If All Roads Meet In The Woods, Which Path Might Illinois Sports Betting Take?

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Illinois sports betting

Stakeholders discussed five directions that Illinois sports betting could go in the state at a hearing last week in the House Subcommittee on Sales, Amusement and Other Taxes.

A surprise fifth amendment targeting DraftKings Sportsbook and FanDuel Sportsbook  added shortly before the hearing by subcommittee chair Rep. Bob Rita garnered the most support from the casino and horse racing industries.

Rep. Mike Zalewski, sponsor of the placeholder bill H 3308, noted that language from the five amendments could be mixed and matched to form the final bill.

Mobile wagering needed to combat black market

While the bad-actor clause created disagreements at the hearing, the call for mobile Illinois sports betting was nearly unanimous despite two of the five amendments not including mobile.

“I think that, in any modern economy, you need to consider that people want to do things from their devices, their PDAs, their tablets,” Zalewski said.

Mattias Stetz of Rush Street Interactive pointed out that online and mobile wagering accounted for more than 80 percent of sports betting taking place in New Jersey last month.

“Not allowing for online and mobile sports betting has the consequence of fueling the illegal black market that doesn’t pay any taxes or give Illinois consumers any protections. Let’s be clear: a large number of Illinois citizens bet online and on their mobiles today within the state with illegal black-market operators. Bettors will bet where it’s more convenient for them.”

Tom Swoik of the Illinois Casino Gaming Association added that remote registration is important to the success of mobile.

“Individuals must be allowed to establish and load an account online and not have to be inside a facility to place a bet or establish an account,” Swoik said.

Collegiate betting should be fair game

Stetz and Swoik contended that legislatively limiting what people can bet on — either by eliminating college games or allowing leagues to limit what betting can occur on their games — also would lead to a failure to recapture the black market.

“Let there be no mistake,” Swoik said. “These bets are happening now, and if we don’t include something in the amendment to allow those, they will continue on the black market.”

Stetz added that restrictions of prop bets or in-game betting, in addition to high fees or taxes, could keep the regulated IL sports betting market from being competitive.

Illinois sports betting tax rate a little high?

Swoik warned that the tax rate has a direct impact on the odds a sportsbook can offer.

Amendment 1 calls for a tiered 15 percent tax on brick-and-mortar sportsbooks and a 20 percent tax on online wagers. Amendment 5 would set the rate at 10 percent.

“It’s up toward the higher end,” Steve Brubaker, representing the Illinois Harness Horsemen’s Association, said of the 15-to-20 percent rate. “I think a lot of states want to be at 10 percent or below.”

Tony Somone, representing the same association, said he wanted to see the Illinois sports betting tax rate between Nevada’s 6.75 percent and West Virginia’s 10 percent.

There wasn’t much talk on the hefty $10 million initial license fee requested by Gov. J.B. Pritzker, other than to say that it would be too much for most off-track betting (OTB) parlors to pay, as called for in Amendment 1. Amendment 5 allows the OTBs to act under the license of their partner horse racing track.

Integrity fee doesn’t sit well with industry

Amendment 3, a league amendment, asks for 0.25 percent of handle as an integrity fee for sports leagues.

Swoik noted that there is not a single state that has included a cut to the sports leagues — whether it be called an integrity fee, royalty or data fee.

“Any type of fee paid to the leagues not only reduces the revenue to the state but also affects the holds and has a negative impact on the odds,” Swoik said.

Dan Spillane, representing the NBA, acknowledged that no state has instituted an integrity fee, but said they are in place in France and Australia, and that the US market is only in beginning stages.

“I think it’s essentially minute three of the game at this point, and I’m hopeful Illinois will set a precedent and create a model for how sports betting should be regulated in the US,” Spillane said.

What’s next in IL sports betting

The Illinois legislative session runs to May 31, by which time the bill also would have to pass the Senate.

Sen. Terry Link spoke at the end of the hearing just to say that he looked forward to working with the House and governor on Illinois sports betting.

Zalewski indicated that the committee would take a week to digest the testimony and then hold another hearing on sports betting in two weeks.