From an operator standpoint, Illinois has just about everything one could ask for when it comes to sports wagering: a metropolis, professional sports teams, easy access to mobile betting, room for more online operators, and available licensee opportunities.
Now in its fourth year of conducting business and firmly established as a top-three market nationally, there is one area where the Land of Lincoln has yet to hit paydirt — finding an operator wanting to go through the full process of becoming an online-only licensee. While no licensing process is easy, the Illinois Gaming Board has as thorough a vetting process as any state before awarding a license.
Almost certainly, the $20 million price tag has provided plenty of reason for pause or to explore other business strategies. FanDuel and DraftKings were originally expected to go the online-only route, only to instead partner with a casino and enter Illinois paying half that amount.
The IGB has gone through the process twice now of accepting bids for the three online-only licenses available, but it has found only one operator each time to have met “the minimum qualifications for licensure.” On both occasions, that operator eventually withdrew its application. In the more recent case, Betway, which withdrew its application before the IGB reached a determination in the initial process that ended in April 2022, bailed late last month without providing a reason.
That leaves the IGB back where it started — no licensees and no prospects. The state agency has yet to announce if there will be a second supplemental bidding process and third overall. If it has one, any potential finalists would not be known for at least six months after that process begins. But there is still a chance someone may find this a suitable path to provide sports betting in Illinois.
One potentially suitable operator: bet365
As sports betting on a whole has evolved, it has reached a point where any operator launching in practically any state needs to have deep pockets to make an impact. Illinois is no different, in the sense that FanDuel and DraftKings dominate the scene. Of the nearly $6.5 billion in mobile handle generated in Illinois through the first eight months of 2023, the two industry leaders have accounted for close to 70%.
The good news for a prospective online operator is that the No. 3 spot is not locked down. BetRivers is well-entrenched, but its year-to-date handle is down 15.5% versus 2022. Looking 12 months into the future, there will likely be only nine mobile options — Circa launched in late September, and Hard Rock Bet is expected to launch relatively soon since it has received all the necessary approvals from the IGB.
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That could make Illinois appealing to bet365, which has shown a willingness to compete for bettors in two large-market states — Ohio and Virginia — via heavy promotional spend. Bet365 doing so in Ohio matters in relation to Illinois because it cannot deduct promotional credits for tax purposes.
To take it one step further, the Buckeye State now has a higher sports betting tax rate than the 15% in Illinois after the Ohio Legislature acted on Gov. Mike DeWine’s request and doubled Ohio’s rate from 10% to 20% during the summer. Illinois Gov. JB Pritzker, who signed the gaming expansion bill in 2019 that legalized sports wagering, has been largely hands-off save his constant renewing of Executive Order 2020-41 to help mobile operators during the pandemic.
Bet365 has spent $65 million in promotional offers in its first nine months in Ohio and $21.1 million in Virginia, so clearly, the money is there. There’s no denying a $20 million license fee is tough to swallow — Ohio’s top Class A license cost is $2.5 million and Virginia charges $250,000 for a permit holder — but bet365 could play the long game and choose an optimal launch date in Illinois, should it meet the IGB’s qualifications for licensure, and hold that promotional spend like dry powder.
The X-factor: Internet casino gaming
If the first two bidding processes in Illinois have shown anything, it is to expect the unexpected when it comes to potential license applicants. The first go-round saw Tekkorp, a complete unknown doing business as Caliente Interactive, meet the minimum requirements for licensure before its eventual withdrawal. Fubo applied but was rejected, as a key person did not pass muster.
The recently completed supplemental process had an application from J&J Ventures, an Illinois-based business known in the state for operating video gaming terminals. Though J&J Ventures withdrew its application before the IGB announced Betway had done enough to move forward, it is worth noting J&J Ventures’ bid for the online license was higher — $23.1 million versus $22.5 million — than Betway’s.
This raises the possibility there may be an applicant who is willing to hedge Illinois will eventually have internet casino gaming, and the applicant will be able to offer sports betting as part of an online suite of gaming. There are internet casino gaming bills filed with the current General Assembly that could be considered starting next year, but the combination of widespread VGT play throughout the state — which has the support of the service industry as well as bars and taverns outside Chicago — and the recent opening of Bally’s casino in downtown Chicago means those could face heavy opposition among stakeholders and legislators.
While sports betting has generated $90.3 million in state taxes the first eight months of the year, that figure is dwarfed by the $625.8 million that VGT play has provided the state through September. Casino gaming has generated $216.6 million worth of state taxes in 2023.
The wild card: Fanatics Sportsbook
It is possible and perhaps probable Fanatics Sportsbook may not have to go the mobile-only route due to its acquisition of PointsBet, which already operates in Illinois. The IGB has previously conducted the transfer of a license with regards to a Master Sports Wagering licensee — FanDuel moved from Par-A-Dice casino in East Peoria to FanDuel Sportsbook & Horse Racing in Collinsville near the Missouri border — but the agency has yet to transfer a Management Services Provider license among licensees.
Per IGB rules and regulations, the transfer of a Management Services Provider license can only take place “with leave of the Board.” Hawthorne Race Club, which is the tether for PointsBet’s license, is also unique in Illinois as it conducts wagering at three off-track betting locations as allowed by state law.
Fanatics is expected to close business dealings to acquire PointsBet business interests in Illinois by the end of the calendar year, but considering Fanatics is operating both on its own and through PointsBet in Maryland, it is not completely certain what Fanatics’ final form in Illinois will be.
Another sportsbook that could re-emerge is Tipico, which was widely believed to be the “almost applicant” from the IGB’s initial process. Though never confirmed, it is thought Tipico submitted its bid 15 minutes too late and was never reviewed by the IGB.
Tipico has quietly been competitive in the second tier of Ohio operators in handle. Its promotional outlay in terms of percentage of handle has been less than 10% spanning the last four months, compared to more than 20% in the first five months of operations.
The Malta-based sportsbook is also in its first year of operations in Iowa, where it has ranged from 2% to 5.3% mobile handle market share among 19 options. Tipico has generated $4.1 million handle in the Hawkeye State, and a 3.5% market share in Illinois during the NFL season could generate potentially 10 times that amount.
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