The days are winding down to pass online casino legislation in Illinois this session.
There are online casino bills in the House and Senate, but video gaming terminal (VGT) operators are adamantly against expanded internet gaming for fear of cannibalization.
In a House Executive Committee meeting in late April, online casino advocates and detractors stated their cases.
Ultimately, it became clear that the VGT industry is the biggest hurdle to legalizing online casino gaming in Illinois.
Let’s take a deeper look at VGTs in Illinois and why their operators don’t want expanded internet gaming.
What are VGTs in Illinois?
VGTs are similar to slot machines you’d find at a casino. You can find VGTs at:
- Adult entertainment boutiques
- Fraternal organizations’ meeting places, e.g., lodges
- Gas stations
- Liquor stores
- Truck stops
- Veterans’ organizations’ meeting places, e.g., VFW halls
For these types of businesses, VGTs provide another revenue stream.
The state of Illinois earned nearly $70 million in tax revenue off of VGTs in April alone.
Because there are so many VGTs in Illinois, most businesses that have the machines aren’t getting rich off of them. Still, it’s another revenue source at a time when many bars and restaurants are still feeling the effects of the COVID-19 pandemic.
Therein lies the conflict between online casino proponents and VGT operators.
VGT operators fear ‘cannibalization’
Witnesses frequently used the word “cannibalization” when discussing online casinos and VGTs at the House meeting.
For VGT operators, the fear is that legalized online casinos would discourage people from playing at VGTs, as the game offerings are similar.
State Sen. Dave Syverson shed some light to PlayIllinois in August about why there could be a lot of opposition to expanded internet gaming:
“Bars and restaurants that have been just devastated by the overly restrictive COVID rules from the state of Illinois need the little bit of video gaming they have going right now to help them stay in business. If they lost VGT revenue to the internet, we’d see a lot of restaurants and bars having to close.”
State Rep. Tim Butler was the most vocal lawmaker against online casino legalization at the meeting. He said, “Mom-and-pop businesses that are not casinos depend on revenue from VGTs.”
Butler also took exception to proponents’ case, which mostly focused on how online casinos wouldn’t cannibalize brick-and-mortar casinos instead of mentioning VGTs.
Jeff Kaplan, vice president of strategic financial planning for Penn National Gaming, touched on brick-and-mortar casino cannibalization at the hearing:
“Prior to the pandemic, we performed an analysis on our customers to determine if there was any cannibalization to our brick-and-mortar revenue and what we found was iGaming was almost entirely complementary to our brick-and-mortar play.”
So, while it’s good news that brick-and-mortar facilities are on board with legalizing online casinos in Illinois, VGTs remain a serious hurdle.
Online casino advocates responded to concerns by pointing out that VGT customers tend to skew older than internet gaming customers.
Will online casino gaming really cannibalize VGTs?
That’s the million-dollar question, and we can’t say with certainty. That’s because not much data on the topic exists.
We don’t have a case study that’s apples to apples with this one. VGTs are not in most states, nor is online casino legal in most states.
On one hand, it’s easy to see the logic from the VGT side. Because the game offerings would be similar and online casino games would be more accessible, it’s not hard to connect those dots.
On the other hand, as proponents said at the hearing, online casino operators are targeting a different crowd than VGT customers. The hope is that more people would start gaming, not to tear down the VGT industry. Proponents are optimistic that both industries could co-exist.
The State Senate recently filed a bill asking for a report on how much online casino revenue Illinois would have made if internet gaming was legal prior to the pandemic. In it, the deadline for the report is Oct. 1, 2021.
While that’s not great news for online casinos in the Land of Lincoln this session, the long-term outlook is a bit rosier.