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The New Gold Rush: Illinois Lawmakers Are Growing Worried as Neighbors Move to Expand Gambling

Members of the Bet on Main Street Coalition walked to the Illinois State Capitol on Wednesday to speak to lawmakers. The group, funded by the video gambling industry, opposes a tax increase on video gambling. (Whitney Curtis, special to ProPublica Illinois)

As part of an ongoing investigation into video gambling and its impact in Illinois, ProPublica Illinois is keeping an eye on broader gambling issues here and around the country. Help us by sending your suggestions and tips to [email protected], or tweet at us at @ProPublicaIL.

1) Welcome to Kentucky, where the gambling industry was “buying its own regulator.”

Horse racing tracks in Kentucky were paying to regulate their own video gambling machines, says the Kentucky Center for Investigative Reporting.

Here’s what was happening:

  • The Kentucky Horse Racing Commission has the job of making sure video gambling in the state is fair. It hired an outside consultant to test the machines.
  • But the commission “let the tracks themselves fund and oversee the consultant’s work,” with three tracks and two machine manufacturers paying more than $845,000 for testing of the gambling machines with virtually no oversight.

“The industry that is supposed to be regulated is buying its own regulator,” Michael Fagan, a former federal prosecutor in the Eastern District of Missouri who specialized in gambling cases, told the Kentucky Center. ProPublica Illinois found this story thanks to a reader tip.

Why this matters: How gambling is regulated is a crucial issue. In Illinois, gaming lobbyists reportedly drafted the Video Gaming Act, created licensing guidelines and began entering into video gambling contracts well before the Illinois Gaming Board could set up a regulatory structure. State lawmakers never studied how much it would cost and the resulting law underfunded and overwhelmed the board, according to an investigation by ProPublica Illinois and WBEZ.

2) Other Midwestern states are moving quickly on gambling. It’s making Illinois uneasy.

Illinois has watched as several neighboring states have passed legislation to expand gambling. Now, as the end of the legislative session approaches on May 31, municipal officials keen to bring gambling to their cities and towns worry Illinois could lose business to its neighbors if a gambling package doesn’t pass soon. It could leave a nearly $300 million gap in Gov. J.B. Pritzker’s budget proposal.

A few of those hotspots:

  • Wisconsin: Plans have quickly advanced for a new Ho-Chunk Nation casino and resort in Beloit, only a half-hour north of Rockford, Illinois. Rockford Mayor Tom McNamara said that he has “literally been going down to Springfield for the past 25 years” asking legislators to expand gambling to his city so it can build a casino. Now, McNamara told WTVO-TV, there’s an “incredible sense of urgency.”
  • Indiana: Legislators recently approved sports betting and new casinos in two cities near Illinois: Gary, just 30 miles from downtown Chicago; and Terre Haute, which borders various communities in east-central Illinois. Gov. Eric Holcomb has not signed the bill but has not signaled opposition.
  • Iowa: The state legislature voted to legalize sports betting on apps, fantasy sports websites and in-person betting at any of the Iowa’s 19 casinos, several of which border western Illinois. (The move also raised concerns from another Iowa neighbor: Nebraska.) Iowa Gov. Kim Reynolds hasn’t said if she will sign the gambling expansion bill.

3) Casino campaigning: Illinois cities and towns queue up for new casinos, with only a few weeks left.

  • Chicago Mayor-elect Lori Lightfoot already supports a city-run casino. She’s also open to video gambling in Chicago.
  • Rockford leaders want Lightfoot to join forces with them for a “stronger chance” in both communities. McNamara, the Rockford mayor and the head of the city’s chamber of commerce, made the appeal in open letters placed as full-page newspaper ads. McNamara also made a two-day visit to Springfield, lobbying lawmakers for approval. (Rockford already has the highest number of video gambling machines anywhere in Illinois, based on an analysis by ProPublica Illinois and WBEZ.)
  • Danville, whose mayor has lobbied for years for a casino, is also making another push.
  • Waukegan Mayor Sam Cunningham told lawmakers at a hearing in Springfield that a site for a casino in his city is “shovel-ready.” The city in 2003 purchased 32 acres near tourist attractions such as Six Flags Great America and Gurnee Mills. The mayor’s testimony follows an aldermanic election where groups linked to the gambling industry made 72% of the campaign contributions, the Lake County News-Sun reported.

4) The Bet on Main Street Coalition protests Illinois’ proposed tax increase on video gambling operators.

  • A few hundred people marched near the capitol on Wednesday to oppose higher taxes on video gambling terminals, and the coalition held a news conference, where supporters said the current tax rate is adequate. Coalition members also visited with lawmakers to voice concern that the proposal would hurt small businesses.
  • As we recently highlighted, the coalition opposes a tax increase on video gambling machines, saying the industry has paid $1.5 billion in taxes since the first video gambling machines went live in 2012.
  • For comparison’s sake: Video gambling companies have reaped $2 billion in revenue from video gambling since 2012. Meanwhile, Illinois accepted a far smaller share of the profits than other states, giving the companies a much larger piece.
  • Also, lawmakers scheduled two hearings on gambling expansion this week in Springfield: Sports betting on Wednesday and video gambling on Thursday. A sports betting bill may be introduced soon, but as The Pantagraph reports, the five different proposals in play make it difficult to know what the bill will look like.

What we’ve spotted elsewhere:

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