Illinois lawmakers could add internet gambling to state’s bevy of betting options

Proponents estimate the state would rake in $450 million in new tax revenue within a year of allowing Illinoisans to play casino games on their mobile devices, eventually generating up to $800 million a year.

Opponents argue it would be a zero-sum game for a state that has more places to bet than Nevada does, when counting Illinois’ 16 casinos, two racetracks and 8,660-and-counting bars, restaurants, gas stations and VFW halls authorized to operate video gaming machines.

“When you start letting people play from home, do you think they’re going to go to those places and spend money?” said state Rep. John Cabello, R-Machesney Park. “It’s cutting off the nose and spiting the face.”

Potential tax jackpots

Illinois government relied on a record-high $2.1 billion in gaming tax revenue in the fiscal year ending in June, including $158 million from casinos, $190 million from sports betting, $848 million from video gaming and $886 million from the lottery, according to the state Commission on Government Forecasting and Accountability.

Seven other states that have authorized internet gambling in recent years have seen significant tax windfalls — and surging interest from gamblers.

New Jersey casinos reported a record $214 million in gross revenue from internet gambling in November, generating about $32 million in state taxes. Pennsylvania, which taxes iGaming at a higher rate, pulled in almost $86 million in taxes on $200 million in revenue.

Gov. Pritzker called the idea “worthy of consideration” for Illinois. His office is drafting its yearly budget proposal, which he’ll present in February and negotiate with lawmakers for passage by the end of May.

Pritzker’s administration has overseen a massive gambling expansion that added six new casinos, expanded video gaming and ushered in the sports betting industry — which the governor and state lawmakers slapped with hefty tax hikes last year.

Lobbyists for major gambling companies like DraftKings and FanDuel banded together as the Sports Betting Alliance to fight the new graduated tax system before it was passed, threatening to leave the state due to the cut into their profits.

But they’re back this time around to push for internet gambling, which the companies offer on their platforms in other states in addition to sports betting.

Cannibalizing concerns

The ubiquity of casino games could go live within a few months of potential legislative passage in Illinois, with licenses likely tied to partnerships with brick-and-mortar casinos, according to Sports Betting Alliance president Jeremy Kudon. That’s how the state handles sports betting licenses.

“All of this iGaming already exists in Illinois,” Kudon said, pointing to illegal online casinos that have long operated offshore. “All we’re trying to do is legalize, regulate and tax it.”

He rejected the idea that internet gambling would cannibalize dollars from other corners of Illinois’ saturated gaming market.

“People who play online blackjack are not the same people going to bars and restaurants and casinos to play. Those have a certain social appeal and physical element that brings people in,” Kudon said.

The companies say they’ve found that internet gamblers tend to be younger than casino or video gaming customers, with demographics skewing toward women with higher salaries who wager no more than $15 per session.

“Something entirely on your phone attracts a different customer. It’s almost like mindless entertainment, or meditation. You’re present in this moment, not thinking about anything else,” Kudon said. “For me, it’s more of a relief than Netflix.”

Castro agreed, saying “there is enough business to go around. We should do everything we can to shut down the illegal market.”

But bar and restaurant owners are worried it would cut into their clientele who are often drawn in by video gaming. Keith Wetherell, executive director of the Illinois Licensed Beverage Association, estimates some businesses could see their revenue drop by 40% if customers have the option to gamble on their couch instead.

“It lowers foot traffic in our establishments. That would be devastating to smaller bars and liquor license holders. A good portion of them wouldn’t survive,” Wetherell said. “A lot of these are Mom-and-Pop shops. Gaming helps subsidize health insurance options and keeps people employed. They wouldn’t be able to shoulder that big of a loss.”

Those losses would hit local governments that split video gaming revenue at the benefit of large out-of-state gambling corporations, Wetherell said.

“Their software isn’t in Illinois. This is a whole lot of money leaving the Illinois economy,” he said.

Cabello, the Republican state lawmaker, called it “absolutely, positively stupid” that Chicago bars and restaurants are missing out on video gaming revenue — a windfall the state could use, too.

“How stupid can any elected official be, to know that your budget is ballooning out of control, and you don’t allow gaming in your city?” Cabello said, adding that he’d push for legislation requiring Chicago and other Cook County municipalities to allow video gaming.

Kudon suggested the iGaming lobby would be open to potentially licensing some video gaming operators to cut them into the action — but Wetherell said he hasn’t seen “any mechanism that would make the system equitable.”

‘Gambling fentanyl’

Other opponents are urging lawmakers to look past the massive dollar signs being flashed by the internet gambling industry and to consider the social costs.

“This literally is the equivalent of gambling fentanyl,” said Les Bernal, national director of the Stop Predatory Gambling advocacy group.”This is putting gambling fentanyl on every smartphone, in every living room, every dorm room, every office in the state of Illinois that has an internet connection.”

A study commissioned by the state in 2021 found that 3.8% of adults in Illinois, or about 383,000 people, have a gambling problem, with additional 7.7% — about 761,000 people — potentially at risk for developing a problem.