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Illinois casinos, horse racetracks wager their financial futures on sports betting

Belleville News Democrat

Friday, April 5, 2019  |  Article  |  By Joseph Bustos

Gambling, Gaming , Governor (44) , Racing, racetracks (76) Hoffman, Jay--State House, 113 , Stuart, Katie--State House, 112

While the grandstands are still empty at Fairmount Park, horses, with riders mounted, gallop around the dirt track, which is muddy from the previous night’s rain.

There are about 475 horses that train at any one time at the racetrack as they get ready for the 2019 season that starts on April 16. By opening day, 600 to 700 horses will be registered at the racetrack before reaching the 900-horse capacity, said Brian Zander, president of Fairmount Park.

“We should have a total of about 41 racing days, and those should be enough horses for that and we’re actually looking forward to a really good year,” Zander said. The season runs through Sept. 14.

But as in previous years, the racetrack is continuing to ask the legislature for an additional revenue source to help fund purses and attract more horses to the track. Even though that revenue source, which has remained out of reach, has been video gaming or slot machines, there is a new potential source that may be on the horizon: sports gambling.

The U.S. Supreme Court struck down a federal law that permitted the federal government to disallow sports betting in certain states. Sports betting is legal in eight states, and nearly 30 states are considering legislation to allow it, including Illinois, Missouri, Kentucky, Iowa and Indiana.

Illinois Gov. J.B. Pritzker has called for legalizing sports betting, saying the initial licensing fees could bring in $200 million for the 2020 fiscal year, if 20 establishments took sports bets and each paid a $10 million licensing fee.

There currently are a number of bills being considered in the Legislature dealing with legalizing sports betting in Illinois.

Proposals include having legalized sports gambling overseen by the Illinois Gaming Board, whether sports betting be allowed at casinos, racetracks or both, or even online. Another proposal would put all sports betting in the state under the authority of the Illinois Lottery.

“Well sports betting is certainly a very exciting prospect for us,” Zander said. “The way we look at it is, there’s three tracks that are left in the state of Illinois — this is our 94th year and Hawthorne and Arlington are close to 100 years — that have taken a legal wager on the outcome of a sporting event. So we think we’re well-positioned to do it. We think our fans definitely like it, and it definitely presents an opportunity for the horsemen and for us to prosper from ... a new line of business.”

Casinos, racetracks on the same page

Sports betting could be a new revenue stream and amenity for both the racetracks and casinos, which have been at odds over whether there should be slots at racetracks.

In the metro-east, there are two casinos: the Casino Queen in East St. Louis and Argosy Casino in Alton.

“Sports betting represents a new opportunity for all those involved, be it casinos and racetracks, brick and mortar. And a mobile platform,” Zander said. “All those have yet to be determined but as opposed to fighting the casinos on any kind of expansion, this will be something where I believe we could certainly work with them and it could actually turn out to be very well for both.”

Surprisingly, casino operators agree.

“We don’t have any problems with racetracks having sports betting, as long we do, too, I think that would be the compromise,” said Tom Swoick, executive director of the Illinois Casino Gaming Association, which represents nine out of the 10 casinos in the state, including the Casino Queen.

Casinos are hoping the current legislative proposals stick to sports betting and don’t get into a larger gambling expansion debate, which has ultimately doomed the measures in recent years.

“If it’s independent on its own, you can run a sports betting bill and have a fruitful discussion about that,” said Jeff Morris, vice president of public affairs for Penn National Gaming, the parent company of three Illinois casinos, including the Alton Argosy. “The problem is when you start layering in all the other stuff, like whether it’s expansion, and VGT (video gaming terminals) stuff, it just gets messy and you start losing support.”

Public polling may signal support for that approach.

The Paul Simon Public Policy Institute released a poll that says 63 percent of Illinoisans support legalizing sports betting in the state. The same poll found that 57 percent favor a larger expansion of gambling in general, such as authorizing more casinos.

Illinois already has one of the largest numbers of gaming stations in the country because it allows video gambling in bars and fraternal organizations.

People may like the idea of putting a legal bet down on the Super Bowl, but Morris said he doesn’t expect sports betting to be a significant revenue generator for casinos in Illinois. He gave the example of New Jersey, which takes in $330 million in bets, but 95 percent of the money actually goes back to the players.

For casinos, sports betting just another amenity to attract customers through the casino doors.

“We have to pay federal tax, state tax, we have marketing costs, labor costs, data costs, etc.,” Morris said. “At the end of the day it’s really a very small number. It only accounts for 1 to 2 percent of revenue at our properties.

“What it does do, it gives us an opportunity to draw in additional customers to come visit the casino. We have seen an increase in food and beverage and hotel stays at some of our other states. Frankly, it’s an amenity rather than anything else. It’s just another type of gaming for our customers to enjoy.”

Morris said it’s early in the legislative process to discuss tax rates, but he said Nevada’s 6.75 percent tax rate would work. It would allow casinos to compete and invest in their facilities. He said increasing costs could prevent casinos from offering the same lines and odds as online sports betting sites and wouldn’t encourage bettors to stop betting on the black market.

“Sports betters are savvy. They’re going go to where they get the best odds,” he said.

Morris didn’t have estimates of how much a casino could bring in; it would depend on what happens in neighboring states, such as Missouri.

“The market is just fluid right now, because we don’t really know how it’s going to settle,” he said.

The gambling expansion debate

Still, as there is talk about sports betting, there will be the ongoing debate about whether racetracks should be allowed to have slots and video gaming terminals and whether there should be a larger gaming expansion in the state.

One of the longtime proponents of getting an additional revenue source for Fairmount Park is state Rep. Jay Hoffman, D-Swansea.

“If we have legalized sports betting it’s going, for me, to have to be at horse racing tracks as well as casinos,” Hoffman said. “There may be other licenses as well (beyond the current 10). There’s also been proposals of expanding gaming at existing casinos, allowing race tracks to have slots at the tracks like they do at so many other states, to make sure Fairmount is viable. I don’t believe sports betting in and of itself is the answer. There has to be more in order to make sure Fairmount is viable, remains vibrant.

“There are literally thousands of direct and indirect jobs as a result of live racing. We need to make sure that stays open. It’s important to the fabric of the community, it’s important to the history of this metropolitan area and it’s important for the families that work directly or indirectly as a result of the track,” Hoffman said.

The racetracks have been asking for slot machines and video gaming terminals for years. However the state’s casinos have been against that expansion as they see their own revenues fall. There have been more people using video gaming terminals at restaurants, bars, fraternal organizations, truck stops, and gaming parlors.

Casinos in Illinois have long been against allowing racetracks to have slots, citing the legalization of video gaming terminals around the state has already cut into their business.

“We’ve been opposed to any large expansion as far as casinos go or slots at tracks, especially now that we have over 30,000 video gaming terminals now in the state,” said Swoick, of the Illinois Casino Gaming Association. “Basically we’re saturated, and all that’s going to happen is that by adding additional casinos, or slots at race tracks, you’re going to cannibalize revenues from one source and put them in another source. This also affects the state, we believe, because the more we make the more taxes we pay. You see the amount being wagered in a particular place and moved to another place, they’re both going to be paying lower tax rates.”

The Casino Queen and Fairmount Park had a deal where the casino would acquire the racetrack if it was allowed to have slots or video gaming. That deal has since expired.

State Rep. Katie Stuart, D-Edwardsville, whose district includes Fairmount Park, has reintroduced legislation that would allow racetracks to have 150 video gaming terminals each. Under the proposal, racetracks would receive half the earnings, to go toward purse accounts to help attract more racers.

“Fairmount Park is a vital source of both jobs and entertainment in the metro-east,” said Stuart. “I have been working on this legislation for a long time now, and I am excited about the potential of ongoing negotiations to protect local jobs and save live racing at Fairmount Park.”

It is estimated that slots could bring in $2 million per year in additional purse money if VGTs are allowed at racetracks.

“Hundreds of employees count on Fairmount Park for their livelihood, and rather than talking about shutting down the track, we need to be considering ways to help them grow and expand the number of live racing days,” Stuart said.

“A new source of revenue could not only ensure Fairmount Park stays open, but help it return to being a hub for economic development in the metro-east.”