Assessing the Competitive Landscape of Internet-Based Sports Betting Licenses in Illinois
Hottest Gaming Action Awaits as Illinois Greenlights Online-Only Licenses
Get ready to place your bets, folks! The Illinois Gaming Board's official website now boasts a crucial line regarding sports betting permits and licenses, but it gained significance when the state democratically revealed the applications for its three available online-only licenses earlier this month.
The applications cannot be considered until December 3rd, marking the end of a 540-day provision in the gaming expansion bill. Following this, the board must announce the winning bidders for the initial competitive selection within 630 days after the first license is issued. Although, the bill grants the IGB the discretion to extend this timeframe.
With Illinois maintaining its position as the top sports betting market in the U.S., surpassing Pennsylvania for five consecutive months and edging Nevada in April and May, there's still substantial room for growth. This means more potential operator revenue and increased tax revenue for the state government.
Six operators are currently taking mobile bets in a top-three market, so it's a no-brainer that there's potential for more operators to join the fray. The online-only license offers a valuable lifeline, as remote registration is crucial in the Chicago area, where in-person registration remains compulsory statewide until the first online license is issued.
The Illinois Sports Betting Landscape: A Scorecard
Let's start with the current state of play. BetRivers is tethered to Rivers, DraftKings to Casino Queen, Barstool Sportsbook to Hollywood in Aurora, and Caesars to Grand Victoria. Both horse racing tracks are accounted for, with FanDuel rebranding Fairmount Park, and PointsBet operating through Hawthorne Race Course. Both are in the early stages of expanding to racinos.
Apart from FanDuel, DraftKings, PointsBet, Rivers, Barstool, and William Hill, several other books are vying for entry into Illinois. When the state enforced new user in-person registration, it was seen to disadvantage operators like Rivers.
That leaves six of the state's 10 casinos with the technical capacity to offer mobile wagering. Two venues, Argosy Casino Alton and Harrah's in Joliet, have known market-access deals with Unibet and theScore, respectively, and both continue to pursue those respective paths per company spokespeople. A third, Jumer's in Rock Island, is expected to be partnered with Bally Bet, since Twin Rivers purchased the Quad Cities-based casino last October as part of its nationwide expansion.
WynnBET has market access to Illinois, but has not publicly disclosed its connection, leaving Par-A-Dice Casino in East Peoria, Hollywood in Joliet, and Harrah's in Metropolis as potential landing spots. Par-A-Dice, however, is long rumored to have BetMGM as its mobile skin via its Boyd Gaming connections.
Both BetMGM and Unibet are applying for Management Services Provider licenses (which would allow them to offer mobile betting through casinos if they receive a temporary operating permit similar to other operators), but the process has been sluggish. The IGB has listed BetMGM's application date as September 4th, and Unibet's as November 16th on its official website.
The state's gaming agency has an extensive workload on its plate, notably the intensive vetting process required for license applications for the six new casinos permitted by the gaming expansion bill. On a positive note, the IGB allows operators in the Management Services Provider license queue to also apply for the online-only license. Additionally, there are seven sports facility sports wagering licenses yet to be formally applied for.
With many moving parts, figuring out who will be submitting an application and setting aside the whopping $20 million licensing fee could be a fool's errand. However, it is still worth the speculation and conjecture given the potential upside to be realized.
BetMGM: Ready, Set, Apply!
While Peoria may be the measuring stick for Broadway success, East Peoria isn't the ideal starting point for BetMGM to cultivate a groundswell of bettors for its mobile app. A three-hour drive from Chicago, Par-A-Dice Casino is closer to Burlington, Iowa - an area already offering remote registration.
BetMGM, the biggest name yet to launch operations in Illinois, has carved out considerable market share in other Midwest states. In Indiana, it has been maintaining a consistent third position to DraftKings and FanDuel for a year, generating over $20 million in revenue and nearly $240 million in handle through the first seven months of 2021. Its staggering handle represents 14.6% of the Hoosier State's online handle.
In Michigan, BetMGM has a strong mobile presence, consistently challenging DraftKings for second place in handle. BetMGM has averaged $55.8 million in monthly handle since the state's simultaneous launch in January, claiming 23.2% market share.
BetMGM has also demonstrated its ability to expand its market share among the second tier of operators. It entered Indiana in February 2020, five months after Rivers, distanced Rivers during the summer as sports scheduling ramped up, and continued to hold its market share in a state with 13 mobile options.
Rivers has held a consistent third place in Illinois since DraftKings and FanDuel ramped up their operations, all lent credence by Governor JB Pritzker's repeated renewals of Executive Order 2020-41, which suspended in-person registration due to the COVID-19 pandemic. However, BetMGM won't benefit from Rossellini's favorable executive order, making applying for a license an inevitable necessity to expand its customer base.
Pondering Penn National
There's always one wild card when prognosticating these events, and Penn National Gaming nearly created chaos earlier this month with its $2 billion acquisition of theScore. Penn already has one operator live in Barstool (tethered to Unibet for the Argosy) and now theScore, which has a market-access deal with Harrah's in Joliet. A third casino in Joliet, run by Penn National (Hollywood Joliet), could potentially host Penn, should it consider further expansion.
While Barstool Sports founder Dave Portnoy is notoriously unpredictable, his significant social media reach in Chicago and the partnership with Hollywood Aurora make pursuing an online-only license potentially self-defeating economically. Part of Barstool's success lies in its growth without needing traditional television ad spending, which comes at a premium in the third-largest market in the U.S.
Also, Barstool has easy access to Chicago to the east via Ameristar Casino just over the state line in Indiana. Its combined handle from Illinois and Indiana is nearly $200 million, a promising start considering the launches were in March in Illinois and May in Indiana.
Looking to Make More Caesars?
Although Caesars already offers sports wagering in Illinois, it's struggling to keep up with other operators, only clearing $10 million in monthly handle once since its launch in September 2020, even lagging behind Barstool, which didn't go live until early March. Caesars has initiated parlay wagers, which has been a significant driver of handle in Illinois, but that increased handle will soar during the NFL season, allowing Caesars to leverage its status as an official partner of the league.
Additionally, CEO Tom Reeg stated previously that Caesars has cash on hand for sports wagering investments, suggesting no hurdles for the $20 million licensing fee. Chicago's massive population of nearly 2.8 million means filing for an online-only license is worth considering regardless of the casino tether, especially when other operators with smaller market shares have flourished.
Could FOX Bet Enter the Illinois Henhouse?
Though FOX Bet (part of The Stars Group) only operates in four states (Colorado, New Jersey, Pennsylvania, and Michigan), it presents a compelling candidate, depending on its confidence in Illinois eventually legalizing online casino gaming. Three of the four states where FOX Bet operates also offer iGaming (Colorado does not), and legislators in Illinois have hinted at exploring this as a potential source of tax revenue.
However, achieving this endgame will be challenging due to the widespread popularity of video game terminals (VGTs) in Illinois. The 40,000-plus VGTs across Illinois have generated over $400 million in state tax revenue this year, with three times that amount coming from casinos (excluding sports wagering) in states without Chicago's VGT presence.
Why Not WynnBET?
Also among the Nevada-based gaming corporations not expected to bid for downtown Chicago's casino license, WynnBET appears to be in a similar predicament to BetMGM concerning their market access outside of Chicago. With Harrah's Metropolis as a potential landing spot, WynnBET could ride the interplay between Illinois and Kentucky, as Kentucky's disruptive foray into sports betting has left bettors frustrated. Moreover, this online-only license offers WynnBET a broader "border" of remote registration to attract Kentucky residents, since WynnBET started this approach with its retail tether in Indiana after launching mobile operations there in April.
The Big Boys: FanDuel and DraftKings
While FanDuel and DraftKings may be on the opposite side of the state regarding their mobile tethers, they're far from being overlooked based on monthly revenue reports. The eternal rivals consistently rank 1st and 2nd in both handle and revenue. If either or both are seriously considering investing the $20 million in an online-only license, they could, but it would make little sense given their rebranding routes for entry into Illinois.
Additionally, both are making physical inroads into Chicago, planning to remain within bettors' reach on their smartphones. DraftKings is working through its partnership with the Chicago Cubs to build a sportsbook at iconic Wrigley Field, recently receiving a significant commission approval for that project. Meanwhile, FanDuel is reportedly working on plans to establish a sportsbook at the United Center. Logistical movements from the city's side concerning FanDuel's plans started last month when Alderman Walter Burnett, whose ward includes the United Center, introduced an ordinance to lift the city's "home-rule" ban on construction of sportsbooks in Chicago.
- The Illinois Sports Betting Landscape is bustling with activity, as six operators currently take mobile bets in a top-three market, with the potential for more to join, such as BetMGM and WynnBET.
- BetMGM, a significant player in the Midwest market, is yet to launch operations in Illinois but could apply for an online-only license to expand its customer base beyond Par-A-Dice Casino in East Peoria.
- WynnBET, another big name, might find value in the online-only license, considering its market access at Harrah's Metropolis and the ability to attract a broader "border" of remote registration, especially from Kentucky.
- The Illinois Gaming Board is currently processing several applications for Management Services Provider licenses, leading to potential mobile wagering through casinos for companies like BetMGM and Unibet.
- Despite Caesars' struggles to compete with other operators in Illinois, the company may still consider applying for an online-only license given its status as an official partner of the NFL and the vast Chicago market population.
