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The need for remote online registration, a more tenable licensing fee and multiple skins were the topics discussed Thursday at an Illinois sports betting subcommittee hearing.
This was the second informational hearing on sports betting held this year in the House Sales, Amusement & Other Taxes Subcommittee. The discussion featured representatives from the state department that handles problem gambling, local governments, industry advocates, Illinois universities and gambling expansion opponents.
There are five amendments in Illinois with language to fill in Rep. Mike Zalewski’s shell bill on sports betting. Remote online registration and multiple skins already are options in at least one amendment.
However, a $10 million initial licensing fee is consistent throughout the options, as it was requested by the governor to fulfill $200 million upfront in his 2020 budget proposal.
To reach that $200 million figure, Gov. J.B. Pritzker is counting on 20 licensees to pony up the $10 million. Robert Davidman, a partner in Spreads Group, pointed out that Pennsylvania, the only other state to ask for such a high figure, has only found eight takers with a ninth potentially on the way.
Davidman contended that the high fees in PA online sports betting delayed the state going to market (although it’s not at all clear that that is the case). He proposed that the $100,000 fee and 9.5 % tax rate proposed in Indiana would lead to more money and jobs for the state in the long run.
“Those are more sustainable and allow more competition in the marketplace, which will mean more revenue for the state,” Davidman said. “… The license fees that are being discussed should be structured, I feel, as a down payment, not just a one-time fee.”
Jake Williams, a vice president from Sportradar who spoke on behalf of industry trade group iDEA, attested that New Jersey sportsbooks have been able to expand their user base by offering mobile, attracting a new set of customers who weren’t interested in driving multiple hours to go to a physical location.
He added that mobile wagering is 80% or more in other markets, and he believes that figure will continue to grow. Williams stated:
“Requiring people to register in person will drastically reduce the number of people who participate in sports wagering. If this is a recreational product, you shouldn’t require that people drive out to a specific location just to place a sports bet or register. Give [retail operators] the opportunity to expand their footprint by giving them the capability to do this in a mobile environment.”
Zalewski seemed receptive to Williams’ comments.
“We’re very much interested in the mobile marketplace as it relates to sports betting,” Zalewski said. “We’ve become very aware that states that don’t have a mobile piece, or if it takes too long to launch it, don’t fare very well.”
In the two most likely amendments offered in Illinois, Zalewski’s Amendment 1 allows for two skins while subcommittee chair Bob Rita’s Amendment 5 permits just one to be tied to the retail establishment.
Davidman said the latter would be a mistake, as forcing online operators to co-brand with existing retail operators could cause confusion to players and reduce the competition.
“Brand investments in other states need to be allowed to be leveraged in order to create this robust market,” Davidman said. “When we discuss skins, anything greater than one means a healthier market.”
Davidman contended that retail operators don’t need to be protected from online brands.
“Retail locations offer consumers peace of mind,” Davidman said. “When an operator is tied to a retail location, it gives the option for the consumer to walk in and talk to somebody in person. While we do want people to patronize the many establishments here in the state, we need to recognize the changing habits of consumers and the digitization of our lives.”
John Pappas, representing GeoComply, gave a real-time demonstration on bets occurring on a map at the New Jersey border while attempted wagers from New York were blocked. He pointed to a bet tried from the bridge between the states that did not go through.
Pappas asserted that 80% of wagers in New Jersey happened within 10 miles of the border.
“We’ve done an analysis of Illinois and we believe that 50% of all wagers here will take place within 10 miles of the border, so we believe it’s important to have sophisticated geolocation technology,” Pappas said.
Bob Greenlee, of Tusk Strategies, led off his request for esports to be included in Illinois sports wagering by noting that Ninja Blevins, the nation’s greatest Fortnite player, is from Illinois.
He asserted that, with a global audience estimated at 500 million, esports is hot with millennials and will continue to grow.
Zalewski admitted that the legislators don’t quite understand esports.
“In reality, we’re very nervous about esports because I think we don’t understand it and we all worry about things we don’t understand,” Zalewski said. “Sports are on TV, it’s live athletes performing these activities we can all see, and there’s an objective outcome. In video games, that’s not necessarily the case.”
Greenlee responded that esports are actually easier to monitor than regular sports because developers have data at the code level.
Saying that he represented athletic directors from 12 of the 13 Division I athletic programs in the state, Illinois State AD Larry Lyons stated they oppose legalized gambling on college sports.
However, if the legislature were to move forward with including collegiate sports in sports betting legislation, he requested the bill: