Neil Bluhm doesn’t need anything from anybody.
The 87-year-old Illinois native is one of the richest people in the world, a self-made billionaire with a substantial list of assets and accomplishments. He is the co-founder of Rush Street Gaming and Rush Street Interactive, most relevantly, the wallet behind the regional success of Rivers Casino and its BetRivers digital brand.
Bluhm’s portfolio features city-shaping commercial properties in Chicago, Los Angeles, and Boston, along with personal residences at a surf club in Miami and a mountain retreat in Aspen. He’s served on the board for the Art Institute of Chicago and the Whitney Museum in New York, and his homes are adorned with pieces from his $300 million personal collection. He has a wife and three kids, an ownership stake in the Bulls and the White Sox, and he once hosted a birthday party for Barack Obama. He is a prolific philanthropist.
Neil Bluhm doesn’t need anything. But what he seems to want more than everything is revenge against two of the country’s biggest sports betting and online casino companies. His grudge against FanDuel and DraftKings has lasted for at least a decade, driven millions of dollars in political donations, and found validation from another of Illinois’ wealthiest men.
Over the past five years, Gov. J.B. Pritzker has helped turn Bluhm’s personal vendetta into a nine-figure revenue stream for the state.
Daily fantasy defiance sparks a feud
If we want to start at the beginning, we have to go back to the heyday of fantasy sports in Illinois.
In 2015, Attorney General Lisa Madigan issued an advisory opinion finding that contests offered by daily fantasy sports companies “clearly constitute gambling” under Illinois law. Madigan’s opinion followed similar directives in New York and Nevada, and an accompanying letter conveyed to DFS operators her expectations that they would promptly leave the state.
But FanDuel and DraftKings did not yield. While most competitors had already exited Illinois, the two giants dug their heels in and continued operating in what they still considered to be a legal gray area. They asked the courts to decide the matter.
“We believe daily fantasy sports… are lawful under state law,” DraftKings attorney David Boies wrote. “We also believe, as the attorney general has said, that this is a policy question for state legislators to address.” Boies indicated that DraftKings would “preserve the status quo” while waiting for a final resolution from the judiciary.
Casino operators saw this as an act of defiance, and Bluhm’s resentment spilled into the public through his legal team.
“My client has paid $125 million at an auction for a casino license,” said attorney Paul Gaynor, who had worked for both Madigan and the Illinois Gaming Board before entering private practice. “My client has paid $1.6 billion of revenue – legal tax revenue – to the state. Meantime, the illegal operators who have been operating daily fantasy sports in violation of our criminal laws, they have not been paying a dime.”
The legality of DFS was eventually resolved in a 2020 state Supreme Court decision that ruled peer-to-peer contests were games of skill rather than gambling, making them legal in Illinois. FanDuel and DraftKings were right all along. By that point, though, they were already enduring some novel punishment for their perceived bad behavior.
Bluhm finds a win with the ‘sin bin’
Any theoretical future threat Bluhm imagined from fantasy sports became imminently real as legislative attention turned to sports betting in 2018. FanDuel and DraftKings were suddenly poised to become direct competitors to casino-operated sportsbooks, and they had a serious head start on customer acquisition and product development. This dynamic was already playing out with their dominance of the fledgling industry in early-adopting states like New Jersey and Pennsylvania.
Bluhm seized his opportunity for payback, assembling a roster of Springfield’s most-connected insiders to lobby on behalf of Rush Street. Millions of dollars in political contributions through the years had earned him easy access to key politicians, and he deployed his rockstar team to the statehouse to push his policy preferences.
Their proposed solution was crude, a three-year “regulatory waiting period” that would expressly ban DraftKings and FanDuel from participating in the opening phase of legal sports betting. It was a transparent attempt to extract a pound of flesh from the duo who dared to stand their ground against the attorney general and the establishment casino industry.
This so-called “penalty box” became the primary point of contention as the deadline for passage approached, boiling over into a series of public attacks from both sides. Rush Street framed FanDuel and DraftKings as bad actors, criminals that openly flouted the law.
“We don’t think it’s fair,” Gaynor said, “for someone who has been operating illegally in Illinois, capturing nearly 100% of the market because of their illegal activity, to be at the front of the line along with entities who’ve been operating legally and playing by the rules.”
FanDuel and DraftKings punched back, together targeting Bluhm’s exclusionary efforts with a joint advertising campaign in the local market. DraftKings CEO Jason Robins even took to Twitter/X to air his grievances about the “corrupt idiots at Rush Street” in no uncertain terms.
“Imagine if your entire competitive strategy was to lobby to keep the best products out of the market,” Robins wondered out loud. “How bad must you think your own product is?”
An abbreviated waiting period was one of several targeted disincentives that ultimately did make it into the final version of the law. Though no companies were singled out by name, the General Assembly structured the licenses so that digital-only sports betting operators would pay $20 million – the highest fee in the country and a 300% markup on the cost to land-based facilities – and they would have to wait 18 months to launch.
The law additionally required bettors to register for accounts in person during that period, an objectively bad policy with the sole purpose of greasing the wheels for the state’s brick-and-mortar gaming operators. The imbalance was further reinforced by requiring sportsbook apps to use the brand of their parent casino or track – like BetRivers, for example.
Mission accomplished for Bluhm and his team.
Smart money beats dumb policy
It was a complete whiff. All of it.
First, some comedic timing from the very serious COVID-19 pandemic shut those commercial casinos down just a few days after retail sports betting launched in Illinois. The governor quickly suspended the in-person registration requirement via executive order, temporarily removing that particular hurdle. The legislature made the change permanent a year later.
But FanDuel and DraftKings had already found a workaround by that point. Determined to skirt the prejudicial rules altogether, both companies were on the verge of establishing a physical presence in the state.
DraftKings moved first, striking a deal with the Casino Queen in East St. Louis. That property is now called DraftKings at Casino Queen for the sole purpose of satisfying the license and branding requirements. FanDuel followed through that loophole too, turning the former Fairmount Park into FanDuel Sportsbook & Racing for the same reason.
These maneuvers made a mockery of the mechanisms that were put in place to hinder their operation. The former outsiders no longer had any use for the marked-up license they were offered, nor did they have to stall or share the branding spotlight with any local casino partner. FanDuel and DraftKings became the casinos, and remote registration meant they no longer had to wait for customers to come visit them to sign up for an account either.
The 18-month waiting period was trimmed down to just two.
Financial waterboarding intensifies
By 2024, Bluhm’s personal policymakers in Springfield had discovered a more elegant solution to the problem. If you can’t outsmart FanDuel and DraftKings, just tax them into submission.
A tiered structure was the first major adjustment Pritzker pushed into the sports betting framework. The progressive tax implemented last July at his urging replaced the initial 15% flat rate with an escalating system tied to each operator’s annual revenue – from 20% for the first $30 million scaling up to 40% above $200 million.
This change impacted all of the state’s licensed sportsbooks, but it did not affect them equally. In the year leading up to the policy change, only two companies crossed that $200 million mark to reach the top tax bracket. Only two even reached $100 million. Guess which ones.
The modified structure has produced a 114% increase in revenue to the state compared to the previous flat structure over the nine months of reported data since its inception, most of it at the expense of FanDuel and DraftKings. Those two have already paid an additional $146 million beyond their initial obligation thanks to that change.
Rush Street’s tax payment meanwhile increased by about $5 million.
A midnight mugging in Springfield
Illinois had found its golden geese, and Pritzker was not done plucking feathers.
The governor’s budget for the upcoming fiscal year includes a flat tax of $0.25 per wager for the first 20 million wagers, increasing to $0.50 per wager thereafter. The first-of-its-kind fee appeared like a thief in the night during the final hours of budget negotiations, but historical context suggests the wheels had probably been in motion for some time.
“For the second consecutive year, the Illinois legislature chose to balance its budget with a crippling tax on legal online sports betting operators,” the Sports Betting Alliance responded. And once again, the targeting is obvious.
DraftKings and FanDuel have each written around 150 million tickets in Illinois over the past 12 months, putting them on the hook for tens of millions of additional tax dollars annually. They were the only two operators to surpass 20 million tickets in that timeframe. Second- and third-tier operators like BetRivers are down around 10-15 million tickets apiece, below the threshold for the higher per-bet rate by a convenient margin.
This series of structural changes demonstrates how laws and regulations can be crafted to favor certain market conditions under seemingly neutral policies that have a non-uniform impact. And it is another reflection of Illinois’ preference for a system that extracts maximum revenue from these two specific companies, whatever the motivation behind it may be.
How many quarters are in the jar?
This latest adjustment will increase the effective tax rate for the leaders by about half.
FanDuel and DraftKings paid a combined tax bill of $286 million for the past 12 months, giving back 31% of their gross revenue to the state. No other operator reached $25 million or 25% of revenue for the same period. Those payments from the two leaders represent 80% of the total tax obligation from all 10 brands that offer online sports betting in Illinois.
A per-ticket tax would have cost the leaders an additional $70 million apiece, bringing their combined obligation to $424 million – more than 45% of revenue for both. Rush Street would have paid an additional $3.3 million to bring its effective tax rate to 27%.
Combined tax payments for all online operators under the new structure would increase from $356 million to $511 million, a blended rate of 42%. Only New York at 51% has a higher commercial tax rate on sports betting in non-exclusive markets. FanDuel and DraftKings will shoulder 89% of the new tax burden.
Prior to launch in 2020, the state’s bean counters projected about $60 million in annual tax revenue under the original structure as passed.
Paying the price for Pritzker’s pride
During the budget signing ceremony, Pritzker framed the increase as a course correction and a discount on New York’s nosebleed rate.
“We’re the third-largest sports betting market,” the governor reminded, “and we had a much lower tax rate than many of the largest of those markets.”
That is no longer the case. In the span of just over a year, the Illinois market has become utterly inhospitable to the very operators driving its success on the national leaderboard. It is, in fact, the second-largest competitive sports betting market in the country behind New York.
Like the previous attempts to thwart these two companies, this new tactic will not be effective. What it will do, in all likelihood, is hurt consumers. FanDuel quickly responded in the most obvious way, announcing a new $0.50-per-bet surcharge for local customers starting on Sept. 1. Other approaches could include things like minimum bet sizes, a pullback in promotions, or less-favorable odds as time goes on – none of which are good for the bettor.
Flutter CEO Peter Jackson was forthright in his criticism of the change.
“We are disappointed that the Illinois Transaction Fee will disproportionately impact lower wagering recreational customers while also punishing those operators who have invested the most to grow the online regulated market in the state,” he commented.
FanDuel’s decision was a green light for DraftKings to reinstall a version of its own surcharge, which it announced and subsequently retracted last year amid consumer pushback following the introduction of the tiered tax. DraftKings’ fee also kicks in on Sept. 1, and it is here to stay this time.
Something worth fighting for?
Illinois politicians have again made life a bit more difficult for all licensed operators as a byproduct of trying to make things extra difficult for FanDuel and DraftKings specifically. The Sports Betting Alliance called the policy “discriminatory, punitive and constitutionally suspect.”
The targeted nature of the tax increase might violate the Equal Protection Clause given the obvious intent to burden two particular companies. The new provision may be especially vulnerable to challenge as a bill of attainder, a piece of legislation that punishes specific entities without due process.
But constitutional challenges can take years to resolve, cost millions to litigate, and offer no guarantee of a favorable resolution. Illinois needs to plug the $3 billion hole in its budget right now. The penalty box may have been illegal too, for that matter, had it ever gone to court. Pritzker’s gambit essentially gives operators a choice between caving to the exorbitant taxes or fighting a lengthy legal battle in a market that nobody can really afford to lose.
Can they?
It is the obvious question. At what point does something you would hate to lose become something you cannot afford to hold onto? Is it worth maintaining a local operation that struggles to break even just for the sake of the brand?
Complicating the issue further is the lingering promise of another gambling expansion in Illinois. Lawmakers have been flirting with online casino legislation, and that sort of expansion would justify a lot of pain and suffering for operators in the interim. It is the more lucrative of the two segments by at least a threefold margin.
But nothing is imminent on that front, and the environment continues to grow more hostile for the would-be online casino leaders too. Who can say with certainty that FanDuel and DraftKings would even be allowed to participate in another expansion, let alone on a level playing field?
Perhaps a better question is whether Illinois can really afford to lose FanDuel and DraftKings. Their co-dominance of the sports betting marketplace is not limited to one state, and any revenue gap left by their departure would not automatically be filled by another licensed competitor. Almost a half a billion dollars in annual tax payments means the state relies on these two companies to cover nearly 1% of its entire $55 billion budget.
Bluhm’s imperfect victory
Neil Bluhm never got the three-year penalty box he lobbied for. FanDuel and DraftKings weren’t excluded from Illinois sports betting; they barely even faced a delay. Now they have their brands plastered on the front of gaming facilities and they control about three-quarters of the local sports betting market between them. By conventional measures, his campaign failed.
Viewed through the lens of ultimate outcomes, though, he achieved something arguably more valuable than temporary exclusion. Bluhm helped initiate a permanent market distortion that turns his rivals’ success into a massive influx of tax revenue for the state while protecting his position in the market. It is regulatory capture disguised as neutrality, and it is working like a charm so far.
Bluhm’s vendetta has become official policy in Illinois, bringing the state’s fiscal priorities in line with his own competitive interests. That may be the ultimate prize for the man who already has everything else.
