According to industry analyst Chris Grove, the legalization of such activities would open up a lucrative new revenue stream for the state; one perhaps even more valuable than in any other state seriously considering iGaming legislation.
That’s the conclusion of his recent white paper: Illinois’ Online Gambling Opportunity: Analyzing Tax And Revenue Potential.
Read and download the full 13 page report here.
Top line numbers for Illinois online gambling
Grove projects that if Illinois were to legalize online casino and poker games, the nascent industry would generate a total of $1.722 billion over the course of its first five years. The crux of that would come from online casino games — much as it does in New Jersey — which will account for roughly 88 percent of total industry revenue.
The current legislation calls for a 15 percent tax rate on online gambling and a $10 million license fee, as a payment against future taxes owed.
Under these provisions, which are still subject to change, Illinois’ state coffers would stand to gain the following from a full online gambling rollout:
- Year 1: $138,250,000, the majority of which would come from operator licensing fees.
- Years 2 & 3: There would be a lull in these years, as operators would be able to keep nearly all of their revenue, thanks to the tax prepayment clause. Total taxes paid would total $11.3 million.
- Year 4: $57,900,000, all of which would come via the 15 percent tax rate on online gambling.
- Year 5: $59,100,000
In addition, the state stands to reap $18.83 million from daily fantasy sports operations over five years, scaling from $2.37 million in year one, up to $4.89 million in year five. DFS operators would be subject to much lower licensing fees, ranging from $1,500 to $50,000, depending upon the annual revenue level of the operator.
Illinois vs. Pennsylvania
Add it all up, and the amendment to H 479 represents a more than $285 million opportunity for the state from inception to the five year mark. That’s still quite a bit less than our projections for Pennsylvania ($349 million over five years), but that’s because:
- Pennsylvania operators will almost inevitably be subject to a higher tax rate — 20 percent by our estimates, but possibly much higher.
- Upfront licensing fees will not count against future taxes owed.
Other benefits of Illinois online gambling
In the report Grove lists a bevy of upsides a full online gambling and daily fantasy sports rollout would bring to Illinois.
- Immediate revenue: The structure of the current bill guarantees that Illinois would receive substantial upfront revenue. Pending “13 unique applicants for online gambling operator licenses,” Illinois would take in $130 million right out of the gate.
- Casino support: As has been proven time and time again in New Jersey, online gambling has a complementary impact on brick-and-mortar casino revenue. According to Grove, “there’s no reason to believe that Illinois would see different results.”
- Employment: The legalization of online gambling in New Jersey was responsible “for the direct creation and indirect support of over 3,300 jobs”. Illinois would be a significantly bigger market, thus resulting in even more job creation.
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What’s next for Illinois online gambling?
H 479 is currently awaiting action in the House.
The chamber wasn’t able to pass a budget before the May 31 deadline, and hasn’t passed one in nearly two years. So it’s presumed resolving the budget impasse will be the House’s primary concern — the House is currently in continuous session.
Whether online gambling will be used to help fill a portion of the state’s budgetary shortfall that runs into the billions is currently unknown. But in either case, the passage of online gambling legislation out of even one chamber in a state as large as Illinois signifies that the appetite for online gambling is greater than at any point in the past several years.
Now it’s just a matter of one state getting across the finish line.
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