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The progress of gambling expansion in the US is notoriously difficult to predict. At times, we’ve seen bills start off strong only to die on the floor. We’ve also had surprises running the other way, such as Michigan‘s successful last-minute push at the end of 2019.
That said, it’s probably safe to call 2020 a write-off at this point. Response to the COVID-19 pandemic has pushed virtually all other legislation way down the list of priorities. There’s also the ongoing battle over the Wire Act, the outcome of which has important logistical ramifications for any expansion of gambling into the online space. Finally, the upcoming presidential election is another distraction, and creates even more short-term political uncertainty.
The question then is what states are likely to attempt an online casino bill in 2021, circumstances permitting. One prime candidate is Illinois, which had a near miss just three years ago.
There is quite probably enough political will to get one through. One major barrier to doing so is an ongoing feud between the state’s casino operators, particularly Rush Street Gaming, and the major daily fantasy sports (DFS) companies, FanDuel and DraftKings. Though Rush Street is unlikely to get its way at this point, its priorities may be shifting in a way that would increase the chances of success for the next attempt at an Illinois online casino bill.
The resentment between Rush Street and the DFS giants dates back to 2015. That’s the year that DraftKings and FanDuel collectively funneled over $200 million into advertising, bringing this relatively new form of gaming into the mainstream and making themselves household names.
Up until that point, the legality of DFS had been ambiguous in many states. The companies themselves argued that it involved enough skill to skirt general prohibitions against gambling, and was legal under the Unlawful Internet Gambling Enforcement Act due to the carveout for fantasy sports.
Illinois House Rep. Michael Zalewski introduced a bill that year to make it explicitly legal in the state. That effort failed, however, because the legislature was dealing with a budget emergency caused by a huge shortfall in public pension funds. Meanwhile, Attorney General Lisa Madigan issued the opinion that DFS was in fact illegal under current law and demanded that operators cease serving customers in the state.
FanDuel and DraftKings took the calculated risk that the Illinois market was large enough to keep operating and take their chances on a legal battle if it came to that.
This afforded the DFS companies a huge head start, both in that vertical and any other forms of online gambling that might arrive later. That advantage, which was gained illegally and unfairly in Rush Street’s view, has been a chip on its shoulder ever since. (Rush Street operates and partially owns Rivers Casino Des Plaines, a major retail property in north Chicago, and was known to be opposed to the express legalization of DFS.)
Illinois has already made two failed attempts to pass an online casino bill. The first of these came in 2013, before the DFS boom. It failed not because of any corporate conflicts, but simply because then-Gov. Pat Quinn was not a fan of online gambling in general.
Some expected that online gambling proponents would get another shot the following year. However, that’s when the pension fund emergency came to light. The ensuing battle lasted years — indeed, the issue still hasn’t truly been resolved — and distracted from all other non-urgent legislation.
The second chance for legal online casinos came four years later, as part of the ongoing effort to address the DFS issue. Illinois casino owners were opposed to its legalization, for reasons already mentioned. Rush Street was perhaps the most vocal opponent.
After two false starts in 2015 and 2016, the 2017 bill included provisions for online casino as an incentive for the casinos to get on board instead of fighting against it. The battle over the pension crisis was raging on, however, and the bill stalled.
It’s hard to say to what extent opposition from Rush Street and other casinos owners contributed to the failure of the 2017 bill. However, it certainly didn’t help. The grudge was also still alive and well in 2019, when the time came for sports betting legislation.
Rush Street came out strongly in favor of a version of the sports bill that included bad actor language which would attempt to prevent DraftKings and FanDuel from entering the market. A representative from the company, Paul Gaynor, told a committee that such provisions were necessary. He said that to do otherwise would be to reward what he called a “pattern of criminal conduct” from those companies.
Gaynor subsequently spoke to Online Poker Report, explaining that “Rush Street doesn’t have a problem with competition. Rush Street has a problem with companies that gained a running head start by acting illegally.”
Ultimately, the bad actor idea proved not to be viable for a variety of legal reasons. Foremost among these was that the state had never attempted to enforce Madigan’s opinion on DFS. Instead, lawmakers found a more roundabout way of attempting to punish the DFS companies. This was to have a temporary in-person registration requirement for sports betting. The idea was that it would, in effect, block online-only companies from entering the state until it expired.
DraftKings found a way around that strategy, however, by striking a deal with the Casino Queen in St. Louis and rebranding it as DraftKings at Casino Queen. It also found unexpected help from the COVID-19 pandemic, which induced Gov. J.B. Pritzker to lift the in-person requirement for safety reasons.
The bad blood runs both ways. When DraftKings Sportsbook finally did launch, CEO Jason Robins couldn’t resist gloating on Twitter about the fact that they were taking bets despite the “corrupt idiots” at Rush Street who “attempted to block” them in the state. That tweet was quickly deleted, but not before the media had seized hold of it.
That mutual resentment isn’t going away any time soon. However, Rush Street’s ability to try to punish the DFS companies is rapidly diminishing. DraftKings is now live in the sports betting space and FanDuel should arrive shortly. How much of a competitive advantage they’ll have based on their DFS activities is debatable, but one way or another, that ship has now sailed.
As for the DFS space itself, it amounts to a fight over pennies while dollars are on the table. Based on what we see in other states, DFS revenue will pale in comparison to sports betting. Online casinos would be bigger still. Rush Street is already in the process of building itself an online casino empire with its BetRivers brand, and is the market leader in neighboring Pennsylvania.
Of course, spite isn’t rational. However, Rush Street will soon be going public via a special purpose acquisition company. Shareholders don’t collectively hold grudges the way individual executives can. They will surely want to see BetRivers casinos operating online in as many markets as possible.
Illinois’ next legislative session will begin in January. Whether there’s room on the agenda for online casino depends on a number of factors, the progress of the pandemic high among them. But whether the next push happens in 2021 or some future year, the odds look good that Robins and his team will feel pressure to let the vendetta rest, and get back to making money.