There is an unusual dichotomy playing out in Illinois.
On one hand, the state is enjoying the most tax dollars it has ever received from video gambling terminals. On the other hand, the rapid expansion of these slots-like machines across Illinois has drastically reduced revenue for the small businesses that house the games.
So, while the VGT marketplace is thriving in Illinois, small businesses are not reveling in that success, according to a report.
Now, some business owners are questioning whether they should continue to offer these games to their customers.
New rules have cannibalized the market
With over a dozen Illinois casinos in operation and more on the way, the VGT market has little impact on the casino industry in The Land of Lincoln.
Or does it?
VGTs provide the most gambling revenue in the state. With over 45,000 VGTs at 8,200 locations, these machines took in over $31 billion in wagers in 2022. That led to nearly $1 billion in tax revenue for the state.
The VGT numbers in 2023 are showing even more growth. Through May, Illinois VGTs had already created $1.45 billion in net income, which was ahead of 2022, when $1.34 billion had been generated by that time. Over $493 million of tax dollars has already gone to the state in 2023.
So how are small businesses that house these machines not collecting more dollars from the machines?
Ralph Martire, executive director of the Bipartisan Center for Tax and Budget Accountability, recently outlined the issue to the Daily Herald.
“There’s a limited demand, so when there’s been substantial terminal growth, it will of course divert some revenue from Business A to Business B.”
The “substantial terminal growth” Martire is referring to has to do with regulation changes that increased the number of VGT machines to 10 in truck stops and the state not limiting the number of machines available. So, as more and more machines are added, the money going to businesses is spread out while the number of players stays the same. That spread has left small businesses with less revenue while the state enjoys the additional tax dollars.
Kevin McGourty, who previously worked in the video gaming industry, said adding more VGT licenses is only allowing the marketplace to cannibalize itself.
“The state also changed the rules on how many terminals can be in a business and the types of businesses that can offer them, with large truck stops now allowed to have 10 devices. We’re cannibalizing the marketplace, and the more liquor licenses they allow, the more gaming licenses they’ll allow with them.”
Businesses might get rid of machines if revenue continues to drop
This oversaturation of the VGT market has specifically hurt smaller businesses that pay to have the machines in their establishments.
One example is Sleepy Hollow, which sits about 40 miles northwest of Chicago. The revenue for each VGT machine has dropped 30% on average despite the number of machines being the same. There are six other areas that saw at least a 10% fall in revenue compared to the year before:
- Crystal Lake
- East Dundee
- Long Grove
- Third Lake
For some businesses, this new reality is leading toward an ultimatum; deal with the current VGT landscape or abandon having them all together. That is the question Jim Iverhouse is working toward answering. He has four VGTs available for use inside of Copper Fiddle Distillery in Lake Zurich for the last few years.
“I’m definitely keeping an eye on it this year because there’s costs involved with operating these things, too. There’s electricity and licensing fees, plus the space they take up I could put in three or four tables.”
McGourty said businesses should not expect the state or local branches of government to take action or alter regulations in favor of businesses because the state is enjoying extreme success with the oversaturated market.
Business owners will have to either prepare for continued losses or get out of the VGT market.