Different IL A/G 'opinion' could backfire casinos' effort to block fantasy sports sites from IL sports betting market

By Cook County Record | May 20, 2019

Illinois State Capitol   Jonathan Bilyk

As state lawmakers prepare to pass legislation to legalize betting on sports in Illinois, casino operators are pushing for the inclusion of a provision to send online daily fantasy sports site operators to a “penalty box” for three years.

However, should the provision be included in the law as currently drafted, the penalty box could be a bit larger than its supporters may envision, as the language could be read to exclude a much broader list of characters from the sports betting market, potentially including even some of the provision’s biggest supporters and – were he a private citizen – Illinois’ current governor.

As Illinois seeks more sources of revenue to shore up its troubled state finances, lawmakers have in recent months taken up a measure to change Illinois law to permit – and tax – sports betting. The U.S. Supreme Court opened the door to legalizing sports wagering in a 2018 decision striking down a federal law prohibiting betting outside the state of Nevada.

Gov. JB Pritzker has estimated such legalized wagering could raise more than $200 million in new state revenue.

The legislation, designated House Bill 1260, was first filed in January by Illinois House Speaker Michael J. Madigan.

On May 8, however, State Rep. Michael J. Zalewski, D-Riverside, filed an amendment to add a provision to HB 1260 that would bar organizations which the Illinois Attorney General has previously identified as “having engaged in the crime of illegal gambling” from securing a state license to offer sports wagering for three years after sports gambling is legalized in Illinois.

Specifically, the provision, designated as Amendment 2, would apply the three-year penalty to any applicant organization in which “the applicant, any affiliate of the applicant or its affiliate engaged in conduct constituting illegal gambling under any law of the United States, the State of Illinois, or another state as determined by a final decision of a court … or as described in an official opinion or pronouncement of the Attorney General (of Illinois) or any other state and continued to engage in such conduct after that opinion or pronouncement was issued.”

That provision has drawn strong support from the state’s casino operators, including companies headed by billionaire casino mogul Neil Bluhm, who owns Rivers Casino in Des Plaines. Lobbyists working for Bluhm’s companies have said the provision is needed to punish companies who have already made large sums of money while “operating illegally” in Illinois for years.

The measure, however, has drawn criticism from online daily fantasy sports sites operators, including FanDuel and DraftKings, who say Amendment 2 represents a thinly veiled attempt to illegally give a head start to existing gambling interests in the state to corner the state’s market on legal sports wagering.

The concern centers on an “advisory opinion” authored in 2015 by former Illinois Attorney General Lisa Madigan. In that opinion, Madigan declared she believed FanDuel and DraftKings and other online fantasy sports sites were running illegal gambling operations in Illinois.

FanDuel and DraftKings sued to ask a court to declare they were operating within the law. However, Attorney General Madigan argued the lawsuit was misplaced, because the opinion was not legally binding and could not be enforced.

The fantasy sports sites and Madigan’s office eventually settled, agreeing to allow the sites to sue should any authority seek to use Madigan’s opinion to prosecute them for illegal gambling.

A group of lawyers hired by FanDuel to review the provision recently published a legal opinion, predicting stiff constitutional challenges should the state enact the “penalty box” provision.

However, sources in Springfield speaking with The Cook County Record, noted the penalty box provision could prove significantly more expansive than predicted. The concern centered on a different advisory opinion issued by a different Illinois Attorney General.

In 2001, then-Attorney General Jim Ryan issued an advisory opinion in which he declared he believed a practice known as “advance deposit wagering” (ADW), which allows would-be bettors to place horse racing wagers online, was illegal under Illinois state law.

Lisa Madigan replaced Ryan as attorney general, but in 2008 said the opinion should stand.

The law was ultimately changed in 2009, specifically allowing ADW betting in Illinois through companies licensed by the Illinois Racing Board, and who operate in partnership with an Illinois horse racing track.

However, in the intervening years between the Ryan ADW opinion and the change in state law, a number of interests continued to offer ADW services to Illinois residents.

Notably among these was online wagering site YouBet.com. In January 2008, for instance, YouBet announced it agreed with four Illinois horse tracks – Hawthorne, Fairmount Park, Maywood and Balmoral – to create an ADW platform for Illinois residents. The announcement came despite the attorney generals’ opinion.

In 2007, current Illinois Gov. JB Pritzker – identified in a YouBet news release as “Jay R. Pritzker” – was named to the YouBet Board of Directors. Pritzker has also been identified as an investor in YouBet.

Others operating ADW services in Illinois before 2009 included a company known as America TAB. In 2007, America TAB was acquired by Churchill Downs. The company continued to use the platform to collect wagers from Illinois residents after the acquisition.

Three years later, Churchill Downs also bought YouBet.

Earlier this year, Churchill Downs secured a controlling interest in Rivers Casino. On one hand, the acquisition would give the casino and its ownership access to the ADW database compiled through YouBet and America TAB both before and since ADW betting was legalized in 2009.

However, since the sites were operating contrary to the pre-2009 Attorney Generals’ opinion, the language of HB 1260’s Amendment 2 could also bar the current ownership of Rivers Casino and Churchill Downs, as well as anyone in leadership at YouBet, from participating in Illinois’ proposed new legal sports betting market.

“Rivers’ (Casino’s) army of lobbyists must not understand what their amendment would do to their client Mr. Bluhm, which is shocking,” said a source familiar with the proposed legislation.

HB 1260 Amendment 2 has been referred to the Illinois House Rules Committee. The House has set a final action deadline of May 31 for the legislation, according to the Illinois General Assembly webpage for the legislation.

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Churchill Downs Illinois Attorney General Illinois General Assembly Illinois House Speaker Michael J. Madigan Rivers Casino State of Illinois

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