Representative Mike Zalewski isn’t exactly sure what his colleagues think sports betting in Illinois should look like. So instead of putting his faith in a single piece of legislation, he’s leading a team of lawmakers who will hedge their bets, and file four distinct sports betting amendments today, Thursday.
The amendments, which offer everything from a New Jersey-style setup to a pro-league friendly framework, will be filed as amendments to HB 3308, a shell bill Zalewski filed in February that was assigned to the Revenue and Finance Committee, of which Zalewski (D-District 23) is the chair.
“What we have learned the last few months is there is great interest and agreement in the gaming industry to bring sports betting and its economic benefits to Illinois, and little agreement yet on how to best do it,” Zalewski said. “By presenting these four proposals today and encouraging robust discussion on everything, I believe we can work out a plan that provides responsible regulation, a safe atmosphere for adult sports fans to bet on their favorite teams and games, and meaningful economic benefits for our businesses and our tax coffers. It’s time to get to work.”
Lawmaker’s goal: Legal sports betting this session
Zalewski’s plan is to legalize sports betting by the end of this session, but Illinois has a history of resistance to gambling expansion, so the question of whether or not mobile sports wagering will be front and center is one that is currently unanswered.
“I think it may be in-person sports betting to start and then mobile will roll out,” Zalewski told Sports Handle. “The brick and mortars in this state are going to say, ‘We’ve been here the longest, we’ve vetted, we’ve tested, we’ve been here before, why would you wait here for the online guys, when we’re show ready right now?’
“That may be appealing to us as a policy piece. It’s a hybrid, so I think slow beginnings are probably preferred over going too fast. “
In the House, Zalewski will partner with Representative Bob Rita (D-District 28) in the potential gaming expansion. Rita held comprehensive hearings on sports betting last fall, and is now taking the lead on a casino/video gaming expansion, but will support Zalewski’s efforts.
At least one of the amendments that will be filed on Thursday would authorize state-wide mobile sports betting. As he was researching and putting together the amendments, Zalewski developed nicknames for each – “New Jersey,” “Mississippi,” “Lottery” and the “Leagues” version. Below is a look at each option. Zalewski’s office released this full fact sheet regarding the amendments.
A look at the various nicknamed measures, models
New Jersey: This one would be similar to New Jersey’s regulatory framework, which permits state-wide mobile with remote registration, and in Illinois it would allow sports betting on riverboats and at racetracks. The amendment calls for a 15 percent tax on sports wagering revenue produced at brick-and-mortar casinos, and 20 percent for online casinos. It would also impose a $10 million licensing fee (same as Pennsylvania) and a $250,000 renewal fee every five years. It would allow each operator licensee up to two “skins” (or branded mobile platforms) at $1 million each, with a $500,000 renewal every five years.
The Illinois Gaming Board would manage regulation and enforcement. It would require racetracks to contract with horseman’s groups before licensing and contribute a portion of revenue to purses. This version of the bill includes an emergency provision, making it effective within 90 days of approval.
In 2019, passing mobile #sportsbetting bills with an in-person registration caveat is the most stupefying thing ever. It's like asking people to drive to GrubHub HQ in Chicago first before they can get their food delivered.
— Robert DellaFave (@RobertDellaFave) March 12, 2019
Mississippi: Originally referred to as the West Virginia model, this will mirror the Mississippi setup in that mobile sports betting would only be permitted when patrons are on site with their devices. Licensed OTBs, racetracks, casinos plus 10 online operators (“tethered to” brick-and-mortar facilities) could apply for licenses. In this one there’s an initial $10 million operator licensing fee, with a $500,000 renewal every four years. Racetracks must contract with horseman’s groups before licensing and are required to put a percentage of revenue into purses. It calls for a 0.20 percent “integrity fee” — an off the top cut of all wagers payable to pro sports leagues — but only if the regulator, the Illinois Gaming Board, were to adopt the fee. Should that fee be put into place, sports leagues would be required to provide official league data to licensees, which to this point they have been selling through private commercial deals. The tax rate on operators’ gross revenue would be 15 percent.
Lottery: As some smaller states, Delaware and Rhode Island included, have found, operating sports betting through the lottery may allow for the state to take the least amount of risk and a larger percentage of revenue (setting aside the issue of whether a larger competitive market would generate more taxable revenue from which to draw). Like both Delaware and Rhode Island, in this scenario Illinois would take a higher cut as compared with the other scenarios — 50 percent of revenue. This version of the bill would give the Illinois Department of Lottery a monopoly, but would require the lottery to shop around for an operator. Sports betting could be conducted through lottery kiosks, though the kiosks would dispense tickets and receipts, but not cash. Patrons could redeem receipts at any lottery retailer. Casinos and racetracks would likely not offer sports betting under this model, as they wouldn’t want lottery kiosks in their venues. This proposal leaves much of the decision making to the lottery.
Leagues: This is what is sounds like, and includes an “integrity fee” – the .25 percent that the pro leagues have been peddling this year – and a mandate to buy “official league data.” Note that officials from the National Basketball Association and Major League Baseball now shun the phrase “integrity fee,” preferring to call the fee a royalty or compensation. Under this version, sporting venues could have sportsbooks if they contract with an operator (for example, a racetrack or casino), and limits the placement of a sportsbook within a five-block radius of a sports facility. Existing casinos can offer in-person and mobile sports betting. The tax rate would be 12.5 percent with an initial licensing fee of $10 million.
No state with legal sports betting currently pays a fee to the leagues, but Zalewski said that just because everyone’s (not) doing it, doesn’t mean Illinois should follow suit.
“I have to view it from a very Illinois-centric prism,” Zalewski told Sports Handle. “I don’t think it’s reasonable to pass a bill in this state that tells the leagues what they have to do in this state, I think that will stall the process. I’d rather let them come in, propose their bill, and defend their bill. In Illinois specifically, you need to at least bring them in and hear what they have to say.”
Illinois has unique relationship with pro-team owners
Chicago, like New York City, San Francisco and Los Angeles, presents a somewhat unique situation in terms of the professional leagues. All four cities have two Major League Baseball teams and at least one team from each of the other major professional leagues.
Chicago Cubs manager Joe Maddon on the legalization of sports betting: pic.twitter.com/fKfEHNxN5k
— David Payne Purdum (@DavidPurdum) May 14, 2018
Chicago’s five team owners – the Ricketts family (Cubs), Jerry Reinsdorf (White Sox and Bulls), the Halas family (Bears) and the Wirtz family (Blackhawks) have deep ties to the city and are, in some cases, household names. Zalewski clearly doesn’t think that foisting an idea upon pillars of his community is the way to go.
As for the other amendments, Zalewski isn’t really sure which – if any – will have mass appeal. His plan was really just to put the information out there and allow the general assembly to chew on the ideas and, if not select one amendment, combine elements from multiple amendments.
“I don’t think it’s easy to know. We have to pass a bill and the one that I think that will draw the least amount of resistance will be the first one because it’s NJ’s bill and it works.” he said. “NJ has a very low tax rate and unlimited, unfettered mobile betting and that gives people pause in this state. I wish it didn’t, but I can’t ignore it. I think they all have their own virtues and their own drawbacks.”
Governor Pritzker supports sports betting
Once the amendments are filed, Zalewski is hoping for a speedy hearing. In February, he told Sports Handle that his goal is to get something onto Governor J.B. Pritzker’s desk by the end of May. Should that happen, Pritzker is expected to be on board – after all, he included sports betting revenue in his most recent budget and literally directed the general assembly to legalize it.
“I am calling on the legislature to take this up immediately so that Illinois can realize hundreds of millions of dollars, create new jobs, and bring sports betting into a regulated environment that will protect citizens from bad actors,” Pritzker said.
Zalewski has already laid the groundwork to move sports betting through the general assembly as quickly as possible. The shell bill he filed is basically a blank check. The entire text of the bill:
AN ACT concerning gaming.
Be it enacted by the People of the State of Illinois, represented in the General Assembly:
Section 1. Short title. This Act may be cited as the Sports Wagering Act.
Because of the way the state constitution is written, such bills are filed as workarounds. In Illinois, the minimum amount of time it takes to pass a bill is five days – one day to be introduced into a chamber, a day for a second reading, and a third day to pass. On that third day, the same legislation may be introduced (in its own shell bill) into the other chamber and the process starts anew. The shell bill has already had its first reading and been assigned to committee, thereby speeding up the process.
