An Illinois Senate bill aims to amend the state’s Video Gaming Act to prohibit municipalities with a population over 1 million from banning video gaming terminals (VGTs) except by referendum. State Sen. Donald P. DeWitte sponsored the bill, which seemingly targets Chicago. Because it’s the only city in the state with a population that fits the criterion.
The Video Gaming Act passed in 2012 gives each municipality the power to allow or prohibit VGTs. Notably, Chicago is among the holdouts. Unlike the rest of the state, Chicago didn’t have any forms of gambling except unregulated sweepstakes machines until recently.
That changed in September when Bally’s Corporation (Bally’s Corporation 17,74 -0,34%) opened a temporary casino in downtown Chicago. The casino located in the Medinah Temple building will operate until 2026 when Bally’s expects to open the first permanent casino in Chicago.
The rest of Illinois has embraced VGTs. The state has over 45,000 VGTs, far more than any other state. The machines are in about 8,200 locations, including restaurants, bars, and truck stops. They generated over $2.7 billion in revenue in 2022.
Meanwhile, the combined revenue of Illinois sportsbooks and retail casinos was less than half of the terminals in 2022. Unsurprisingly, that has led to the VGT industry gaining significant influence in Illinois.
A Way to Raise Tax Revenue or Pleasing VGT Interests?
The proposed bill calls for a 34% tax on VGTs in the targeted municipalities. However, the tax revenue distribution varies slightly from the rest of the state.
According to SB3172, 17% would go to the local municipality, while the remaining 83% would fund the Regional Transportation Authority (RTA), which oversees transport agencies in the Chicago metro area.
It’s unsurprising that DeWitte — R-St. Charles — aims to fund RTA, as many of his campaign sponsors are from the transportation industry. He also has served as a Kane County representative to the RTA and is the Minority Spokesperson for the Senate Transportation Committee.
However, besides the RTA, the VGT industry also greatly benefits from legalizing the terminals in Chicago and could be the real beneficiary of the proposed legislation.
The Illinois Lobbyist List shows that one lobbyist firm, Governmental Consulting Solutions, represents both RTA and J&J Ventures Gaming, one of the largest VGT operators in the state.
Reports show that VGT oversaturation is hurting some small businesses, and some municipalities are considering whether to limit the number of VGTs. That means the best way for VGT companies to grow in Illinois is to enter Chicago.
Bally’s Could Fight Back
The potential expansion of VGTs into the city will likely face opposition from Bally’s. The company has paid Chicago $40 million for the winning bid to build its casino.
Bally’s will also pay another $135 million in fees to the Illinois Gaming Board within the first 30 days of the permanent casino opening. The project will cost an estimated $1.7 billion. If VGTs are introduced, Bally’s could face significant competition and reduced revenue.
Cannibalizing Bally’s revenue would likely mean lower than the projected $200 million annual tax revenue for the state. At the same time, Illinois would become even more dependent on VGT revenue.
Gov. Pritzker Wants to Raise the Sports Betting Tax
Sen. DeWitte’s bill is not the only proposal to increase the state’s tax revenue. Illinois Gov. J.B. Pritzker recently introduced his proposed 2025 budget, which includes raising sports betting taxes to 35%. That marks a significant increase from the current 15% tax.
Estimates show the hike could generate an extra $200 million for the state. The move to increase taxes on sportsbooks is not uncommon. Ohio voted last year to raise sports betting taxes from 10% to 20%.
The governor says the increase would cover gaps in the budget and fund initiatives like migrant care. But an interesting proposal in the budget, which would free $175 million, would change mass transit costs to come from a state fund that pays for road projects.
Unsurprisingly, those affected by the change are strongly opposed. They include unions and asphalt companies, which are among the biggest sponsors of Sen. DeWitte.
iGaming Could Bring Needed Tax Revenue
Raising tax revenue and filling the gap in the budget are stated goals for both Gov. Pritzker and Sen. DeWitte. One way that can significantly help is legalizing online casinos.
Bonus estimates that if an iGaming market were operating today in Illinois, it would bring about $275 million annually in tax revenue. That’s based on the proposed 15% tax in HB2239, an active House bill aiming to legalize online casinos in the state.
However, legalizing iGaming is easier said than done. While HB2239 and another Senate bill sit in both legislative chambers, their chances are slim. That’s because the proposals face an uphill battle unless there are political changes and the VGT industry is pleased.
Rep. Edgar Gonzalez Jr., who sponsors HB2239, agrees. Gonzalez, D-Chicago, told Bonus in January that he doesn’t think his bill will see a vote in 2024. He says his goal is to educate fellow lawmakers, and he believes iGaming is a matter of “when,” not “if.”
However, some gambling industry leaders believe Illinois could be a contender for legalizing online casinos in 2024. DraftKings Co-Founder and CEO Jason Robins recently called the state a “dark horse” in this year’s legislation proposals.
He pointed out that many states will stop receiving COVID-related federal funding and will need to raise tax revenue. That is certainly the case for Illinois.
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