New Gaming Rule Could Be A Shortcut For FanDuel And DraftKings Getting In IL

Posted on May 29, 2020

When Illinois passed its latest gambling expansion bill, it looked like Illinoisans would have to wait years to enjoy unencumbered online sports betting. A recent emergency rule change by the Illinois Gaming Board might lead to a shorter wait for that though.

The IGB instituted a new policy for the branding of online sportsbooks in the state. That could open the door for a creative workaround for online sportsbooks.

What’s up with the emergency rule change?

On Thursday, the IGB posted a new regulation concerning the branding of online sportsbooks. Essentially, it allows online sportsbooks to co-brand themselves.

The important alterations to Section 1900.1260 of the IL emergency sports betting regulations are:

c) When sports wagering is conducted over the Internet or through a mobile
application by a master sports wagering licensee pursuant to Section 25-
30 or 25-35 of the Act:
1) If any brand is displayed, a parent brand must be displayed.
2) If multiple brands are displayed, including brands that are not a
parent brand, a parent brand must be prominently displayed.

d) When sports wagering is conducted over the Internet by a master sports
wagering licensee pursuant to Section 25-40 of the Act:
1) If any brand is displayed, a facility brand must be displayed.
2) If multiple brands are displayed, including brands that are not a
facility brand, a facility brand must be prominently displayed.

This rule essentially says that online sportsbooks that operate in IL in partnership with brick-and-mortar, master-license holders must display the branding for those master-license holders. For example, BetRivers’ online sportsbook needs to display the logo/name of Rivers Casino Des Plaines when it launches in IL.

While that may appear to be merely a cosmetic change to the untrained eye, it could actually have significant ramifications. It’s necessary to understand how state law plays into these circumstances.

How IL gambling laws complicate the situation

Illinois’ sports betting law does allow for licensing standalone online sportsbooks. It makes the IGB wait to issue those licenses, however, and limits the number of them to three.

The law says the IGB can’t issue those licenses until 540 days after brick-and-mortar sportsbooks start operating. While that clock started running on April 9, it’s still going to be late 2021 before the board can even issue licenses.

There will be some additional wait after that. That’s because, after receiving licensure, it still takes some time for online sportsbooks to actually start taking bets.

So online sportsbooks like DraftKings and FanDuel had a choice: partner with a master-license holder in IL or wait the 420 days and hope they get one of the three standalone licenses. Or so the legislature thought.

The motivation behind this part of the law was to give casinos in the state a head start and to “punish” DraftKings and FanDuel for accepting paid DFS entries despite the IL Attorney General considering them illegal. DraftKings and FanDuel may have figured a way out of the penalty box early, however.

DraftKings’ and FanDuel’s “get out of jail free” card

With this co-branding rule, DraftKings and FanDuel could start taking wagers online much earlier. All they would have to do is acquire a facility in the state eligible for retail wagering, get a master license, and then display the branding of that facility on the sports betting app.

While that might seem like an onerous path, it could actually represent a decrease in cost. Illinois put the price tag of a standalone online license at $20 million.

A master license is half the price. That would leave an online sportsbook another $10 million to spend on a facility with immediate entry into the market instead of having to wait 540 days.

Unconfirmed reports had FanDuel kicking the tires on buying the Fairmount Park Racetrack in Collinsville, IL. If FanDuel were to purchase the track and receive a master license, it would only have to receive approval for its management services provider license that it has already applied for.

DraftKings has applied for the same kind of licensure as well. Those licenses would allow DraftKings and FanDuel to handle the sports betting operations for the master license holders, which in these hypothetical situations, would be themselves. It’s a little complicated, but it would work.

The cost for a management services provider license is just $1 million, so buying a casino or racetrack would be a lot more expensive than contracting with an existing master-license holder. Owning a facility would also carry a lot of operational costs as well.

F0r that reason, many online sportsbooks may barter market entry deals or wait it out. It just depends on how much those companies value being among the first movers in the market.

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Derek Helling

Derek Helling is a freelance journalist who resides in Kansas City, Mo. He is a 2013 graduate of the University of Iowa and covers the intersections of sports with business and the law.

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