When Governor JB Pritzker was seeking office, he said that Illinois needed to find other sources of revenue to close the state’s massive budget gap. One of the doors he said he’s willing to open is sports betting in the prairie state.
Seven states and the District of Columbia have passed sports betting bills since the Supreme Court paved the way for it in May, but Illinois legislators hasn’t even voted on a proposal yet. Lawmakers, both current and former, say that there is general support for betting on sports. However, important details about how and where the bets would be placed still need to be decided.
The Opening Line – Getting Started
Representative Mike Zalewski (D, Riverside) has been involved with sports legislation for years. In 2016, Zalewski pushed for regulation of daily fantasy sports websites that blurred the line between competing and gambling, calling for “steep” regulation. He’s one of several legislators working to create the framework of sports gambling regulation from scratch.
“In the legislative cycle generally I’d say we’re in the bill introduction phase,” Zalewski said. “So, I’d expect a few of my colleagues to introduce some bills on sports betting. I hope to be among them.”
The paradox with this process is that the government works slow, but Zalewski believes the state is under the gun to pass this quickly.
The seven states that legalized sports wagering since May are Rhode Island, New Mexico, Mississippi, Delaware, Pennsylvania, New Jersey and West Virginia. Throw the District of Columbia in the mix and the geographic picture is clear: there is a gaping hole in the middle of the country where there are no legal sports betting options.
“There’s an impetus to do this sooner rather than later so that we don’t fall behind the states like Indiana, Iowa, Wisconsin, and Missouri and make sure we’re on the leading edge of this,” Zalewski said.
Former governor Bruce Rauner said he would have signed a sports gambling bill before the end of his term, if one reached his desk.
The trick is there is no cookie-cutter model for sports betting. Nevada allows bets online and in person and taxes them equally. New Jersey allows bets from anywhere, but the taxes are cheaper if you place a bet in person. Washington, D.C. does not have casinos and will only allow sports betting through their local lottery.
“I think we should do it in a way that maximizes profit for the state of Illinois,” Zalewski said. “When I say that, I don’t mean at the detriment of the players or the gamblers themselves or of the leagues or the athletes. I think it’s important for the state to derive a real benefit from this.”
Over/Under – The Tax Rate
When the Supreme Court overturned the law forbidding sports gambling outside Nevada, the arms race was on for states to pass and implement their own laws. Rep. Zalewski says New Jersey is a model that Illinois has studied, and he says there are favorable comparisons.
New Jersey flipped the switch in June and had taken $1.24 billion in bets by the end of the year. But, as of the end of November, they only saw $8 million in tax revenue.
“We have a much bigger population than New Jersey, Illinois’ a much bigger state than New Jersey, we have Chicago,” he said. “I think [we would get more tax revenue than that], but I don’t know how much more.
“I don’t think it’s the solution to all of Illinois’ fiscal problems – I think we need to be careful about that.”
Another proponent of this legislation is now-former Skokie representative Lou Lang. He sat down for an interview before his surprise resignation at the beginning of the year. In November, he said he was working on a “third or fourth” draft of a bill that was not meant for filing – just for discussing with various stakeholders.
“You have to do it right if you’re going to entice people who are gambling now illegally to come over to the legal side,” Lang said. “It will require very clever taxation, very nuanced.”
The reality is that offshore sports betting is fairly easy (although unregulated and risky) for most people to figure out, and it’s available now. Part of New Jersey’s tax revenue conundrum is the same balancing act facing Illinois – how much should the state tax something that a lot of people are already doing tax free?
“When it comes to taxes we should try to be strategically smart for the people in the State of Illinois, but at the same time we’re going to want to grow some innovation in this technology and make sure we’re doing it the right way,” Zalewski said. “I expect this to be a stakeholder conversation that takes place as the dialogue progresses.”
New Jersey taxes eight percent for bets placed in person and 12 percent for bets placed online. Pennsylvania taxes a whopping 34 percent, which critics blame for an underwhelming start to their legal betting era.
“The only reason they made it 34 percent is because they needed the money like Illinois did,” Zalewski said.
Governor Pritzker hasn’t said what he’d like to see the tax rate be, or what he’d like to see that revenue spent on. “We haven’t decided exactly whether they’d be dedicated to a particular need in state government,” he said in December, “but remember the overall goal here is to make sure we’re meeting the needs of the people of the state and having a balanced budget.”
Prop Bets – How Will it Work?
The biggest questions left to answer are where will sports bets be placed and who will take them?
Answering it starts with untangling a web of competing interests between the state’s casinos, video gaming parlors and off-track betting sites.
“We have the horse tracks that can’t get along with the video gaming parlors who can’t get along with the casinos who can’t get along with the other horse race tracks,” Zalewski said. “It’s a frustrating dynamic, I think, for myself. It’s a frustrating dynamic for my colleagues. Ultimately we’ve got to get past that. This could be the glue that brings everyone together.”
Another issue is the state’s moratorium on land-based casinos. In the last legislative session, eight senators and representatives introduced SB7, The Chicago Casino Development Authority Act, which proponents say would keep money in Illinois by paving the way for a casino in the nation’s third largest city. The bill never made it to the floor for a vote.
Currently river-boat casinos are allowed. Boyd Gaming, which owns Par-A-Dice Casino in East Peoria, did not want to comment for this story.
Video gaming parlors are a model that Zalewski says he and his colleagues are weary of copying. “I think generally we’re going to be very mindful of overdoing it,” he said.
One model that could appeal to local business owners is the D.C. approach, which is done through their lottery. In this set-up, any business owner can pay a $5,000 fee every two years to install a kiosk in their store or restaurant where people can place bets.
“For a sports bar I think it’d be great,” Ryan Hunt, owner of The Fieldhouse in Peoria, said. “When the Bears are good, people will come in and gamble and have a couple of beers and enjoy the game while they’re trying to win some money.”
Hunt and his wife bought the sports bar from her family in 2017. They say profit margins are slim, and installed several video game terminals to try to make a little extra money. He says he makes 35 percent margins on those machines, which helps, but another revenue source would make a difference.
Zalewski, however, is dubious of a model that places sports books in every bar.
“I think generally we’re going to be very mindful of overdoing it,” Zalewski said. “If every bar has a kiosk you can bet on I think lawmakers in my caucus and the other caucus are going to say, ‘eh, do we really want that?’ But if we have a licensure process, regulatory process, vetting process of applicants and then the sports bar can say, ‘this what I want to do and how I want it to look,’ I think that’s probably a healthier approach.”
He believes that sports bars will benefit because more people will watch sports to bet on them, even if it’s on their phones or through a casino.
“I disagree,” Hunt says, “because if the interface is not in the restaurant what’s going to make people come out instead of just staying at their home and getting a six-pack at the liquor store and gambling on the game?”
Payout – Coming Together
If lawmakers can answer these questions they are optimistic about what it could mean for Illinois’ future, even if it won’t put an end to budget deficits.
New Jersey targeted $25 million in revenue per year from sports betting, and they are not on track to hit that so far. Even Nevada only gets a fraction of one percent of its overall budget from sports gambling revenue. But, lawmakers say Chicago’s population could be a game changer, and even a little revenue is better than no revenue.
So, the question is, will we be able to bet on the Bears in 2019 in Illinois?
“That’s a great question,” Zalewski says. “I would hope so, because when New Jersey introduced sports betting they were able to get it online quickly.
“We could really be the hub of an entertainment circuit involving sports.”
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January 31, 2019 at 10:56PM