Internet Gaming Act could see online casinos launch within 4 months, with a 12% tax rate and three skins per license

Illinois Internet Gaming Act Provides A Springboard For An Accelerated Online Casino Launch

As expected, Illinois is among the states to be looking at online gambling in 2021.

A new bill, HB3142 appeared in the House today. It lays out laws which would, if they pass, become known as the Internet Gaming Act (IGA). These would legalize both online poker and online casinos in Illinois.

Illinois sports betting is already underway, and close to celebrating its one-year anniversary. The state passed its Sports Wagering Act (SWA) in 2019. The first legal bet in the state was placed at Rivers Casino Des Plaines in March 2020.

Typically, it takes a year or more between the time an iGaming bill becomes law, and the launch of the first sites. However, the IGA contains provisions that would help accelerate this process. Depending on how fast the legislation progresses, it’s even possible we could see the first Illinois online casinos within the year.

Greasing the wheels in advance

In many ways, HB3142 is a typical iGaming bill. What really stands out about it, however, is the number of provisions aimed at minimizing the time it will take to launch.

First of all, it directs the Illinois Gaming Board (IGB) to draft emergency rules immediately. The regulator will in fact have only 90 days to prepare these. Contrast Michigan, which just launched its iGaming market last month. Its regulatory agency took the better part of a year to finalize the rules before it could even begin issuing licenses.

It furthermore instructs the IGB not to reinvent the wheel. Rule-makers are directed to base the emergency rules on existing rules for Illinois retail casinos, and iGaming regulation from other states “to the greatest extent possible.” That, too, should accelerate things, as well as avoiding the sorts of idiosyncratic, poorly-justified suggestions that sometimes come up during the rule-making process.

Licensing will also go quickly. The bill requires the IGB to issue a temporary license within 30 days to any applicant, provided they already hold the equivalent license for sports betting under the SWA. These temporary licenses are good for one year.

All told, then, it seems that Illinois plans on letting online casinos begin operating in as little as 4 months from the time the bill becomes law, if it does.

Interstate potential also built in from the start

The Illinois bill also takes into account the implications of the recent First Circuit Court of Appeals ruling on the federal Wire Act case. This struck down the Department of Justice’s attempt to extend that Act’s prohibition on interstate sports betting to apply to other forms of gambling as well.

The IGA nips any similar interference at the state level in the bud. It expressly allows the IGB to enter into interstate compacts for purposes of gambling, “including but not limited to” multi-state poker. That will be a huge boon for real money online poker in Illinois.

It also specifies that servers for online casinos and poker don’t necessarily have to be located in the state. For the IGA’s purposes, the location of the person placing the bet is all that matters. The data can cross state lines, and the operator can resolve the bet using computers in other places.

Beyond that, it allows operators to link Illinois players’ accounts with accounts they’ve registered in other states. It even provides for the potential to allow operators to accept bets from other US jurisdictions, provided this is in accordance with local laws.

At the moment, there’s no other state which would allow this. However, it could become the norm in future. The language of the IGA is forward-thinking in this regard and could become a template for other states down the road.

Other features of the IGA

The bill is overall quite friendly to operators. The tax rate it sets out is 12% of adjusted gross gaming revenue, lower than any other state with legal online casinos at the moment. What’s more, it expressly prohibits local government from imposing additional taxes.

Licenses will cost $500,000 up front, which is neither very high nor very low. Renewing a license costs $250,000, and takes place on the same schedule as retail gaming licenses, i.e. every four years.

Primary licenses are available to all 10 retail casinos and three racetracks in the state. It allows each of these up to three skins, so there’s room for up to 39 online casinos in the state. It’s unlikely to hit that limit in the foreseeable future. After all, even the crowded New Jersey market still has fewer than 30.

The bill has good provisions for responsible gaming. Operators have to allow customers to self-exclude, either temporarily or permanently, using a statewide registry. They must also provide the ability to set personal deposit and spending limits. Furthermore, it stipulates that $10 million of the tax money raised by iGaming each year must go to the Department of Human Services for the specific purpose of problem gambling treatment.

There is one unfortunate provision in the bill, however. As with sports betting, there will be an initial window of time during which online casinos have to conduct registration in person.

The good news is that this window will last just 6 months. After that, online registration will be possible. This isn’t too onerous a demand, given that the bill’s provisions for a quick launch look like they will get online casinos off the ground at least 6 months faster than it has normally taken in other states.

What’s held Illinois online gambling back?

The political will was probably there to pass iGaming laws at the same time as the SWA. Like many states, however, Illinois suffers from competing interests that complicate matters. Although it’s impossible to know exactly what’s discussed behind closed doors, many suspect that it was largely Rush Street Gaming’s vendetta against the daily fantasy sports industry that has held the state back.

These companies, like DraftKings and FanDuel, offered their DFS products to Illinois citizens while their legality was still being debated. Rush Street, as a retail casino operator, couldn’t risk engaging in such gray market activities.

To this day, Rush Street feels that the DFS companies obtained an unfair advantage this way, particularly as regards other forms of online gambling.

Though there’s not nearly as much money in DFS as in online casinos, DraftKings and FanDuel have become top competitors in the iGaming space thanks to their extensive customer databases. Their DFS platforms allowed them to build those databases and brand recognition well in advance of legal iGaming in states like Pennsylvania, West Virginia and Michigan.

Among other things, this led to so-called “penalty box” language in the SWA. This was meant to delay the market entry of online brands like the DFS companies. The IGA’s six-month in person registration window is probably there for similar reasons.

However, DraftKings quickly found a way around the SWA penalty box and launched its Illinois sportsbook app in August.

With that ship having sailed, there’s little cause for Rush Street to resist iGaming any longer. What’s more, its online division has recently gone public, so there is surely shareholder pressure to expand those operations. With its support, the IGA’s chances of passing look very strong indeed.

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for OnlinePokerReport, he has been writing about poker and the online gambling industry in various capacities since 2014.
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