A bill to lower exorbitant Illinois sports betting renewal fees for suppliers faced backlash Wednesday in the House Gaming Committee.
The Illinois sports betting legislation passed in 2019 set the initial supplier licensing fee at $150,000 for the first four years. But suppliers must continue paying $150,000 annually.
Chris Nybo, a lobbyist representing the gaming trade association iDEA Growth, presented the discrepancy as a drafting error. That argument worked in the Senate, where SB 323 passed 55-1 on March 29.
But with Illinois Gaming Control Board Administrator Marcus Fruchter expressing opposition, House committee members pushed back on lowering the fee.
Argument to lower Illinois sports betting supplier fee
The original supplier licensing language in the Illinois sports betting bill doesn’t necessarily seem like a drafting error. And Rep. Bob Rita, chief sponsor of the 2019 bill and vice chair of the committee, didn’t appear to look at it that way.
The law reads:
“Beginning 4 years after issuance of the initial supplier license, a holder of a supplier license shall pay a $150,000 annual license fee.”
Nybo argued that this must have been a mistake because all other licensing fees for sports wagering, or gaming as a whole in Illinois, either stay the same or decrease upon renewal. The IGCB doesn’t need to spend as much money reviewing a renewal application of a supplier in good standing with the state.
Suppliers are not online sportsbook operators, Nybo said. As management services providers, they paid $1 million for the initial four-year license. But it is renewable for a lesser amount, $500,000 over four years.
Yet, the sports wagering supplier license quadruples to $600,000 over four years.
“The suppliers are the ancillary service providers, the geolocation providers, the payment processors, some of the technology, some of the game content,” Nybo said. “This is not DraftKings or FanDuel. This is not the people holding the operators’ licenses and running the platforms. These are peripheral services to support the infrastructure.”
The bill being considered would lower the renewal fee to $50,000 over four years. Nybo said that would still be the highest renewal rate in the nation. He said sports betting suppliers in New Jersey pay $5,000 annually for renewal, and Michigan has a tiered structure up to $5,000.
Pushback to lowering Illinois sports betting supplier fee
Fruchter said his opposition was based on a reduction of revenue to the state. Currently, there are 15 licensed sports wagering suppliers in Illinois. Over an eight-year period, he explained that those suppliers would pay $13.6 million in licensing fees. Under SB 323, they would pay $3.4 million over that period.
That’s a reduction of more than $10 million. Fruchter pointed out that, after regulatory expenses, that money goes to support capital improvement projects.
“We believe that the supplier fee contemplated in SB 323 devalues the work that the board has to perform to go into investigating and vetting and looking into these companies as part of the licensure process,” Fruchter said.
Rep. Martin Moylan said he wanted to see how much money the 15 suppliers are making annually before he considered lowering the rate.
Rep. Jeff Keicher agreed:
“The information that I see out there consistently reported is that Illinois has been a bonanza for sports betting. They’re making money hand over first, and it’s all online platforms it seems that are out of state, out of area. I think it’s a reasonable fee that helps keep some of those dollars here.”
Keicher added his belief that a higher fee limited sports wagering suppliers in Illinois to quality companies.
Nybo said suppliers entered the Illinois market thinking this was a drafting mistake that would be fixed before renewal. And he stressed that Illinois needs suppliers to run sports betting.
“What I worry about is when they hit their four-year renewal, how many suppliers are going to say, ‘Well, Illinois was good for four years but, for $600,000, I’m leaving.’”
Bill increasing problem gambling measures also heard
The committee heard a total of five gaming measures passed by the Senate.
Another was SB 1508 to increase problem gambling safeguards. That bill, sponsored by Rep. Bill Cunningham, passed 54-0 in the Senate.
Rep. Daniel Didech, who chairs the House Gaming Committee, took up sponsorship in the House.
Didech explained the bill:
“It would require all online sports wagering operators to at least once an hour display a pop-up message advising the user of the time elapsed since logged on, the amount of money they have wagered and include information for gambling addiction assistance. My understanding is that the gaming board is comfortable with the implantation of this new requirement. The intent of the legislation is to be a small change in law that would help people in Illinois self-regulate their gambling activity and gamble more responsibly.”
No committee members voiced any concerns with the bill.
No action taken on either Illinois sports betting measure
Didech also took house sponsorship of the bill seeking to change the supplier fee. Sen. Cristina Castro authored the bill in the Senate.
Didech said he would continue working on the bill.
“This is an odd fee structure for this particular license. So I don’t know why it was adopted this way, but we’ll keep working with Chris, Marcus and members of the committee to see if there’s a compromise to normalize this in a way so that it mirrors at least the structure of the other licensees we’re doing.”
Fruchter also committed to finding a solution.
Nybo said iDEA Growth drafted an amendment on the Senate floor to make the renewal fee the same $150,000 over four years as the initial fee. But the amendment was held back when Fruchter wouldn’t agree to drop the IGCB’s opposition.
The Gaming Committee figures to vote on the bills at a later date, with the problem gambling additions seeming less controversial.
The Illinois legislative session ends May 19.