Video gaming terminals (VGTs) are a major industry in Illinois and influence much of what’s happening with gambling in the state. Illinois has about 45,000 terminals, far more than any other state. The terminals are located in about 8,200 locations, which include restaurants, bars, and truck stops.
VGTs are similar to casino slots, but available at a variety of retail establishments where local regulations permit them. While simple, these terminals are extremely popular. But why are VGTs so influential in Illinois, and how do they impact the chances of online casino legalization?
Video Gaming Terminals Are the King of Gambling in Illinois
Perhaps the biggest reason VGTs are crucial to Illinois is the tax revenue they bring to the state and local municipalities. Illinois charges a 34% tax on the 45,000 video terminals’ income. Of that, 5% goes to local municipalities.
Net proceeds from VGTs are divided as follows:
- 65% goes to the venue and terminal operator
- 29% to state taxes
- 5% to the local municipality
- 0.8% to the Illinois Gaming Board (IGB) to cover costs
In 2022, the VGT handle in Illinois was $31 billion. Players won over $29 billion, while VGTs took in $2.7 billion in net income. That translated to $921.5 million in taxes ($786 million to the state and $135.5 million to local municipalities.)
This year, video gaming terminals are on course to beat those numbers. Up until June, the terminals generated $1.45 billion in net income (vs. $1.34 billion in 2022). That equals $493 million in total tax revenue (vs. $455.3 million in 2022.)
Casino and Sportsbook Revenue Lag Behind VGTs
To put these numbers in perspective, Illinois casino revenue in 2022 was half of VGTs, or $1.35 billion. Casinos also pay a lower tax (varying based on revenue). For 2022, casinos paid $290 million in state taxes and $76.5 million in local taxes for a total of $365.5 million.
Year-to-date through June 2023, casinos have generated $731 million in revenue and $122.5 million in state taxes, along with $41.7 million in local taxes (for a total of $164.2 million). Meanwhile, year-to-date through May, sportsbooks brought only $66 million in state taxes and $5 million in local taxes.
Sportsbook and casino combined revenue and tax contributions are not even half of those for VGTs. Even once Bally’s Chicago casino opens, the industry won’t likely catch up to VGTs. The Bally’s Entertainment project, planned for a 2026 opening, is forecast to generate up to $200 million in tax revenue annually.
This revenue from VGTs goes to the Illinois Capital Development Fund, which in turn pays for economic development and infrastructure investments. Public money is hard to come by in Illinois at the moment, as other parts of the government struggle under a ballooning debt load.
Video Gaming Terminals Are Connected to Illinois Politics
Other reasons that VGTs influence Illinois include big lobbies and the fact that many terminal operators and venue owners are connected to politics.
Accel Entertainment Gaming, which claims to be the largest VGT operator in the nation, is the biggest operator in Illinois. Accel has terminals in almost 2,800 locations across the state.
The company shows up under its name on the Illinois Lobbyists List, plus under five other lobbyist firms. These include one led by Michael Kasper, a top aide to former Illinois House Speaker Michael Madigan. VGTs were legalized under Madigan’s tenure.
Another big operator in the state, J&J Ventures Gaming, operates almost 2,600 terminals and also shows up on the lobbyist lists. Eight lobbyist firms represent the company.
Meanwhile, some licensees and business owners have ties to Illinois politics. One such case is the lawyer and banker James J. Banks, who served on the Illinois Tollway Board under five governors. Banks received a license to operate VGTs earlier this year after a lengthy process and initial denial.
Other examples include the mayor of McCook (a suburb of Chicago) and his father, a nearby Willow Springs village trustee. The father-son duo, both named Terry Carr, are Steak ’N Egger franchise owners and operate VGTs in four of their locations.
VGT Influence Threatens Illinois Online Casino Expansion
The influence of VGTs is one of the main challenges to legalizing online casinos in Illinois. The industry says the addition of online casinos would cannibalize VGT sales and directly impact small businesses that depend heavily on the terminals’ income.
However, VGTs’ importance and pushback go beyond small businesses. Many lobbyists and people in the industry are interested in not allowing iGaming. Instead, they want to continue growing VGT sales in the state.
But state lawmakers might have to look at the financial impact of online casinos. Estimates by Bonus show that online casinos could generate up to $240 million a year in tax revenue. That is based on other states with similar populations and tax rates like the proposed 15% tax by one of Illinois’s two failed iGaming bills this year.
While $240 million won’t fix Illinois’ debt problems, it’s another source that could help. But one thing is for sure, passing an online casino bill would require pleasing the VGT industry and convincing lawmakers that it won’t cannibalize sales.
Corrections
As originally published, this article contained two inaccuracies. First, it described VGTs as being similar to video lottery terminals, when in fact they function more like slot machines. Second, it suggested that VGT revenue could help with the state’s pension debts when the Capital Investment Fund is unrelated to pension funds. Bonus regrets the errors.
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