4 ways sports betting might be allowed (and taxed) in Illinois

 
By Grant Morgan
Capitol News Illinois
gmorgan@capitolnewsillinois.com
Updated 3/23/2019 12:14 AM
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SPRINGFIELD -- An Illinois lawmaker leading the charge to bring sports betting to the state has laid out the first concrete details on how that might happen.

Four amendments were filed to Riverside Democratic Rep. Michael Zalewski's House Bill 3308 Thursday, each of them providing a different avenue for legalizing sports betting in the state.

Gov. J.B. Pritzker supports and has already budgeted to bring in more than $200 million of new state revenue next fiscal year from licensed sports gambling.

But that revenue hinges on the ability of the legislature to pass a sports betting bill by May, a task Zalewski thinks will be difficult.

"Any gaming bill is difficult to get through, and we're probably going to need the governor's help to pass something like this," Zalewski said. "But I'm also confident my colleagues are interested in this topic and want to see the state benefit from it."

If successful, Illinois would become the eighth state to legalize sports betting since the U.S. Supreme Court ruled against its prohibition in a case last May. The practice was already legal in Nevada.

New Jersey model

While no two systems are the same, Zalewski said the "classical" New Jersey model is the most likely to get broad support from Illinois stakeholders.

That model would allow for both brick-and-mortar betting at the state's casinos and racetracks and online betting on digital platforms, with a tax rate of 15 percent for the former and 20 percent for the latter.

Licenses in the New Jersey-based plan would cost $10 million with a $250,000 renewal every five years, while each licensee would be allowed two contracts with partners to provide mobile and online betting -- known as skins -- at $1 million per skin with a $500,000 renewal every five years.

"I think the New Jersey model is what most people expected [Illinois'] to look like," Zalewski said, adding that he does not have a preference. "It's kinder to existing bricks-and-mortar and racetrack casinos, gives them the first slice at implementing it, and has a reasonable tax rate."

Mississippi model

The second amendment to HB 3308 contains details for the "Mississippi Model," which allows for brick-and-mortar betting at the state's racetracks and casinos but limits online betting to 10 operators that must be partnered with brick-and-mortar properties.

The $10 million license fee is the same as in the New Jersey-based model but must be renewed at higher costs along with other fees totaling $850,100 every four years. Both plans would be overseen by the Illinois Gaming Board.

Professional sports leagues plan

The third option, called the "Professional Sports Leagues" plan, connects sports betting in the state to the leagues on which people bet by limiting the gaming facilities to sports venues, giving a .25 percent royalty on wagers to the leagues, and providing for data sharing between sports betting operators and the leagues for accuracy and to watch for illicit activity.

Details for the administration of this plan are less clear than the first two.

Illinois lottery plan

The fourth plan, meanwhile, gives the Illinois Lottery jurisdiction over all the state's sports betting operations by relying on just one state-issued license. The tax rate on this plan would be 50 percent.

Moving forward

Because the legislature is still in the earliest stages of developing a plan, Zalewski said, those laid out in HB 3308 are nothing more than conversation starters until more groups have a chance to testify in committee.

Ivan Fernandez, executive director of the Illinois Gaming Machine Operators Association, said the group is happy conversation has begun with the various plans, although none of them are "etched in stone."

"And we're going to be active participants in that conversation, because Illinois has a unique gaming environment that can make sports betting a powerful winner for the state, small businesses and the players that are interested," he said.

Fernandez added he is unsure of details on the sports league model, but the three other options "all have merit and could bring a benefit" to the state.

Pritzker spokesperson Jordan Abudayyeh did not specify which of the early plans is most desirable, but said the governor looks forward to "bringing sports betting off the illicit market and into a legal, regulated space."

"Because this is a new market, Illinois has the opportunity to move expeditiously and be the first state in the Midwest to legalize sports betting," she said.

Zalewski said he expects the largest opposition to the bill to come from anti-gaming groups, while complications could also arise as casinos and racetracks negotiate licensing, taxes, royalties and administrative structure.

"But overall, the response has been pretty good so far," he said.

HB 3308 is assigned to the House Revenue and Finance Committee, which Zalewski chairs. As the bill moves through the legislative process, Illinois joins a wave of 29 other states with active bills to legalize sports betting, and two other states that have passed but not implemented it yet.

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