettors)

The bill isn’t great for bettors that would like to wager from the comforts of home.

Eligible residents and visitors age 21 and up located within Illinois state lines will be able to place a mobile wager from anywhere in the state, but will be required to register at one of the land-based gaming facilities before they can bet. This is another nod to the land-based facilities, as bettors will at least have to travel to the facilities where they will, in theory, be more likely to patronize other options as the venues.

This clause sunsets once one of the online operators is licensed (which will likely mean 530 days from when the first in-person facility is authorized) but that means a minimum of 18 months of mandatory in-person registration before this could happen. Assuming an optimistic timeline where the first land-based license is issued in September of this year, that would mean online registration won’t begin until 2021 (at the earliest).

College (and Kindergarten) Bettors

Illinois lawmakers made it very clear there will be no betting on amateur sporting events in their state, no matter what level.

The bill prohibits bets on in-state college athletics, mirroring a similar prohibition in New Jersey. Like every other state to take bets, it also bans all wagers on high school sporting events, but the Illinois bill goes even further to protect amateur competition.

Sports Betting Industry Backers

As discussed ad nauseum above, any passed Illinois sports betting bill was a pretty astonishing accomplishment in of itself. Though any legal sports betting bill that can take players from the unregulated black market onto a government-sanctioned entity is, overall, a good thing, the bill contains many of the provisions industry stakeholders have long fought against.

That encompasses several caveats mentioned above, including the licensing fees and overall restrictions on online skins. Gaming backers have touted the need for as many viable options as possible to create a robust, well-rounded market with a myriad of reliable options for customers. The unprecedented initial fees and restrictions on the number of eligible online purveyors, or “skins”, is not likely to draw many fans from gaming companies.

The in-state college ban is also frowned upon. Local teams, again unsurprisingly, draw a significant portion of a local market’s total handle. By limiting wagers on major in-state teams like Illinois or Northwestern, the state could see would-be legal bettors stay with their illegal bookies or offshore sites. The same fear goes for the in-person registration requirement, which may be enough to deter bettors from a regulated entity.

And those are just some of the concerns voiced by the industry.

One of the most substantial qualms comes over a mandate that sports gambling purveyors use league-sanctioned data for in-play betting options or player prop bets. This means operators will effectively have to compensate the leagues hosting the competitions. Opponents to this clause fear the sports leagues will then charge exorbitant rates to do so, further cutting into what is a low margin industry to begin with.

The legislation specifically says they will only have to pay the leagues on commercially reasonable terms, but this nevertheless is an unwelcome development for operators and their bottom lines. These “data fees” have been largely rejected in other states, and worries are percolating it could revive this mandate in other states considering legalized sports betting.

Add all that to a 15 percent tax on adjusted gross wagering receipts (17 percent in Chicago), which are among the highest rates in the nation for sports betting.

Still, this bill will do a lot of good for the legal industry as a whole.

There will be no shortage of in-person options in the state. Online betting, which makes up about 80 percent of total revenue in New Jersey, is comparatively more limited, but there will still be multiple options for bettors, especially once the online purveyors become eligible in the coming years.

The best news is Illinois will begin taking legal sports bets, likely before the end of the year. That will make a lot of winners for the sports gambling industry.

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