[ad_1]
Though it may no longer get you a franchise NFL quarterback or front-end MLB starter these days, $20 million is still a significant sum of money. And it is the entry price point for one of three online-only sports wagering licenses in Illinois.
Illinois is the nation’s No. 2 market in terms of legal sports betting handle this year, behind only New York, and home to the country’s third-largest city in Chicago (plus St. Louis bordering Illinois to the west in Missouri, which repeatedly fails to legalize). But the state is still capable of growth in handle, with only seven mobile operators currently serving a population with more than 8.6 million residents of legal betting age.
The Illinois Gaming Board’s announcement last Thursday that Betway was the lone bidder to move forward in the licensing process was surprising. J&J Ventures — the only other applicant in the supplementary process — sought to withdraw its application last month, which IGB Administrator Marcus Fruchter granted just prior to last week’s reveal.
The fact that the IGB is fielding applicants at all means the $20 million license fee is not necessarily prohibitive, particularly when said applicants are willing to bid over the minimum to be considered. The state agency published the two applications on its website, and there are interesting tidbits each prospective licensee brought to the table for consideration.
Betway sees the process through
The Digital Gaming Corp. — which does business as Betway — made few changes from its previous application submitted in December 2021 and later withdrawn. It again bid $22.5 million, which covers the license price and “a further $2.5 million committed at the Applicant’s discretion.” It again pledged a minimum of 1.5% of its post-tax adjusted gross revenue to be donated annually to Common Goal USA “to fund projects that harness the power of sports” in alignment with the United Nations’ Global Goals.
DGC notes the pledge “answers the call from the [Gov. JB] Pritzker administration, legislators, and community advocates, to invest in the social determinants of health and help restore, reinvest in, and renew Illinois’ most deserving communities.”
One key area where DGC expanded its application compared to 2021 was providing a listing of four Illinois-based minority partners. It stated a commitment to achieving a “minimum of 15% minority and/or diverse equity investment.” The four individual investors, who signed term sheets with DGC, would give the applicant “15% persons of color, which 15% includes 4.5% women and 3.5% veterans.”
Sign Up For The Sports Handle Newsletter!
The most intriguing name among the quartet is Chimaobi “Chima” Enyia, a former vice president of the cannabis company Cresco who was also executive director of the Illinois Liquor Control Commission from 2018-21 and associate director for the state’s Department of Revenue from 2015-18. In April, losing Chicago mayoral candidate Paul Vallas sued Enyia and his company Ikoro for $680,000 in the Cook County Circuit Court’s Chancery Division. Vallas alleged Enyia and his company failed to conduct promised voter outreach in the final days of his campaign before losing to current Mayor Brandon Johnson.
Betway’s primary Illinois tie-in is being an official sports betting partner of the Chicago Bulls, though that deal only runs through the 2024-25 season.
J&J: Sports betting outsider, Illinois insider
J&J Gaming provides exciting gaming experiences for patrons at their favorite local establishments. Stay up to date with J&J and follow us on our social platforms for the latest news, updates, & more! pic.twitter.com/Mlb1wSRtZl
— J&J Gaming (@JJVntrsGaming) July 31, 2023
For the second time in as many application periods, the IGB accepted paperwork from an unexpected potential licensee. Last time it was Tekkorp, which eventually withdrew its application before the full vetting process. This time it was J&J Ventures, known throughout Illinois as one of the primary vendors of VGT (video gaming terminal) machines that are commonplace throughout bars in the state.
VGTs provide the majority of gaming tax revenue in Illinois, generating more than 6.6 times the $118.4 million sports wagering did in 2022, at $786 million. J&J Ventures, which has been a licensed entity in Illinois since 2012, shortly after the passage of the Video Gaming Act, proudly claimed in its application it “currently pays more gaming tax to the State of Illinois and local communities than any other Illinois gaming licensee, including any casino or sports wagering licensee.”
It also had enough money after paying those taxes to make the higher bid of the two applicants, offering $23,001,101 for a license. J&J Ventures also planned on using well-known sports betting platform Kambi as its odds provider. Kambi currently has a presence in Illinois sports wagering through BetRivers and will eventually add Bally Bet after signing a deal with parent company Bally’s in May as part of the gambling company’s overhaul of its struggling product.
J&J Ventures, though, has no sports wagering history or presence. It was approved for a Type C license in Ohio, which allows for sports wagering via kiosks at locations with a liquor permit, but it has not launched any operations there. It had the potential to be among a handful of operators — there are fewer than 15 nationally — with an online sportsbook operating in just one state.
J&J Ventures provided the IGB a five-year economic outlook in its application, presenting three scenarios with gross revenue ranging between $6.7 million and $15.6 million in its first year of operations. Using its mid-point “Base” scenario, J&J Ventures estimated claiming 1.25% market share of the state’s $894 million sports betting operator winnings in its first year, with that market share increasing to 4.5% by Year 5.
Using its mid-point “Base” scenario, J&J Ventures estimated $11.2 million in revenue for Year 1 and $40.2 million by Year 5. State tax revenue on top of the license fee would grow from $1.7 million in Year 1 to just over $6 million by Year 5.
Using the industry standard 7% hold, J&J Ventures would need nearly $160 million handle in Year 1 to attain that revenue target. As a point of reference, BetMGM — the most recent mobile operator to enter Illinois in March 2022 — generated $37.5 million in revenue and nearly 4.4% market share from $562.6 million handle in its first 12 months. But J&J would have entered Illinois as, at best, the 10th mobile operator taking bets, as both Circa Sportsbook and Hard Rock Bet are positioned to go live by the end of September.
One thing J&J Ventures did not have in its application was a hierarchy for its sports wagering unit, as it was proposing it to be a new entity. It projected to have between five and 20 employees in its first year of operation and was “committed to ensuring equal opportunity and promoting diversity in a manner that reflects and includes the local community both in employment and vendor purchasing and procurement.”
[ad_2]
Source link