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Why Regulating Online Gambling in Illinois is Complicated

Posted on by John Lathram

IllinoisSome industry professionals have high hopes there will movement this fall towards regulating online gambling in Illinois. However, due to the breadth of measures being proposed, opposition from existing licensees, and potential operator exclusions, meaningful progress is unlikely.

Two weeks ago, Illinois´ House Gaming Subcommittee held the first of two scheduled hearings to discuss an expansion of gambling in the Prairie State. Members of the Subcommittee heard from various parties both in favor and opposed to an expansion of gambling during a lengthy meeting that went on for more than four hours.

The hearing mostly centered on the pro and cons of expanding the number of gambling opportunities, rather than what they might consist of – which will likely be the topic of the second hearing scheduled for October 3rd. The hearing was informative in nature, so no vote taken about whether an expansion of gambling is a good idea or not.

What Measures are being Proposed?

The breadth of measures being proposed is daunting. The bill into which the measures are packed (SB7 – PDF) is already more than five hundred pages long and only includes placeholders for the regulations relating to Daily Fantasy Sports (DFS), sports betting and online gambling – the details to be filled in once they have been agreed.

Assuming the details will be similar to previous attempts to regulate DFS and online gambling in Illinois, there are a number of precedents that have already been set. Therefore, if the length of the bill itself doesn´t confuse politicians unfamiliar with gambling, some of the concessions likely to be found in the final draft of the bill most certainly will. For example:

  • In order to appease the casino industry´s fears about cannibalization, only brick-and-mortar casinos will be able to apply for online gambling licenses.
  • Fears about racecourse operators losing income to online gambling will been addressed by allowing racetracks to install slot machines.
  • Due to the greater number of slot machines in circulation, VGT operators will be allowed to increase their payouts to make their machines more attractive.

Who is Opposing the Measures?

Even though the bill´s objectives of assisting economic development, promoting tourism, and raising tax revenues are supposed to be met by channeling money from the unregulated market into the regulated market, the casino and horseracing industries are in disagreement about operating slot machines on non-racing days, while the VGT industry is still raising concerns about saturation and cannibalization.

Their objections do not help politicians with little understanding of the unregulated market, who will likely be confused about how this merry-go-round of money is supposed to achieve the bill´s objectives. There are also objections from anti-gambling groups and problem gambling support groups, who claim Illinois´ existing gambling laws are the worst model for legalized gambling in the country.

Which Operators Might be Excluded?

In addition to the complexity of the proposals and the opposition from existing licensees, there may be further complications if proposals to ban “bad actors” are also included in the final draft of the bill. Over the past five years, various attempts to regulate online gambling in Illinois have prohibited operators who accepted wagers via the Internet in contravention of United States law.

Proposed online gambling legislation in 2013 was fairly clear about banning online operators for ten years if they had continued providing a service in the post-UIGEA era. However, in a bill passed by Illinois´ Senate last year, the wording was changed in such a manner that it could be interpreted as permanently banning any operator that has ever taken an online bet.

The Timing´s Not Great Either

The timing of the next House Gaming Subcommittee comes just before November´s election, when politicians will be more concerned about holding onto their seats rather than focusing on a complicated and potentially contentious piece of legislation. In theory, the bill could be discussed during November´s “veto session” or January´s “lame duck” session, but the likelihood is that it will expire in January and have to be reintroduced in the next legislative session.

If this is the case, it might be better if the bill was dismantled and its passage attempted piecemeal. Although this may ultimately delay regulating online gambling in Illinois (assuming sports betting legislation and DFS legislation takes preference), there will be a better chance of politicians understanding what they are voting for than the current complicated omnibus approach, and therefore a better chance of online gambling legislation being passed at all.

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