Illinois Senate Passes Online Gambling Regulation Bill

Lawmakers in the Senate of the Midwestern state of Illinois approved a bill Wednesday, May 31 that would legalize onling gambling and daily fantasy sports as reported by OnlinePokerReport.com. The legislation (HB 479) was passed in a 42-10 vote, but it still must be voted on by the Illinois House of Representatives before it becomes law. Unfortunately, that body has adjourned and will not reconvene until June 8.

Proposed Licensing Regime

Under the provisions of the act, both online poker and internet casinos would be made legal, subject to the control of a Division of Internet Gaming. To obtain a license, companies would have to pay a $10 million upfront fee and a 15% tax on their gross revenues. The $10m licensing fee is considered an advance payment on these taxes. In order to promote the growth of the market, new licensees will see their tax rates lowered to 10% during the first five years on revenue less than $100 million.

Only corporations that already offer legal brick-and-mortar casino or horseracing products in Illinois would be eligible to receive a license for online gambling. There's a limit of two skins to be operated by any single licensee, and each skin must represent a "brand owned by the licensee or any affiliate of the licensee in the United States." It's expected that existing offline gambling organizations will partner with established tech firms to craft their online wagering solutions, and these technology vendors will have to pay a $250,000 application fee. There's a bad actor clause that excludes anyone "who had accepted wagers via the Internet in contravention of this Act or in contravention of any law of the United States." It's unclear precisely how this will be applied in practice, but it's pretty vague language that can be interpreted basically an infinite number of ways.

Daily fantasy sports would also be permitted with a different regulatory body and taxing regime. Many political observers feel that online casino and poker gambling were added on to appease Rush Street Gaming and other live casino and racebook owners in the state. These entities view internet fantasy sports as a direct competitor and are likely to oppose it politically, but online poker and games of chance give them a vehicle for expanding their businesses and augmenting their revenues. No online sports betting provisions have been submitted at this time.

Legislative History of HB 479

It's a fairly big surprise to see that this bill regulating online gambling was passed by the Illinois Senate. It originated in the House in February where it was a measure to change the date on the state seal. As it made its way through the House and Senate, it was amended to include provisions relating to gambling, which was not its original intent. (Hmm, this reminds us somehow of something from about a decade ago.) Now that it has received a "yes" vote from the Senate, it must proceed back to the House, and there's no guarantee that it will pass even after the new session begins in June.

Possible Impact of Illinois Regulated Online Gambling

Illinois has a massive amount of public debt, which some estimate to be over $300 billion, and it costs a fortune in interest payments, apart from actually retiring the debts themselves. At the same time, there has been an inability to pass a state budget for two years straight. The revenues from licensed and regulated online gaming could certainly go toward covering budget shortfalls in future years.

The larger impact, which could involve many states, lies in the fact that Illinois would become, by far, the most populous state to have enacted an online gaming licensing framework. The prior states that have done so are small by comparison when we look at the numbers:

• Delaware: 952,065 residents
• Nevada: 2,940,058 residents
• New Jersey: 8,944,469 residents
• Illinois: 12,801,539 residents

The implementation of legalized online poker in Illinois would just about double the pool of players in the United States with access to state-approved online cardrooms. If an interstate compact to share player traffic is reached between Illinois and another state, the benefits would accrue to both areas. This is because poker, unlike casino games, depends upon having enough players online for games to run steadily especially for higher-stakes tables and tournaments. The games that run currently in the regulated environments of New Jersey, Nevada, and Delaware, while better than nothing, don't even come close to approaching the variety and size of those available at real money offshore sites. There are a number of poker sites that currently serve Illinois, so you can play right now regardless of what the authorities do or don't do.