It appears that DraftKings is following competitor FanDuel’s lead in Illinois. According to the latest update on the Illinois Gaming Board website, DraftKings (Crown IL Gaming LLC) applied for a management services license for sports betting on April 28, which may indicate that the company is seeking a quicker way into the Illinois market rather than enduring the waiting period for online-only sports betting platforms.
A DraftKings representative told Sports Handle via email this week that the company doesn’t “have any comment to provide regarding the MSP application/license in the state.”
FanDuel is pursuing a similar strategy via a partnership or purchase of Fairmount Racetrack. For DraftKings, it’s currently unclear who the partner would be, but Harrah’s Joliet, Jumer’s Rock Island, and the Casino Queen have not publicly disclosed who their online partners will be and could be possibilities.
Three potential partners
There are connections between DraftKings and at least two of the casinos:
- Harrah’s Joliet is owned by Caesars, which has an agreement with DraftKings to offer “market access for online gaming products.”
- Jumer’s is owned by Delaware North, which partners with IGT in West Virginia, and IGT partners with DraftKings at Mississippi’s Scarlet Pearl. An inquiry to Delaware North went unanswered.
The Casino Queen is an employee-owned business.
A move like FanDuel’s would mean that DraftKings could go live with mobile sports betting ahead of the waiting period mandated for mobile-only operators. According to the new law, mobile-only platforms cannot even apply for a sports wagering license until the first sports betting license is issued in the state.
None has been issued to date, though both Rivers Casino and the Argosy at Alton went live with retail sports betting under temporary operating permits in early March, just days before the COVID-19 pandemic slammed the brakes on professional sports and gaming across the U.S. Five other casinos have been granted temporary operating permits, but they have not yet been approved for betting.
Illinois lawmakers making mobile sports betting wait 2 years and then going live with in person betting as COVID 19 is about to hit is the most Illinois thing ever. So many tax dollars bumbled away.
— MBerkowi (@thatfnmb) March 6, 2020
Rivers and the Argosy could get their permanent licenses at the June 11 Illinois Gaming Board meeting, though the agenda is not available yet. Should that happen, the clock would start ticking for online-only platforms. From the date the first license is issued, the IGB has up to 540 days (18 months) to accept licenses from online-only operators, and an additional 90 days to announce which operators would be approved. In total, that’s a 21-month wait — read early 2022 — before an online-only operator could launch.
The waiting period has been referred to as the “penalty box,” and is designed to keep national, mobile-only operators — DraftKings and FanDuel in particular — out of the market for at least 18 months, allowing local retail sportsbooks to get a head start.
According to a 2015 Illinois attorney general’s opinion, the companies were operating illegally in Illinois both before — and continued to do so after. Local sportsbook operators in Illinois didn’t want DraftKings and FanDuel to have the ability to leverage their DFS databases and get a jump on local operators in the mobile market.
In March, sources told Sports Handle that FanDuel was in talks to purchase Fairmount Racetrack, which would allow the company to launch mobile sports betting as soon as it got approval.
Tethered mobile platforms must have 80% interest
According to the law:
The sports wagering offered over the Internet or through a mobile application shall only be offered under either the same brand as the owners licensee is operating under or a brand owned by a direct or indirect holding company that owns at least an 80% interest in that owners licensee on the effective date of this Act.
At the moment, neither FanDuel nor DraftKings has disclosed an 80% ownership in a casino in Illinois.
The difference between offering sports betting via an owners license and an online-only license is $10 million. There is a $10 million application fee for an owners license vs. $20 million for an online-only license. It could prove more cost effective for FanDuel, DraftKings, or any other potential online-only operator to buy real property or a stake in another company than to pay the $20 million fee.
On a pretty slow sports day without mobile. Illinois sports betting will 🚀 once there is competition. https://t.co/M5AqAodTj0
— Joe Ostrowski (@JoeO670) March 11, 2020
Going live with an owners license would allow an online-only operator to get into the market faster. According to the IGB’s rules, tethered online platforms (i.e. those under the umbrella of an owners license) can go live as soon as they get IGB approval. For example, Rivers Casino was the first to go live with retail sports betting in Illinois on March 9, and the company appears to be first in line to launch its online product, BetRivers.
Chris Altruda and Matt Rybaltowski contributed to this report.