One of the larger pieces of the emerging U.S. sports betting puzzle fell into place a week ago when Illinois legislators passed an expansive gambling package, opening a Chicago market that includes a metro population of 9.5 million, major pro teams in every league and a speedway.
But the details of that legislation included a mix of wrinkles previously unseen in any state, leaving many to wonder what shape it will take as it rolls out.
The new law will permit retail sportsbooks at pro stadiums and arenas that seat more than 17,000; mandate the use of official data to settle bets placed after a game begins; launch a pilot program that will allow for as many as 5,000 parlay betting kiosks across the state; and authorize the construction of a mega-casino that promises to fuel the appetite of one of the major chains.
But it also includes unprecedented restrictions that could, at least initially, make it difficult for most of the deep-pocketed sportsbook operators who already have planted flags elsewhere in the U.S. — MGM Resorts International, William Hill, FanDuel, DraftKings and The Stars Group — to launch sports betting in Illinois.
“It’s important that Illinois approved sports betting, so I guess that’s a step in the right direction,” said Scott Butera, president of interactive gaming at MGM Resorts, which has locked down official status sponsorships with the NBA, MLB, NHL and MLS. “When we look at what makes for good legislation, it’s open competition, reasonable licensing fees and reasonable tax rates. And I think you have here something that’s less than open, certainly favors the brick-and-mortar [casinos] from both an operational and a branding standpoint and has some fairly expensive up-front fees and licensing fees.
“That being said, we like the state. We’ll continue to work and we’re going to find options and paths to be successful. But it’s going to require a little more creativity than we would have wanted.”
None of the major pro franchises in Chicago would comment on the legislation, which the Illinois House and Senate passed and sent to Gov. J.B. Pritzker last week. But they had to be happy on two fronts.
First, Illinois joins Tennessee as only the second state to pass legislation requiring sportsbooks to use official data provided by the leagues to settle “in play” bets — those placed after a game begins. The Illinois bill does not specify a price for that data, instead requiring “commercially reasonable terms.” For the leagues, the sale of official data likely will be the largest direct revenue stream created by the expansion of sports wagering.
The major pro teams in Chicago were winners, too, thanks to the inclusion of licenses to operate sportsbooks within a five-block radius of stadiums and arenas of 17,000 or more. That opens the door for teams to contract with sportsbooks to operate within their facilities, which likely will drive value of deals in the category substantially, since the sportsbooks could not only market in the venue — as they can in other states — but also operate there.
But a closer look at the legislation reveals a tenuous road to those deals.
Illinois is the first state to require that casino operators use their own brands on their sportsbook websites, precluding them from sublicensing to the major brands, as casinos in many other states have. Illinois will require casinos to operate online under either the same brand as they do at retail, or the brand of a casino in which their parent company holds at least an 80% stake.
MGM and William Hill — and even legacy DFS brands FanDuel and DraftKings — set the stage for their national rollout through market-access agreements with smaller, regional brick-and-mortar casino chains, which would sublicense their online licenses to the bigger players. Though those agreements sometimes included ownership stakes, none came close to the 80% required in Illinois.
In a twist of fate, MGM sold its 50% interest in a riverboat casino in Elgin, Ill., last August. It expected to use a market access agreement with Boyd Casino, which operates the Par-A-Dice hotel casino in East Peoria, as its way into the state.
“You can partner and operate as we intended to, you just can’t use your brand unless you own 80% of the facility,” Butera said. “Obviously we’d like to use our brand. We’re figuring out how to approach Illinois in light of that.”
The most obvious avenue would be through acquisition, but the bill also might quell that, requiring that the 80% interest be held “on the effective date of this Act.”
Of the 10 casinos in Illinois, only three are tied to brands owned by companies that operate online sportsbooks in other states. Caesars Entertainment has two Bally’s casinos in Illinois. Chicago-based Rush Street Gaming has Rivers Casino in Elgin.
The bill not only gives brick-and-mortar casinos an 18-month head start in the market, it also provides for the addition of only three online operators after that period, each tied to a hefty fee of $20 million.
While the major sportsbook operators remain bullish on the Chicago market, they’re uncertain about the road into it.
At Wrigley Field, the Cubs this season opened a 3,000-square-foot premium space called the W Club, designed with the look of a sports bar. As yet untied to a sponsor, it would appear to be a natural fit for a sportsbook. Thus far, neither Caesars nor Rush Street has signed on to purchase official MLB data. Unless they do, the Cubs can’t sell them a sponsorship. The only sportbook that has, MGM, is without a clear path into Illinois.
“Clearly partnering with any of the [Chicago sports facility] operators is attractive,” Butera said. “They’re all high-quality operations in good locations. They’ll attract a significant amount of sports bettors. Clearly those all will be attractive opps for somebody.
“It’s all just a matter of who goes where and when.”