Incoming Gov. J.B. Pritzker included Illinois sports betting revenue in his budget proposal to the state legislature Wednesday.
But the parameters he outlined to authorize the activity could make it difficult to reach expected revenue totals.
Pritzker slotted for an ambitious $217 million in the state budget from sports betting in FY 2020. That total is based largely on making available 20 interactive sports wagering licenses at a staggering $10 million each.
That’s the same sky-high license fee implemented in Pennsylvania. Pritzker also asks for a 20 percent tax of gross sports betting revenue, which would be the nation’s second-highest behind Pennsylvania.
“I am calling on the legislature to take this up immediately so that Illinois can realize hundreds of millions of dollars, create new jobs, and bring sports betting into a regulated environment that will protect citizens from bad actor.
“If we do it this year and become the first state in the Midwest to move on this initiative, we can realize more than $200 million from sports betting fees and taxes in FY 2020.”
Details of IL sports betting proposal
Pritzker was surprisingly specific in laying out what he wants to see in Illinois sports betting legislation. In addition to the details listed above, Pritzker requested:
- In-person or mobile wagering while physically located in Illinois, or a jurisdiction that enters into a reciprocal agreement with Illinois.
- Sports wagering tax revenue would be deposited into the State Gaming Fund.
- An annual interactive license renewal fee of $5,000.
- For the first five years of operation, sports wagering operators would be able to deduct a maximum of 90 percent of one-fifth of the initial $10M license fee each year from the sports wagering tax.
The proposed budget spells out exactly how much money Pritzker believes IL sports betting can bring:
Based on estimates from Oxford Economics, Illinois could generate between $384 million and $680 million in gross sports wagering revenues per year under full implementation. At the proposed 20 percent tax rate, this would generate tax revenues of between $77 million and $136 million per year.
Tax rate may be pliable
Rep. Mike Zalewski, who plans to introduce a sports betting bill, tells Legal Sports Report that what’s important to take out of Pritzker’s budget address is that the governor wants the legislature to get him $200 million from legal sports betting in 2020. Crafting legislation that gets him that figure is now up to lawmakers.
“I think that, in respect to sports betting, the governor was forceful where he wants us to act, and that was reflected in his need for revenue upfront. That’s the core to what he needs out of the sports betting legislative process. Now it’s incumbent for the legislature to get him a bill he can sign that fulfills those criteria, and I think we’re ready to help him do that.”
While reaching that revenue figure appears to require $10 million in licensing fees, Zalewski noted that the structure of the licenses and the tax rate will be discussed with stakeholders over hearings in March and April before a bill is finalized in May.
“It doesn’t make much sense to fixate on the tax rate at this moment,” Zalewski said. “I think the tax rate specifically is very much pliable. I think there’s areas where the governor is looking for legislative guidance.
“We’ll have hearings on the amount of people interested in a license, the way the license will be structured, and we’ll work with him collaboratively to make everyone happy.”
Gov’s comments ‘major shot in the arm’
While the details might need some work, there’s no doubt that Pritzker came out strongly in favor of authorizing sports betting.
As he pointed, gambling expansion bills have a history of failing in the Illinois legislature as stakeholders draw lines in the sand.
“Expansion of gambling is a perennial effort in this state, and often these proposals get bogged down in regional disputes and a Christmas tree approach. But in those instances, we were talking about adding more riverboats or adding into other regions.
“Sports betting is different – this is a new market created by a recent US Supreme Court decision. Every day we argue about ‘who’s in and who’s out’ is money that goes to other states and to the black market.”
Zalewksi said the governor’s remarks are just what the legislature and stakeholders needed to push Illinois sports betting over the top.
As Zalewski recently told LSR, Pritzker holds a lot of sway with the legislature as a new Democratic governor, with Democrats dominating both chambers of the Illinois General Assembly.
“I think sports betting got a major shot in the arm today,” Zalewski said. “A newly elected governor in his first term is trying to build support for the budget of his vision of the state of Illinois. Including sports betting in that vision is a big deal.”