Illinois could be losing out on as much as $105 million in tax revenue annually by not legalizing Illinois online casinos.
That’s based on an American Gaming Association study produced by The Innovation Group. The study, released in November 2022, estimates that more than $4 billion in taxes are lost each year in the United States to people betting just on illegal black market online casino sites.
Further, counting all illegal gaming — online casinos, sports betting and unregulated gaming machines — and the AGA estimates:
“Americans bet more than $510 billion a year with illegal and unregulated operators. This costs the legal industry $44.2 billion in gaming revenue and state governments $13.3 billion in lost tax revenue.”
And, almost two-thirds of that total comes from illegal online casinos.
“By defying regulations, illegal and unlicensed operators capture revenue from the regulated market, thereby reducing tax revenue used by states to support critical public programs such as education and law enforcement. This further inhibits the considerable economic benefits that come with regulated gaming. The scale of the tax loss is enormous: more than half of all potential state gaming tax dollars are lost to unregulated operators.”
Illinois accounts for illegal online casino handle of $1.65 billion annually
Now, let’s crunch some numbers.
The hesitancy to legalize Illinois online casinos is sometimes based on a false premise that Illinoisans are not already betting on illegal, unregulated online casinos.
The AGA study — the results of a survey of more than 5,000 Americans and their gambling habits — shows otherwise.
It estimates some $91.8 billion is wagered annually through illegal online casinos by people living in the 12 midwestern states. That amounts to some $3.7 billion in revenue captured by the black market in the midwest alone.
There are officially 12 states considered to be in the midwest, of which Illinois has the highest population:
- Illinois – population of 12.67 million
- Ohio — 11.8 million
- Michigan — 10 million
- Indiana — 6.8 million
- Missouri — 6.2 million
- Wisconsin — 6 million
- Minnesota — 5.7 million
- Iowa — 3.2 million
- Kansas — 2.9 million
- Nebraska — 2 million
- South Dakota — 895,000
- North Dakota — 775,000
The combined population of the midwest states is approximately 69 million. Illinois alone accounts for about 18% of the total number of people in the 12-state region.
An 18% share of $91.8 billion in handle wagered on illegal online casinos and $3.7 billion in lost revenue is:
- $1.65 billion in handle
- $660 million in revenue
In 2022, the average tax rate for Illinois online sports betting was 16% of revenue. Apply that same tax rate on the estimated lost revenue to illegal online casinos in Illinois alone of $660 million and it works out to approximately $105.6 million in taxes lost to the black market that could go into Illinois coffers.
Bottom line, that’s a lot of revenue in a state that needs it.
Illinois clearly needs the money
Illinois, like most states, is in dire need of additional revenue.
According to figures from USGovernmentSpending.com, Illinois has the fifth highest debt in the nation at around $65 billion. Fortunately, the state’s debt as a percentage of gross state product is relatively low at 6.6%.
Yet, The Pew Charitable Trusts reports that between 2005 and 2019, Illinois was one of eight states where expenses exceeded revenue. And Pew said Illinois could operate just over 27 days on existing balances.
Meanwhile, Illinois has one of the highest state and local tax burdens in the US. The state has the seventh highest tax burden at some 12.9%.
And, Illinois has the second highest unfunded pension debt as a share of state personal income in the country at 19.2%. That’s one of the reasons revenue from the to-be-built Bally’s Chicago casino is behind directed toward the city’s police and fire pension funds.
All that combined suggests Illinois needs lots of revenue without raising taxes. Seven Illinois online sportsbooks are already operating. And, six of those offer both online casinos and sportsbooks in the seven North American jurisdictions that have both.
Notably, Illinois is already an established online gambling market. It is the second biggest sports betting market in terms of revenue and third biggest in handle in the US.
So, it would be a quick and easy way to generate significant revenue for the state of Illinois to add online casinos.
Regulating online casinos also protects Illinois citizens
Most importantly, beyond driving needed revenue from an activity that is already occurring illegally in Illinois, legalizing and regulating online casinos is the best way to protect consumers.
The AGA said:
“The legal gaming industry is among the most highly regulated industries in America. Whether it is financial solvency and other licensing requirements, know your customer or anti-money laundering regulations, legal gaming operators and suppliers comply with thousands of laws and regulations designed to ensure consumer protections and confidence in the gaming market.
“Illegal and unregulated gambling operators do not follow any of these standards, which exposes consumers to severe risk and undermines the economic and tax contributions of the legal gaming industry.”
Trouble is, some consumers have difficulty differentiating between legal and illegal online casinos. The AGA report said 90% of gamblers said it was important for them to bet with a legal site. “But unlicensed online operators often purport to be legal options, sowing widespread confusion.”
Also, those that do bet illegally have no protection for their money and could be supporting wider criminal activity such as organized crime, money laundering, drug trafficking and violent crime.
All this speaks to a need to license, control and regulate online casinos in Illinois so long as the legislation comes with strong responsible gambling requirements.