In an effort to leave no stone unturned, Illinois lawmakers heard testimony on Thursday from stakeholders ranging from professional leagues to horseman’s groups and racetracks to the state’s lottery vendor during a House Revenue and Finance, Sales, Amusement, and Other Tax Subcommittee hearing on sports betting. The two-plus hour hearing run by Rep. Bob Rita (D-28th District) was mainly for informational purposes, however some testimony was heated, particularly in relation to an amendment that wasn’t even on the agenda.
Last week, a group of lawmakers, headed by Rep. Mike Zalewski filed four amendments to HB 3308, a sports betting shell bill. A fifth amendment was held back, but appears to have been filed on Monday, and at least one of Thursday’s witnesses, a representative from Midwest Gaming and Entertainment, which operates Rivers Casino, voiced his support for Amendment 5, which appears designed to shut out internet/mobile sportsbook operators DraftKings and FanDuel, both of which are dominating in the New Jersey market.
A sort of “bad actor” clause, a pertinent section of Amendment 5 reads:
No sports wagering operator license or Internet sports wagering vendor license shall be granted to an applicant that has accepted, that has or had an affiliate that has accepted, or that has officers or directors who are or have been officers or directors of another party that accepted wagers through the Internet in contravention of any United States law, Illinois law, or any substantially similar laws of any other jurisdiction before the application date pursuant to a final determination of a court or an unequivocal official pronouncement from a government authority or chief law enforcement officer.
Railing against the potential competition
Paul Gaynor of Midwest Entertainment claimed that DraftKings and FanDuel would have a “duopoly” on sports betting if they are allowed to participate in Illinois and that in the past, both companies have [flouted] the law with regard to daily fantasy and should not be rewarded for that behavior with the opportunity to have sportsbooks in Illinois.
“Without language barring bad actors from the licensing process, the proposed legislation would ignore DraftKings’ and FanDuel’s pattern of criminal conduct and reward bad actors, who to this day, refuse to comply with the laws,” Gaynor testified. “If we allow this to happen in Illinois, DraftKings and FanDuel, under the proposed legislation, would pay $20 million for 85-90 percent of the market, leaving a mere 10-15 percent of the market” for others.
Gaynor was referring to the $10 million license application fee in several of the amendments.
Rep. Zalewski immediately took issue with Gaynor’s comments and even went so far as to call it “silly” that the two DFS companies were being discussed in a hearing meant to help lawmakers better understand and refine their thoughts on what sports betting in Illinois should look like.
The goal of the hearing, per Zalewski, was to present testimony on four amendments. Each is distinctly different and represents a potential model for the Illinois sports betting regulatory framework.
Amendment 1 is modeled after the current New Jersey law that allows state-wide mobile and internet sports betting; Amendment 2 is modeled after Mississippi, which allows mobile and internet sports betting on site only; Amendment 3 is a “league bill” that favors the professional leagues by mandating the purchase of official league data and would require sportsbooks to pay the the leagues a royalty; and Amendment 4 makes the lottery the regulator and sole operator of sports betting and does not include a mobile sports wagering component.
Good to lead a lengthy hearing today on the ins and outs of bringing sports betting to Illinois. We hope to move ahead to create more entertainment and economic activity this year. pic.twitter.com/y7GeMntIvv
— Rep. Bob Rita (@RepBobRita) March 28, 2019
$10 million application fee questioned
In general, testimony was informational and civil. Members of both the horseman’s groups and racetracks oppose the $10 million license application fee included in several of the amendments as well as any payout to the professional leagues while supporting the concept of making at least one skin available to each racetrack facility.
Casino stakeholders were vocal in support of the New Jersey-style amendment, arguing that existing facilities at casinos and racetracks are the best equipped to get sports betting up and running quickly. Tom Swoik from the Illinois Casino Gaming Association said his group supports online/mobile gaming with remote registration, the ability to bet on college as well as professional sports and a low tax rate. His group opposes any kind of payout to the sports leagues.
“Sports betting with internet gaming will bring new revenue to the state,” he said. “We believe that legalizing sports betting will create a safe environment for the state and bring new revenue. We believe that Amendment 1 is the best place to start.”
Not surprisingly, Dan Spillane, an NBA Vice President who has been lobbying across the country regarding legal sports betting, once again made the case for mandating the use of league data, paying the professional sports leagues a royalty, and allowing the leagues to “opt out of riskier bets.”
Spillane said Major League Baseball and the Professional Golfers Association share the NBA’s position. Despite the fact that no states with legal sports betting pay the pro leagues, Spillane implored Illinois lawmakers to be the first.
“No other state does it,” Spillane admitted. “The model comes from international situations, but we are early in the process here. We’ve only been engaged in the process since last year, so essentially, it’s Minute 3 of the game. I am hopeful that Illinois will set a precedent about how sports betting should be run.”
Joe Briggs, representing the NFLPA echoed many of Spillane’s points, but his main goal is protecting players, even ahead of protecting the games they play. Briggs argued that biometric data collected by his league could become part of “the insider trading that has been talked about.”
Intralot: State lottery is ‘biggest gaming brand’
Twenty-one witnesses were initially scheduled to speak, but in the interest of time, the subcommittee opted to make state regulators available for questions rather than take time to testify, and only one panelist supporting the lottery bill spoke. Nick Papadoglou, Intralot’s Chief Commercial Operator, made a strenuous argument in favor of the lottery amendment.
“We will offer the biggest return to the state,” he said, and then shared a chart that shows why. “The biggest gaming brand in the state is the state lottery. It carries values like integrity and responsible gaming and it supports more than 10,000 retailers.”
Among the nine states and jurisdictions that have legalized sports betting, only three run sports betting through the lottery — Rhode Island, Delaware, and when it launches this summer, Washington, D.C. None of the bigger states, New Jersey included, have chosen the lottery route. New Hampshire is headed toward becoming the next “lottery” sports betting state.
Just over two hours after the hearing started, lawmakers called it day as they headed to the House and Senate floors. From here, Zalewski said they’ll take a “work week” next week, which will allow staff to absorb and sort through testimony and revise and refine the amendments.
Zalewski’s goal is to move sports betting through the House as quickly as possible in an effort to get legislation onto Governor J.B. Pritzker’s desk by late May. Pritzker called on the state legislature to legalize sports betting this session and went so far as to include revenue from it in his budget.