Illinois Online Gambling Bill Details

March 7, 2013

Two days after Illinois Governor Pat Quinn vetoed a bill that would expand brick and mortar gambling, State Senator Terry Link has sponsored a bill that would expand brick and mortar gambling and legalize online gambling.  The bill is called the Chicago Casino Development Authority Act.  It goes well beyond just Chicago.

The bill would authorize the creation of the Division of Internet Gaming.  This division would be a department within the Illinois Lottery.  The bill allows for online poker and online casino games.  While the Illinois Lottery would be the licensing jurisdiction, games could be offered by other entities upon approval by the Lottery.  Sports betting would not be allowed unless both federal and state laws were changed to specifically allow it.

Illinois Online Gambling Licensing Requirements

Licenses would be issued for five years with five year renewals.  A $250,000 application fee would be required for all companies and individuals wishing to receive an internet gaming license in Illinois.  If approved, a company would be required to post a $20 million licensing fee.  This fee would be a down payment on future taxes.

Potential licensees could be any company already involved in licensed Illinois casinos, either as an operator or a gaming supplier.  Companies that hold an Advanced Depositing License for the state’s off track betting industry and companies that provide gaming devices to taverns may also qualify for a license.

Bad Actor Clause

The bill was later amended to only exclude companies that have been convicted of violating US online gambling laws.

The bill excludes any applicant “who has accepted wagers via the Internet in contravention of this Section or United States law in the 10 years preceding the application date”.  This is especially interesting because GTECH owns 80% of Northstar Lottery Group, a company that currently holds a large contract with the Illinois Lottery.  GTECH also owns Boss Media, a company whose licensees accepted US players in both their online poker rooms and online casinos until the UIGEA passed in 2006.

GTECH does not operate any casinos in Illinois so they would likely be classified as a vendor.  This could become a major issue for the company under the current bill’s language.  The bill states that “No certification shall be granted to an Internet gaming vendor who has accepted wagers via the Internet in contravention of this Act or in contravention of the any law of the United States”. This language contains no time limits.  This could mean that GTECH may never receive a license to become a vendor in the Illinois online gambling industry.

The same language could apply to, PokerStars, 888, or any other company whose software accepted US players in its entire history as all former online gambling companies that left the US did so after the UIGEA passed in 2006.  It would depend on how this language was interpreted by the Illinois Lottery.   The bill allows the State some latitude in making licensing decisions.

Cheaters Subject to Criminal Penalties

Cheating is also covered in the bill.  Any player caught cheating would be forced to forfeit any winnings related to their fraud.  Criminal charges could also be filed by the State against any player determined to have violated the statute.

Responsible Gambling

There are also several responsible gaming provisions.  Any person already on the brick and mortar excluded player list would not be allowed to create an online gambling account.  Felons could also be excluded from online gambling in the State.  Anyone convicted of a gaming crime would also find themselves on the excluded player list.  Even players on excluded player lists in other states or foreign countries could be excluded if this information was made available to the Illinois Lottery.

Players could opt-out of internet gambling either permanently or temporarily.  Players could also set deposit and time limits.  Access to problem gambling features and information would be prominently displayed within the software.  The first $10 million in tax revenue generated annually would go to treat problem gambling.

Online Gambling Taxes

Online poker rooms and casinos would be subject to a tax.  Online poker and other fee based games would be subject to a 15% tax.  House games would carry a 20% tax.  Taxes paid under the initial $200 million licensing deposit would be set at 10% on the first $200 million in gross gaming revenue for house banked games and 7.5% on fee based games, including online poker, up to $200 million.

Internet gambling winners would also be subject to taxes.  Records would be kept of all winnings and losses under this bill and players would be responsible for paying taxes based on these records.

No Competing Games Allowed

No game would be allowed if it directly competes with games already offered by the Illinois Lottery.  This could exclude games such as keno or pulltabs.

Brick and Mortar Gambling Covered

The Chicago Casino Development Authority Act authorizes the City of Chicago to be the full beneficiary of a casino located in the city.  While Chicago would not operate the casino, it would essentially be owned by the local government.  Slot machines would also be allowed at airports operated by Chicago Department of Aviation.  This includes both O’Hare and Midway.  Airport gaming operations would only be available inside secure areas to passengers 21 years of age or older.

The Illinois horse racing industry also stands to benefit from this bill.  The bill allows for the state’s racetracks to operate slot machines.  The bill’s sponsor feels that the state would raise $120-$200 million in licensing fees and $100-$300 each year in tax revenue by allowing the state’s racetracks to offer slot machines.  The bill also finds that the state’s horse racing industry may fail without this expansion of gambling.  More than 2,000 machines could go live in racinos under this bill.

Tax revenue from Chicago casinos, four additional casino locations allowed under this bill, and racinos would go towards funding public education and the state’s underfunded pension program.

Illinois expanded gambling just last year when the State launched video poker and slot machines in establishments that also have a license to serve alcohol by the drink.  No more than five machines are allowed in these establishments.  The Illinois Lottery also began selling tickets online in 2012.

Like all bills, the language is certain to change if it should pass.  Most notably, the language that may exclude existing lottery vendors could be subject to these changes.

The entire 555-page bill is here.

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