When Illinois Governor J.B. Pritzker finally signed the Sports Wagering Act into law in June 2019, industry experts and enthusiasts predicted the state’s rapid rise as the epicenter of the sports wagering world in the US. As you can imagine, the prospects could not have been any more promising as Illinois appeared poised to dominate the sports betting market.
Fast forward to 2023, and reality paints a slightly different picture. For years, Illinois has struggled to dominate, always playing second fiddle to New York. This has raised important questions in the minds of many; will the Prairie State ever emerge as the sports betting mecca of the country or is the market destined to lag perpetually behind the Empire State?
What we cover
Slow start for Illinois
Like many other newly legalized sports betting states, Illinois kicked off its sports betting journey with excitement and hope. Legalization brought a wave of positivity, but the process wasn’t as swift as envisioned. First and foremost, Illinois faced regulatory complexity when it came to sports betting. Not only did the process of drafting and implementing comprehensive regulations take time, but lawmakers also needed to establish rules and guidelines that could effectively curb possible issues like gambling addiction and fair play.
The process of licensing sports betting operators and platforms was also intricate. Determining eligibility, conducting background checks, and ensuring compliance with various regulations posed challenges. These complications delayed the entry of several operators into the market, limiting choices for gamblers in Illinois.
Furthermore, the state found itself in a market where multiple operators were vying for attention within the borders. By the time the market was launched, several high-profile operators including FanDuel and DraftKings had set their intentions to operate in the market. While competition is healthy for any industry, an oversaturated market can lead to division and struggles in establishing a unified approach to promoting legal sports betting.
To make things more difficult, while brick-and-mortar sports betting was operational, the debut of mobile betting platforms was delayed. Under the initial sports gambling law, anyone wishing to take part in online sports betting was required to register in person at a brick-and-mortar sportsbook. Punters were only allowed to register remotely, that is through a mobile betting app or online, last year on March 5th.
Mobile sports betting has always been a considerable driver of revenue in the sports betting sector as it allows punters to place bets conveniently. This delay in introducing mobile betting admittedly limited the market’s reach, as well as its accessibility. The outbreak of the pandemic further complicated matters.
Lockdowns, restrictions on public gatherings, and economic uncertainties due to the pandemic impacted the sports industry. Major sports events were postponed or canceled, affecting the betting landscape, and further slowing down the industry’s growth.
What’s the New York advantage?
Today, New York represents the most attractive sports betting state given its population, sports culture, as well as its wealth, and income. So much so that before the launch of the market, the New York State Gaming Commission had already approved 10-year licenses for 2 groups of gambling companies consisting of 9 operators.
One group under Kambi Group included the likes of Caesars Sportsbook, Wynn Interactive, Rush Street Interactive, Resorts World, and PointsBet. The second group consisted of FanDuel including Bally’s, BetMGM, and DraftKings. Thanks to the Empire State’s population of close to 20 million residents, the state continues to attract attention from some of the biggest and best.
In New York, operators are required to pay a substantial licensing fee to enter the market. Additionally, they are subject to a competitive bidding process. While the fees are indeed considerable, New York’s large market size and the potential for high revenue generation make these costs more manageable for sportsbook operators.
Moreover, the revenue generated from a populous state like New York often offsets the initial investment, which has made New York an attractive investment opportunity for sportsbooks that want to thrive. The cost of entry into the sports betting market in Illinois, on the other hand, has proven to be a significant hurdle for many sportsbooks, especially smaller or newer companies.
The cost of obtaining a license in Illinois can be exorbitant. Illinois has a $20 million application fee, which is not only too high but also comes with substantial annual renewal fees. For smaller operators with limited financial resources, these costs act as a deterrent, making it challenging to enter the market and compete effectively. Bigger gambling operators like FanDuel and DraftKings boast significant resources that allow them to invest heavily in marketing, as well as technology.
This puts them at a considerable advantage over smaller competitors. Even if a smaller sportsbook manages to enter the Illinois market, the competitive pricing and promotional strategies employed by larger players often lead to thin profit margins. In essence, the high cost of entry in the sports betting industry in Illinois has created a situation where only gambling operators with substantial financial backing can thrive.
Illinois’ $20 million application fee is far bigger compared to other states. In New York, for instance, the situation is different. In the Empire State, sports betting providers awarded licenses by the New York Gaming Commission must part with a one-time $25 million licensing fee. However, companies are more willing to invest in New York’s market owing to its great potential for profitability.
In comparison, Illinois’ market dynamics, including population size and regulatory conditions, have made it tricky for some companies to justify the investment. The relatively smaller market size and intense competition have influenced the perceived feasibility of entering the sports betting market in Illinois.
Final Thoughts
Legalized sports betting was a new frontier for Illinois. Both operators and consumers needed time to understand the nuances of legal sports wagering, responsible gambling practices, and the benefits of using legal platforms. As you can imagine, this steep learning curve affected the initial adoption rates.
While both New York and Illinois have high entry costs, New York’s larger market size and revenue potential make these costs more justifiable for operators, leading to active participation and investment in the state’s sports betting market.
