Anyone who wants to offer online sports betting in Illinois without a land-based presence can once again apply for a license. All it will cost is $20 million up front.
However, the reason that’s possible is that the state got no takers the first time around. At least, none who saw the process through.
The state’s Sports Wagering Act allows for up to three such licenses, which cost at least twice as much as the regular ones. The price for those is based on the operator’s handle and caps out at $10 million.
The advantage, in principle, is that companies offering betting this way don’t need a retail sportsbook with the same brand. That means they can exceed the one-brand-per-retail-license limit and don’t have to share revenue with a partner casino.
The initial application period ran from Aug 5 to Dec 3 last year. A total of four companies applied, but ultimately, none received their license. The reasons were different for each:
- One unnamed company dropped out very early in the process
- One applied too late, and the Illinois Gaming Board (IGB) refused to accept its application
- The IGB deemed Fubo Sportsbook unsuitable, which was just as well since it has recently shut down its operations
- Finally, on Oct 14, Tekkorp Digital Acquisition Corp, the last remaining candidate, withdrew its application
If Tekkorp’s name is unfamiliar, that’s because it isn’t a sportsbook operator. It’s a special purpose acquisitions company (SPAC), which had presumably been seeking to enter the space by acquiring an existing sportsbook.
SPACs were a big trend in the US gaming space circa 2020, but the pool of acquisition targets has dried up. Tekkorp presumably couldn’t find one likely to be successful enough to be worth a $20 million license.
Did Illinois Overplay its Hand?
Illinois’ approach to sports betting was notorious for its protectionist leaning. It has become standard in the US for states with both retail and online gambling to force online operators to partner with land-based license holders. That, in turn, guarantees those brick-and-mortar casinos and racetracks a cut of the revenue.
For Illinois, that wasn’t enough. Its retail casino industry – Rush Street Gaming in particular – has a well-documented, mutual, and profound dislike for the daily fantasy sports (DFS) companies, DraftKings and FanDuel. The feeling is that those companies gained an unfair advantage in the online gambling space by building a customer database while DFS was still in a legal gray area, leaving regulated companies like Rush Street unable to participate.
That feud may have informed Illinois’ policies. The most heavily criticized of these was the now-expired in-person registration requirement. It was known colloquially as the “penalty box” due to the assumption that it was meant to keep the DFS companies out of the market temporarily until local companies could level the playing field.
If that was the goal, though, it failed. FanDuel opened a sportsbook at Par-a-Dice Casino. DraftKings went even further and bought the Casino Queen in its entirety.
Likewise, the attempt to extract a premium from online companies seems to have backfired. No one has paid the $20 million.
The IGB apparently hopes to get some takers on the second offer. However, it’s hard to see who would do so. Golden Nugget and Bally’s are both building retail presences in the state, and all the big brands are there already.
At a time when smaller sportsbooks are shutting down, even in more hospitable states, spending that kind of money to be a latecomer to a competitive market seems like financial suicide.
The Online Casino Question
There is one question mark still hanging over Illinois, however. That is whether its Internet Gaming Act (IGA) will make a reappearance in 2023 and whether it will fare better this time around.
Initially introduced in April 2021, it seemed to hold a lot of promise. However, it stalled and, despite remaining on the table in 2022, never progressed any further. Its sponsor, Sen. Cristina Castro, said she hoped to educate her fellow lawmakers on its merits and try again in 2023.
Opinions on its likelihood of success vary. Illinois looks good on paper, yet opposition is strong from unions, the retail casino sector, and especially video gaming terminal operators. What’s more, a key supporter of the effort recently lost in the primaries.
If a bill similar to the 2021 IGA were to pass, each land-based license holder could partner with up to three online brands. Thus, there would be room for more online operators, yet not all of these could offer sports betting.
In principle, that would be the one factor that could motivate a company to seek an online-only sports betting license. Sportsbooks don’t make as much money as online casinos, but they serve as an important customer acquisition channel. Plus, starting with sports betting now would mean having a customer database in place ahead of time.
Is that worth $20 million when Illinois online casinos aren’t even a sure thing? Probably not.
It might be worth it if online-only sports betting operators could also acquire a license to offer their online casinos independently. Not having to split that revenue could easily be worth $20 million. However, the first draft of the IGA contains no such provisions, and it’s improbable that the retail casino industry would stand for it.