The Curious Case Of Illinois Sports Betting

November 21, 2022
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A second application process for three online-only licenses is the latest chapter in the story of an Illinois sports-betting market that has become the second largest in the U.S. but taken on a very different shape than was anticipated when a state law was passed three years ago.

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A second application process for three online-only licenses is the latest chapter in the story of an Illinois sports-betting market that has become the second largest in the U.S. but taken on a very different shape than was anticipated when a state law was passed three years ago.

The Illinois Gaming Board (IGB) on November 1 reopened the process to award the three online licenses available under the 2019 Sports Wagering Act, after the lone applicant in an initial process withdrew its application.

The online-only licenses costing a stiff $20m were initially expected to be the entry point for fantasy-sports brands FanDuel and DraftKings, before those companies were instead able to navigate other legal restrictions and launch in Illinois through branding partnerships with incumbent casinos and racetracks.

The IGB’s initial process to award the licenses was an ill-fated one as the only qualified applicant — special purpose acquisition company Tekkorp Digital, which was then in advanced negotiations to acquire Mexico’s Caliente Interactive — has since been disbanded due to capital-market conditions and a second applicant, Fubo Gaming, has also now withdrawn from the U.S. sports-betting market.

Although there will now be another opportunity for the third company that apparently submitted a late application during the first round, IGB administrator Marcus Fruchter did not exactly sound like he was anticipating a glut of interest before a March 1, 2023 deadline when he took pains during the IGB’s most recent monthly meeting to describe the new licensing window as a “statutorily mandated competitive selection process.”

An alternative option for the three online licenses would be to make them available to Illinois companies meeting certain diversity criteria, rather than those able to pay $20m upfront, said Cory Aronovitz, a gaming attorney with Casino Law Group in Chicago.

“The process will open up, [but] I do not see any takers without revisions to the law,” Aronovitz told VIXIO GamblingCompliance. “There may be a movement to push social equity opportunities by expediting the process and reducing the fee. This would take legislative support in an effort to cure disparities in the industry.”

Twists And Turns In A Major Market

The prospect of a second false start for Illinois’ online licenses is symptomatic of a sports wagering market that has taken on an altogether different shape than anticipated when the 2019 law was first approved.

An earlier twist came when statutory provisions requiring in-person registration of mobile sports-betting accounts at physical casinos or racing facilities were suspended by Governor J.B. Pritzker for more than nine months through the height of the pandemic.

In-person registration was initially to be required until the three online-only licenses were awarded, before lawmakers last year agreed to amend the restrictions that had already been neutered by the state’s pandemic response.

In addition to casinos and racetracks, Illinois allows for retail sportsbooks at major sports arenas.

Three-plus years after passage of the 2019 law, however, no sports-arena sportsbooks have actually opened, in part due to a need for local approval to permit sports wagering within Chicago city limits.

As things stand, only one facility — the Chicago Bulls’ and Blackhawks’ United Center alongside retail partner FanDuel — has even applied for a license, according to the IGB’s website.

IL

Also in the 2019 law was a so-called pilot program authorizing the Illinois Lottery to operate a network of sports-betting kiosks in up to 5,000 retail establishments.

But getting that program off the ground always seemed challenging due to a requirement for a kiosk system operator to pay a $20m fee for a scheme that would be limited to parlay wagers and expire on January 1, 2024.

Two bills to extend the lottery pilot program to 2030 and reduce the upfront fee to $1m were introduced in the Illinois House and Senate earlier this year but not passed out of committee.

“As it relates to sports lottery, the 2019 provision was not viable,” Aronovitz said. “I project the legislature taking another look at this as well. There have been proposals in the last [General Assembly] and I anticipate those being re-introduced with new support.”

Despite morphing into a different shape and having a limited rollout relative to the initial law, Illinois has still become a key battleground within the wider U.S. sports-betting market.

Through the first nine months of the year, Illinois generated $512.7m in total gross sports-betting revenue, more than any other state besides New York, according to VIXIO data.

Ultimately, the ability of leading online operators to partner with Illinois casinos, rather than be required to wait for their own license, is a key factor behind the market’s success, according to Tom Thanas, executive director of the Illinois Casino Gaming Association.

“I see the success that Illinois has experienced with the rapid rise of the sports wagering industry is attributable to some of the existing land-based casinos and riverboat casinos affiliating with well recognized companies that have expanded the sports wagering market on a national level,” Thanas told VIXIO.

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