Arlington Park in Illinois Says No to Casino, Yes to Sports Betting

In a surprise turn of events, Arlington Park has declined to apply for a casino license under the new Illinois gaming expansion law. Parent company Churchill Downs claims the taxes called for in the new gaming law are simply too high for the track to achieve profitability through any future expansion of casino games at the track.

Churchill Downs’ decision is a bad look compared to Hawthorne Race Course, which was the first business in Illinois to partner with a gaming entity. Just two weeks after the new gaming law went into place, Hawthorne entered an agreement with PointsBet Illinois to operate its retail and online sportsbook.

Similarly, Illinois horse track Fairmount Park is also moving forward with plans for a casino. At Fairmount, the new gaming bill could save a dying establishment.

Ironically, Arlington Racecourse has for years lobbied that it needed to be able to offer table games and slots in addition to racing to save its own business. However, despite now having the opportunity, Churchill Downs officials have chosen to decline it. This decision comes much to the chagrin of many — especially those working in the Illinois horse racing industry.

In a statement, the Illinois Thoroughbred Horseman’s Association said the following:

“We are stunned and profoundly disappointed by Churchill Downs’ decision not to pursue supplemental gaming at Arlington Park to do its part to grow jobs and economic opportunity for thousands of Illinois men and women both at the track and throughout the state’s agribusiness community.”

While Churchill Downs is declining to apply for a casino, it still plans to apply for an IL sports betting license. The owner of Arlington went on to say that they are considering moving horse racing away from Arlington permanently. In the meantime, Churchill has only committed to horse racing at Arlington through 2021.

To say the IHTA was upset upon hearing the news is an understatement. They went on to say “by virtue of its now-annulled commitment to Illinois racing,” Churchill should be denied the property tax break it receives as a horse track ($2.47 million) and its recapture subsidy ($4.47 million). In addition, they want Illinois to decline Churchill Downs’ sports betting application.

While this sounds petty at first blush, it can be argued that what Churchill Downs is threatening to do is against the spirit of the new gaming law.

Section 1.2 labeled “Legislative intent” reads, “This Act is intended to benefit the people of the State of Illinois by encouraging the breeding and production of race horses, assisting economic development and promoting Illinois tourism.”

So, in quite the ironic twist, as a result of this bill, the largest horse track in the state is potentially planning its exit.

According to Churchill Downs CEO Bill Carstanjen, “Arlington would enter this market with an effective tax rate that would be approximately 17.5% to 20% higher than the existing Chicagoland casinos. Due to contributions to the thoroughbred purse account.”

The part of the gaming law that Carstanjen is referring to requires them to take a portion of casino revenue and dedicate it towards racing purses. Effectively, Churchill Downs is unhappy about not making quite as much money as casinos without a racetrack. This isn’t about the track not being profitable, as is the case with the current Chicago casino situation. This is simply a business protesting additional fees.

At Fairmount Park, those “fees” are what will keep the horse racing business afloat. Currently, Fairmount is unable to offer purses for winning horses that are competitive with nearby tracks with table games in place. So, it would appear that putting a portion of casino winnings towards the racing purse is an established norm in the business and is almost a requirement to secure the best horses.

“Essentially it’s really going to save the place,” said Fairmount President Brian Zander.

In stark contrast, according to Churchill Downs, “the economic terms under which Arlington would be granted a casino gaming license do not provide an acceptable financial return, and we cannot reasonably proceed.”

Reading between the lines, Churchill Downs seems to be leaning on Illinois lawmakers as the gaming giant repositions itself before a new draft of the law is put into effect in September.

Playing devil’s advocate, this is, of course, a business decision by Churchill Downs. As majority owners of River Casino in Des Plaines, just 10 miles from Arlington, one can see how Churchill Downs could reasonably expect some cannibalization profits. And with the additional horse purse fee on top of everything, it’s an easier decision for Churchill Downs to make.