The Illinois State Senate has finished its Internet Gaming in Illinois report, detailing how much money could have been generated had online casino been legal prior to the pandemic.
And while the numbers are estimates, they are gaudy nonetheless.
Report authors estimate that during the 16-month period beginning on Feb. 28, 2020, online casino gaming in Illinois could have generated anywhere between $622.4 million and $1.249 billion for operators.
The report then shows how much tax revenue online casino in Illinois could have been generated based on different flat tax rates. Here are the numbers:
- 12%: Between $75 million-$150 million
- 15%: Between $93 million-$187 million
- 16%: Between $100 million-$200 million
- 15% on the first $25 million and 20% on the rest: Between $105 million-$230 million
For context, legal sports betting in Illinois has generated about $53.8 million in tax revenue in about a 14-month span.
Delaware, New Jersey, Pennsylvania, Michigan and West Virginia are the only states that have legalized online casino games. Nevada has legal online poker, but not casino.
The report authors from the Commission on Government Forecasting and Accountability used revenue numbers from those states to inform their Illinois report and adjusted for demographics.
They also examined factors such as Illinois’ booming video gaming terminal (VGT) industry and people’s gaming habits during the pandemic compared to a “back to normal” society.
The VGT factor, though, is the biggest obstacle to passing the online casino in Illinois. Let’s break it down.
Why VGTs matter to Illinois online casino
Illinois easily has the largest VGT market in the country. There are over 40,000 VGTs in Illinois.
For comparison, West Virginia has the most VGTs of any state where online casino is legal. West Virginia only has about 7,500 of them.
VGTs feature similar games to online casinos, which is why they are considered competition. Report authors attempted to factor VGTs into their revenue estimates.
Because of the lack of precedent in the US, it’s hard to predict exactly how much online casinos would impact VGTs. Though for what it’s worth, the report authors have concluded that cannibalization is likely.
From Page 22 of the report:
“As history has shown, the creation of new gambling, whether it be in the form of a new casino or the implementation of video gaming terminals throughout the state, will likely cause a decline in revenues at existing gaming locations. While online gaming may bring in some new gamblers and dollars to the State, it is likely that a significant portion of these internet gaming revenues would come from existing gaming areas.”
The authors detail how casinos in the Chicago area have experienced revenue decreases ever since the inception of VGTs.
To wrap up the VGT section, the report says:
“Furthermore, if the tax rate imposed on online casinos was significantly lower than the rates currently imposed on video gaming revenues, it is possible that the overall net value of total taxes collected could be surprisingly low, despite the increase in overall gaming dollars.”
VGTs generated about $70 million in tax revenue in April 2021 alone. Of course, that number will not going to go to zero if online casinos in Illinois become legal.
But lawmakers may fear the unknown when it comes to the next round of negotiations.
Did the pandemic inflate online gambling growth?
The report also contains a section attributing US online gambling growth in 2020 to the pandemic. From Page 14:
“The limited options for entertainment during the pandemic likely increased the number of “new” gamblers participating in the gambling experience. In addition, the amount wagered may have risen because of increases in discretionary spending as a result of the lack of spending in other areas and/or due to the federal stimulus checks.
“These higher-than-normal figures must be assumed in the Commission’s hypothetical projections for Illinois as well.”
With that said, we haven’t seen any evidence of a post-pandemic drop off yet in any state. In New Jersey and Pennsylvania, the robust online numbers appear to be the new normal.
It’s certainly something to monitor going forward but shouldn’t be an automatic assumption.
Where does online casino stand in Illinois?
The Illinois House and Senate introduced online casino bills early in 2021. Neither gained substantial traction, but there is momentum for expanded internet gaming in IL moving forward.
Sen. Cristina Castro told PlayIllinois that 2023 could be the year to target:
“I don’t know if it can be done in a year. It’s going to take time to educate my colleagues on what iGaming is and what it isn’t. There are people with concerns, and we need to address VGTs. Maybe we set up the groundwork over 2022 and look at 2023 to pass it.”
Online casino was a hot topic at a public April House Executive Committee hearing. There were proponents and detractors, and the detractors were mainly on the VGT side.
That’s going to be the gaming legislative battle to watch over the next few years in the Land of Lincoln.