ILLINOIS GETS A HANDLE ON SPORTS BETTING

SUPER BOWL LV WAGERING NETS $1.1M IN REVENUE FOR STATE

Illinois State Comptroller
Jun 2 · 10 min read

When Illinois Gov. JB Pritzker signed the Sports Wagering Act into law in the summer of 2019, it opened up gambling options across the state amid hope for more revenue to shore up the state’s checkbook.

But a global pandemic that emerged later that year had other plans, shutting down the state and national economy, including entertainment, for much of 2020.

On March 9, 2020, Illinois saw its first legal sports wager with little fanfare as concerns about the deadly virus dominated headlines. Days later, the NBA suspended its season after several players tested positive for COVID-19. Other major sports leagues followed, putting interest in sports betting on ice well into the summer. In addition, casinos and video gaming businesses were shuttered during the state’s pandemic stay-at-home order.

But once pandemic restrictions across the country began to loosen in February of this year, Super Bowl LV paid off for Illinois. Football fans here wagered about $46 million, of which more than $42 million was bet online. The resulting tax revenue for Illinois was $1.1 million, according to figures from the Illinois Gaming Board.

An analysis from Oxford Economics conducted prior to the enactment of sports wagering in Illinois estimated the state could potentially generate between $384 million and $680 million in adjusted gross wagering receipts. Under the current law, these receipts are taxed at 15%, which would generate state revenues between $58 million and $102 million. The consultants compared these estimates to other states that legalized sports betting, and the expectations seem reasonable and even conservative.

However, after the cancellation of many major sporting events due to the coronavirus, the state only received $12 million in tax revenue in fiscal year 2020, of which $7 million were licensing fees.

More than a year after the pandemic shutdown, the nation is more optimistic about getting the virus under control and resuming more normal activities, including the return of competitive sports. But even with the delays and uncertainty caused by COVID-19, there is reason to be optimistic about sports betting and what it could do for Illinois’ budget.

In May 2019, Illinois lawmakers approved a series of measures that, together, would help fund the statewide Rebuild Illinois construction program. The multiyear program is divided into two project types: horizontal and vertical. The horizontal projects refer to roads, bridges, and other transportation-related spending. These items are funded primarily through tax increases on motor fuel and other vehicle user fees, a cigarette tax increase, and a parking garage tax approved in Public Act 101–0032.

The vertical projects refer to construction at schools, universities, parks, health care facilities, prisons, and other government-owned properties. The accompanying revenues to fund the vertical projects were primarily the expansion of gambling, including legalization of sports wagering; new casinos around the state; and a mega casino in Chicago. Gov. Pritzker signed these into law as Public Act 101–0031.

After the Illinois Gaming Board issued rules governing the operations of sports wagering on Jan. 23, 2020, there were hopes that sports betting would be up and running in Illinois before the 2020 Super Bowl on Feb. 2, 2020, but wagering wouldn’t get rolling until a month after the big game.

The Rivers Casino in Des Plaines took the first legal sports wager in Illinois on March 9, 2020, when Chicago Blackhawks announcer Eddie Olczyk bet $100 on the Chicago White Sox to win the American League pennant. Soon after, the NBA announced it was suspending the season after several players tested positive for COVID-19. The other major sports leagues followed suit, bringing sports betting to a halt.

In addition, casinos and video gaming parlors throughout Illinois were ordered closed as part of the state government’s stay-at-home guidelines designed to stop the spread of COVID-19. This further reduced the state’s ability to collect revenues from all forms of betting.

As summer progressed and professional sports began to pick back up, sports betting in Illinois began to take off largely due to the advent of mobile betting. While state law initially required bettors to register in person in a casino in order to place bets online, Gov. Pritzker suspended the rule because of the ongoing pandemic.

After the rule was suspended, online betting quickly took off, and by September over 92% of Illinois bets were placed on mobile devices. By October, seven of the 10 casinos in Illinois had been approved for sports gaming licenses and most had launched their online and mobile sites to take bets remotely.

By the end of November 2020, according to online data from the Illinois Gaming Board, more than 38 million sports wagers had been placed, totaling $1.2 billion in total bets.

For the state coffers, this led to nearly doubling the amount of tax revenue received in all of fiscal year 2020 in only the first half of fiscal year 2021. Transfers into the Sports Wagering Fund-0968 show nearly $22 million in deposits from sports gaming taxes and fees from July 2020 through December 2020. This fund is viewable on the Illinois Comptroller’s website “Fund Search” page by typing in the fund name or number.

There are several other elements of the sports gaming authorization that have yet to launch since the approval of legislation in 2019 that should also increase the tax revenue.

Sports venues will be able to open betting locations under seven licenses that were approved by the General Assembly but yet to be issued to any venues in Illinois. As of spring 2021, in-person events have resumed, and it’s expected there will be renewed interest in these permits, which cost $10 million per location approved.

Illinois has more than 2,500 lottery vendor locations, and another provision will allow for sports wagering at these locations. The state is currently in the process of launching this pilot program that will run through 2024. One vendor will be chosen to manage the sports lottery operations and all the proceeds will benefit the state lottery fund that goes to education spending. The vendor will charge a management fee for operations instead of receiving direct revenue and will be charged a $20 million fee for its license.

Although casinos are allowed to operate online and through mobile betting, three master online-only sports gaming licenses are also available and have yet to be awarded through a competitive bidding process.

Anyone who has watched a sports segment on the television news or looked at a sports story online has probably noticed sports lines mentioned or printed. They also might have seen figures denoting how much money people in Illinois are betting and wondered what that means for the State of Illinois.

To understand how Illinois makes money off sports betting, it helps to understand the anatomy of a sports wager.

The lines

In a hypothetical football match-up between a team from Chicago versus a team from Springfield, the betting lines for the game might look something like this:

Here’s what that means.

The “point spread” on this imaginary game is seven points. The minus sign by Chicago’s point spread number means the casino thinks Chicago will win by at least seven points. Springfield is the underdog, which is indicated by the plus sign by its number.

If a person were to wager on Chicago and the point spread, the team would have to win by eight points or more for the wager to win. Should Springfield win, or should Chicago win by six points or less, the wager would not win. If a person bet on Springfield, then they wouldn’t actually have to win for the wager to pay off; they would just have to lose by six points or less.

If Chicago were to win by seven points exactly, the wager would end up in a “push,” which means no one won and the casino would return the bet to the bettor. Casinos place odds on sports bets because they want to get an equal amount of money on either side of a wager. In this case, even if most bettors think Chicago is likely to win, they might not think Chicago will win by seven points or more. That means it’s more likely some bettors will wager on Springfield to “cover the spread.”

The -110 by either number denotes how much money would need to be wagered to win $100. For this hypothetical game, no matter which side of the bet a person is on, they must wager $110 to win $100. They can wager more or less than that, but this is a simple way to see what the potential return on a bet is.

The $10 difference between what a person bets and what they could win is called the “vigorish.” It’s the money the casino hopes to keep as its earnings for accepting the bet. For example, if Bettor 1 wagers $110 on Chicago and Bettor 2 wagers $110 on Springfield, the casino would pay the winning bettor $210 — their original money back, plus $100. The casino would keep the $10 vigorish.

The money the casino collects becomes the adjusted gross receipts. That is how a casino makes money off sports betting.

The total amount bet on a game is called the “handle.” In the hypothetical example, the handle is $220. The handle and the adjusted gross receipts are reported by the casinos to the state.

Back to the betting line, the final number on the right is the “money line,” which means betting on one of the teams to win straight up regardless of the final score. Because Chicago is favored in the money line, the number has a negative by, which means a person must bet $405 to win $100. The plus sign by the Springfield number means that if a person bets $100 on Springfield and they win, the bettor will win $300.

The last line on the bottom is the over/under line. That breaks down how many points the casino thinks will be scored in this game by both teams combined. A person can bet if they think the teams will score a combined number of points that’s over or under 56 points. And the -110 next to it again means a person must wager $110 to win $100.

Understanding the difference between the handle and the adjusted gross revenue is important when considering the benefits the state can reap from approving sports wagering. In general, sports betting has a 4–6% profit margin. When considering the nearly $1 billion of wagers placed in Illinois, the 15% tax rate will only be applied to a small amount of the gross proceeds.

Acceptance of the idea that government can fund operations off the taxation of legalized gambling is a relatively recent development in Illinois.

Until riverboat casinos were approved in the state in 1991, most gambling was illegal in Illinois, outside of the lottery and betting on horse racing. Some advocates still question the enormity of the Prairie State’s approved gaming sources and the negative societal toll that legalized gambling has on individuals and communities.

The 2019 gambling expansion, when fully implemented, could add more than 23,000 gaming seats in a state that already saw thousands of new video poker terminals added in restaurants, bars, travel plazas, and other social clubs every year since the approval of those locations in 2009.

Although there are provisions to set aside some gaming revenue for gambling addiction services, a 2019 report by nonprofit news organization ProPublica and WBEZ Radio in Chicago found that Illinois is one of the worst states for funding these programs.

Their reporting found that even as the state added more than 30,000 gaming terminals and users lost more than $5 billion on the machines, actual treatment services for addicts declined.

“Yet even as video gambling expanded, state spending on addiction fell nearly 20% between 2012 and 2017, according to the most recent figures available. The number of people assessed or treated for gambling addiction by state-funded providers declined nearly 37% during that time,” the report stated.

The reporting also noted that, in response to research conducted by the Perelman School of Medicine at the University of Pennsylvania, national psychiatric standards were changed in recent years to classify gambling addiction as a disorder and not just a compulsion.

“Researchers say brain imaging studies show that, much like drugs or alcohol, gambling triggers spikes in the chemical dopamine, which activates the brain’s reward system and influences human behavior. Researchers have found that gambling addiction is often accompanied by other forms of addiction,” the report concluded.

“Those who are susceptible wager beyond their means or spend inordinate amounts of time gambling. Unable to see, or indifferent to, far-reaching consequences, they may find themselves lying to loved ones, turning to crime to cover their losses or becoming suicidal.”

The state does allow problem gamblers to opt out of casino gaming and launched a similar program for sports bettors.

In July 2002, the Illinois Gaming Board launched a Statewide Casino Voluntary Self-Exclusion Program that allows people who have determined they are problem gamblers to self-exclude themselves from all Illinois casinos. According to a 2019 report by the Chicago Sun-Times, 13,584 individuals had availed themselves of the self-exclusion program.

The Sports Wagering Act from 2019 requires the gaming board to expand the self-exclusion program to sports wagering. Individuals already on the self-exclusion list are precluded from participation in sports wagering. However, no similar exclusion is available for video gaming in the state.◼︎

For more information, visit:

Illinois Gaming Board’s problem gambling website: https://www.igb.illinois.gov/ProblemGamblers.aspx

Illinois Department of Human Services Division of Substance Use Prevention and Recovery’s gambling addiction website: http://www.weknowthefeeling.org

Fiscal Focus

This publication is designed to provide fiscal information of general interest. Fiscal Focus is published by the office of Illinois State Comptroller Susana A. Mendoza, 201 Statehouse, Springfield IL 62706. Questions or comments may be directed to 217-782-6000.

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Fiscal Focus

This publication is designed to provide fiscal information of general interest. Fiscal Focus is published by the office of Illinois State Comptroller Susana A. Mendoza, 201 Statehouse, Springfield IL 62706. Questions or comments may be directed to 217-782-6000.