Illinois is just a governor’s signature away from having legal in-person and online sports betting. Lawmakers put in long hours over the weekend with the House approving a sports betting bill on Saturday and Senate lending its approval on Sunday.
The Illinois sports betting bill now heads to the governor’s desk for one last approval. Governor J.B. Pritzker has voiced his approval of such legislation and is expected to sign the bill into law. Should that happen, Illinois will become the latest state to legalize in-person sportsbooks and mobile betting apps.
SB 690 (see pg. 227), also called the Sports Wagering Act, is likely to become law now that the bill has made it to the governor’s desk. Today, we take a close look at what the bill contains and what sports fans can expect moving forward.
Good News, Bad News and Interesting News
While any legislation authorizing sports betting is a welcome sight for fans, the Illinois bill offers a mixed bag of good news, bad news and interesting news.
The good news is the legalization of mobile sports betting is a big win. Some states have chosen to legalize in-person sportsbooks only, and that has always been a bit of a disappointment.
Mobile betting will be good for customers in terms of convenience and good for the industry in terms of revenue. For some perspective, New Jersey is currently seeing about 80% of its betting volume come in through mobile devices.
The bad news is the bill has multiple provisions that are anti-competitive or that inconvenience customers. An official data mandate, prohibitively expensive licenses, in-person registration and a ban on FanDuel/DraftKings for 18 months are all bad for business in various ways.
The bill also includes a couple of interesting aspects that don’t appear outright good or bad at first glance. Sports stadiums will be given a chance to obtain sports betting licenses and the lottery will also be getting in on the action. Let’s get to it.
Official Data Mandate
Official data must be used, but the new IL sports betting law does provide some minimal amount of protection as it says sportsbook operators do not have to rely on official league data if they can demonstrate to the Illinois Gaming Board that the sports governing body cannot provide such data on “commercially reasonable terms.”
How “commercially reasonable” is defined remains to be seen. Illinois could have just left the league data requirement out of the law entirely and the free market itself would have determined “commercially reasonable” all on its own with no outside intervention.
The way this portion of the law is written gives the leagues the upper hand over sportsbook operators, and politicians the upper hand over everyone else as it will presumably be someone who sits on the Gaming Board who will be in charge of deciding whether or not data contracts between the leagues and operators are “commercially reasonable.”
In-Person Registration Required
During the first 18 months sports wagering is active, all customers wishing to place bets online or through mobile devices must first visit a casino or racetrack in-person to register an account. This provision ends after 18 months.
Complicated and Expensive Licensing Fees
Illinois will be one of the most expensive states for sports betting operators. The law calls for licensing fees equal to 5% of each operator’s previous year’s adjusted gross receipts with a cap of $10 million.
That’s not all. The law further explains that for licenses issued after the effective date of the Sports Wagering Act, the fee will be $5,000,000 and then the amount of that fee will be adjusted 12 months later based on 5% of its adjusted gross receipts (up to $10 million).
Up to seven sports facilities may also apply for licenses at a flat fee of $10 million.
Illinoi will also be issuing three licenses to mobile-only sports betting providers. These licenses will cost $20,000,000 and will be awarded through “an open and competitive selection process.”
All sports betting licenses will be valid for four years and may be renewed at a cost of $1,000,000.
All told, Illinois has set itself up to become one of the most expensive jurisdictions in the world any sports betting operator could hope to enter. Only Pennsylvania comes close with its $10 million non-renewable licensing fee.
FanDuel/DraftKings Shut Out of IL for First 18+ Months
Online-only operators such as FanDuel and DraftKings will be shut out of the Illinois market for at least the first 18 months. A provision included in the new law gives the Gaming Board 540 days to receive its first mobile betting application, up to 630 days to announce who has been selected to receive a license and the option to extend this time frame at any time.
The only logical conclusion we can draw is Illinois lawmakers included this provision with the specific purpose of giving local casinos a head start by keeping the likes of DraftKings and FanDuel out of the market.
However, nothing will be stopping them from partnering with local casinos to offer their services on the backend. All mobile betting brands are required by law to operate under the name of the license-holding casino. In other words, you won’t see a “Harrah’s Sportsbook powered by DraftKings” any time soon even if those two were partnered. Still, at least both would be active and taking wagers within the state.
The whole thing just doesn’t seem very well thought out with everything considered. FanDuel and DraftKings fought the provision the best they could while the bill was being debated, but neither should have too much trouble finding a willing casino partner. After that, it won’t exactly be a big secret who has partnered with each.
FanDuel and DraftKings have proven very adept at meeting and exceeding customers’ expectations in New Jersey and that in turn has helped them become the state’s two largest mobile betting providers. It is unfortunate IL policymakers chose casino special interests over the interests of their own constituents by attempting to keep two highly-regarded operators out of the market.
Here’s DraftKings CEO Jason Robbins on the issue:
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. Very disappointing that Illinois customers will not have the best options available to them for 18 months.
— Jason Robins (@JasonDRobins) June 2, 2019
Sportsbooks Coming to Stadiums
The new IL sports betting law authorized the Illinois Gaming Board to issue up to seven sports betting licenses to sports facilities. These licenses will allow major stadiums to operate in-person sportsbooks in addition to offering mobile betting within a five-block radius surrounding the facility.
IL Lottery Sports Betting Kiosks
The IL Department of the Lottery is now tasked with choosing a “central system provider” to assist the lottery in entering the sports betting business. Under the new law, the IL Lottery may install up to 2,500 sports betting terminals across the state during the first year and an additional 2,500 terminals during the second year.
The key thing to know about these sports betting terminals is they will not offer full-fledged sports betting; they may only offer parlay-style wagers.
Types of Licenses to be Issued
- Master sports wagering license: $10 million or 5% of previous year’s revenue (whichever is greater). Renewable every four years for $1 million
- Occupational license:
- Supplier license: $150,000 fee plus $150,000 renewal after the initial four-year term and $150,000 annually after that
- Management services provider license: $1,000,000 fee plus $500,000 renewal fee every four years
- Tier 2 official league data provider license: Licensing fees range from $30,000 to $500,000 depending on data sales and must be renewed every three years
- Central system provider license: One license will be issued to a provider who will manage the Illinois Lottery’s terminal-based sports betting product at a cost of $20,000,000 to the licensee.