Illinois is poised to become the sports betting capital of the Midwest after the Senate voted 46-10 in favour of SB 690. The House had already passed the sports wagering bill and it now heads to Gov. J.B. Pritzker’s desk for him to sign it into law. That is considered a slam-dunk, as Pritzker is a huge advocate of sports betting and he has already earmarked $200 million in revenue from taxing sportsbooks in the 2020 financial year. It marked a frenzied end to the Illinois legislative session and a double victory for Pritzker, as a bill to legalize recreational cannabis use also passed through both chambers and went to his desk.
Next year the good people of Illinois will be able to legally bet on sports and then sit back and light up a loaded bong while the action unfolds. It’s a brave new world and Pritzker has rapidly turned his state into one of the most liberal and progressive in the U.S. since he was sworn into office earlier this year. SB 690 authorizes the immediate construction of six new casinos, which can launch sportsbooks and casino games. It also opens up the state’s gambling industry in many more ways.
It increases the number of video slots permitted in Illinois and ramps up the maximum stake per spin. It transforms the state’s racetracks by allowing them to bolt on casinos, while a further two tracks will be opened, bringing the total to five. The number of state-sponsored places to bet within a casino, bar or racetrack – called “positions”, but essentially seats – will go from 44,000 to almost 80,000. By 2021 Illinois could boast 16 casinos, five racetrack-casino hybrids, 5,000 lottery betting kiosks, video slots at major airports and both physical and online sportsbooks.
Hard Work, Determination and Teamwork
Rep. Mike Zalewski, one of the bill’s original proponents, said it marks “the culmination of a tremendous amount of hard work, determination and teamwork behind a vision for entertainment and economic opportunity in Illinois”. This bill was mainly about sports betting and proponents are delighted with the result. It will make Illinois the 13th state to permit sports wagering, following Nevada, Delaware, New Jersey, Mississippi, West Virginia, Pennsylvania, Rhode Island, New Mexico (at a tribal casino), Montana, Indiana, Iowa and Tennessee. Pritzker called it “a win for our whole state”.
Lawmakers made a remarkable amount of progress as the legislative session drew to a close, following five months of inactivity. There were several amendments made late in the day, but it eventually dashed over the line before the clock ran down. It includes a complex fee for a master sports betting license, which is calculated on gross revenue from the previous year. Operators will pay 5% of their revenue in order to offer sports wagering for four years, up to a maximum of $10 million.
There was previously no cap and the initial rate was 15%, so these amendments have worked in operators’ favour, particularly larger ones. Yet it also allows smaller sportsbooks to set up shop as there is no lump sum fee being demanded and they will only be charged on what they bring in. The amendment also creates three online-only licenses costing $20 million each and awarded after a competitive bidding war.
Bad Actors Savaged
The big losers are DraftKings and FanDuel, who have been prevented from launching in Illinois for the first 18 months under a so-called “penalty box” clause. That brands them as “bad actors” for offering daily fantasy sports in Illinois when it was not exactly legal. Casino operators in the state led calls for DraftKings and FanDuel to be excluded, ostensibly to prevent them from dominating the nascent industry, as has been the case in New Jersey. The Garden has emerged as the largest of the new sports wagering markets since PASPA was axed in May 2018, but Illinois is larger in terms of population and GDP and it could become the largest sports betting jurisdiction in the US.
DraftKings and FanDuel are naturally incensed. “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,” said DraftKings chief executive Jason Robbins. “Very disappointing Illinois customers will not have the best options available to them for 18 months.” It is also a headache for Flutter Entertainment (previously known as Paddy Power Betfair), which purchased FanDuel in order to cash in on the brand name as the front for its U.S. operations. It does have other brands it could use to enter the Illinois market before the 18-month penalty box expires, but they are not as strong and it has channelled its marketing activity into FanDuel.
Nevada Still Top Dog
Outside of New Jersey, many states have struggled to pull in much revenue from sports betting after giving it the green light. Rhode Island has had a particularly underwhelming start to life, largely due to its lack of online offerings. Yet April was its highest grossing month to date, as its Twin River sportsbooks generated $2 million in revenue off a handle of $17 million. The state missed its target of $11.5 million for the 2018/19 fiscal year, but it is now aiming to raise $22.7 million in taxes in 2019/20, even though online sports wagering has not yet been legalised.
There has been much talk of Nevada losing its crown as the sports betting capital of America to New Jersey or perhaps Pennsylvania. Yet figures for 2019 so far show that it is on course for a record year and it shows no signs of relinquishing its top-dog status just yet. Revenue was up 32% year-on-year in April, reaching $21.7 million. Handle for the first for months of the year stands at almost $2 billion, showing that Las Vegas is still a major destination for sports bettors, while it continues to benefit from a lack of legal sportsbooks in neighbouring California.
The Golden State showing no signs of legalising sports betting any time soon, while New York is still struggling to launch an industry and sports wagering is not coming to Texas. That means it will develop into a battle between Nevada, New Jersey, Pennsylvania and Illinois to emerge as the biggest sports betting market in America in the years ahead. Given the momentum it is enjoying right now, you would not want to bet against Illinois seizing that crown.