State lawmakers from two House subcommittees gathered in Springfield on Wednesday for a second hearing on gambling expansion including Illinois sports betting.
The first, held in August, created the foundation for this deeper dive, with stakeholders from across the landscape offering perspectives.
New casinos, online gambling, daily fantasy sports and sports betting were all on the table, but the latter dominated the conversation.
Quick backstory in Illinois
A 2017 bill numbered S 7 served as the spark for this hearing, but efforts have expanded in the time since introduction. The current version contains placeholders for each of the other gambling categories mentioned.
When Sen. Terry Link first presented his proposal, its focus was on authorizing a new casino in Chicago. Illinois has 10 riverboat casinos, but much of the gambling traffic slips away into neighboring states. Indiana casinos, for example, live just across the border and well within reach of the Windy City.
S 7 has been active in the statehouse since last January, but passage so far has been elusive. And the hill has only gotten steeper in recent months. Link’s bill has morphed into a 500-page behemoth seeking broad expansion of the state’s gambling industry.
The state Senate already passed the previous version of this bill — twice, in fact — but it hasn’t advanced through House committees in almost 18 months.
Illinois sports betting in the spotlight
Rep. Rob Rita runs point for S 7 in the lower chamber. As chair for both subcommittees, he opened the hearing with the declaration that sports betting would be the focus.
A key proponent, Rep. Lou Lang, was the first to testify. The representative from a Chicago-area district stressed the importance of “doing it right” when it comes to expansion, citing the PA sports betting model as one to avoid.
Lang is one of five lawmakers that sponsored an Illinois sports betting bill this year. He was in attendance to offer his thoughts on regulation and implementation — and to make sure his colleagues were asking the right questions.
During his testimony, Lang worked to manage revenue expectations. “We have to consider this a piece to some larger puzzles that we have,” he said. “This is not a cash cow, although it is an important tool for economic development.”
He also cautioned against over-taxation, which would stunt acquisition and hinder the conversion of existing bettors to regulated channels.
Lang offers conditional support for league fees
Any discussion of fees and taxes is incomplete without covering the integrity fee.
A group of professional sports leagues, led by the NBA and MLB, has actively lobbied for a share of the industry’s revenue in states around the country, Illinois included. So far, none has passed a law or installed a statute requiring operators to pay sports leagues a cut of their action.
Lang supports the concept, though, provided the state receives some value in return.
“I don’t have a problem giving major league sports a fee, but I want to give them a fee for something. Not a fee for nothing.
“I have proposed to them … that any fee they get ought to be in exchange for information we need — data, pictures, videos, demographic and marketing information …
“That would help us market sports betting in Illinois, and that would give us something for anything we might pay them. I don’t want to pay them for nothing.”
Referencing an illegal site by name, Lang says state-regulated sportsbooks could better compete if their platforms were populated with league content.
Former NFL player and current Sen. Napoleon Harris also sponsored a 2018 bill, and his is the only one that expressly includes an integrity fee.
Sports leagues make their case
Hours after Lang first addressed teams and leagues, Rita called them to the table for testimony.
John Corvino was first up, representing the Chicago White Sox. Corvino waxed poetic about the fabric of American youth, the pitfalls and possibilities for fans and aspiring athletes, and the generational connection the game provides.
“Now I’m sure that we all recognize the risk that sports betting poses to the integrity of our game,” he said as his story arrived at the key request. (There is something amusing about this comment originating with a franchise that is responsible for the largest betting scandal in sports history, but that’s beside the point.)
Corvino asked lawmakers to include provisions that protect integrity without directly asking for a fee.
That job fell to Josh Alkin, speaking on behalf of MLB. Alkin clearly referred to the integrity fee as a “royalty,” extending a new trend from league lawyers. With their messaging growing cloudy over time, embracing fees as a straight-up royalty may be their best shot.
MLB also asked for the remaining pillars of its proposed framework, including the ability to restrict certain wagers and the mandated use of official data.
Players fighting for a voice too
Representatives from league players’ associations provided some of the more intriguing testimony of the day.
NFLPA representative Joe Briggs was the most talkative of the group, laying out a list of requests related to data. Briggs raised concerns about the personal safety of athletes amid sports betting expansion, citing the recent beer-throwing incident in Massachusetts.
Clarence Nesbitt had a follow-up request on behalf of the NBPA.
Focusing on betting information, Nesbitt asked lawmakers to craft laws that “clarify that players own their own performance and biometric data.” This sort of data could have use in the sports betting industry, but ownership is likely a matter for collective bargaining.
Referencing an undisclosed LeBron James injury during last year’s NBA Finals, Nesbitt said players should have discretion over the release of such information.
“LeBron’s integrity is clearly beyond reproach and needs no defense from me,” he said. “We need you to leave the choice of data disclosure in LeBron’s capable hands — pardon the pun.”
Briggs testified that no state has so far passed a sports betting law with sufficient provisions, but indicated conversations with New York lawmakers were ongoing.
Industry stakeholders weigh in
The subcommittees heard testimony from several stakeholders involved in the mechanics of online gambling.
Lindsay Slader testified that modern technology allows regulators and operators to monitor compliance with location restrictions. Her company, GeoComply, is the primary supplier of the geofencing tools used in other markets. Network transactions run through more than 350 verifications before approval.
Michael Pollock from Spectrum Gaming Group offered support for Lang’s testimony as he reiterated the primary message.
“In the choice between doing it quickly and doing it right, please err on the side of doing it right.”
Pollock testified about the ancillary benefits that come from legal sports betting but cautioned against viewing it as a “fiscal cure-all” for the state budget.
Gaming Laboratories International (GLI) followed up with testimony from Kevin Mullally regarding standards and controls that guide the industry in other markets. He testified that GLI has deployed “ethical hackers” to test GeoComply’s virtual fences with no success.
The American Gaming Association also sent a representative to Springfield to lay out the benefits of well-crafted regulation.
Jim Ryan steals the show
Lawmakers warned longtime gaming executive Jim Ryan to be brief, but nobody wanted to interrupt him once he got started.
A man of many hats, Ryan delivered his testimony on behalf of the iDevelopment and Economic Association (iDEA). He’s also the CEO of Pala Interactive, which operates an NJ online casino and poker platform.
Ryan focused on illegal, offshore operators as he relayed his own recent experience.
He told lawmakers he found it “shockingly easy” to register for an illegal account from his hotel room the night prior. There were no ID verifications and no issues processing the payment. “It was a perfectly seamless experience,” he said.
Illegal operations represent the primary threat to the emerging, regulated industry. The site Ryan was patronizing is based in Curacao and operating in open violation of US law.
“I have no idea if the game I played last night is fair. I have no idea if the $75 I deposited continues to exist. And I don’t know, if in fact the Bears beat the Patriots, if I’ll be paid.”
Fantasy sports makes a quick appearance
Rep. Michael Zalewski was just about the only person who spoke to the fantasy sports placeholder in S 7. As the chair of the House Revenue Committee, he has previously tried to spearhead an effort to legalize Illinois DFS.
Zalewski’s testimony was brief. He cited the ongoing presence of FanDuel and DraftKings in the state as he pitched for a legislative update:
“They’ve been good corporate citizens. We want them to continue to flourish in Illinois. We want them to have comprehensive regulations.”
The chairman pleaded with his fellow lawmakers to include provisions for DFS in any gambling expansion package.