A heated debate has been brewing in Illinois and it appears it may have finally reached its boiling point. DraftKings and FanDuel are at the heart of this issue but as allies. Neil Bluhm, the billionaire owner of Rush Street Gaming, is looking to a “bad actor” clause to keep the two sportsbook giants out of Illinois. An attempt that DraftKings and FanDuel are prepared to fight.
The “Bad Actor” Issue
One proposal that is heavily supported by the state’ casinos, is the “bad actor” provision to House Bill 1260 that would look to keep DraftKings and FanDuel out of Illinois. DraftKings and FanDuel are arguing that the legislation is an attempt to illegally block them from the Illinois market in order to give the casinos a head start in the marketplace. The “bad actor” provision would keep those who have “engaged in the crime of illegal gambling” from securing a state license to operate sports betting for three years after sports betting is legalized in Illinois.
Attorneys for DraftKings and FanDuel believe that this potential amendment is aimed specifically to keep them out of Illinois. “As the amendment’s proponents have made abundantly clear in their committee testimony, the purpose of the amendment is not to seriously assess the suitability of potential operators, but instead to exclude two specific competitors who are leading the market in other states.” This would give Illinois casinos a huge advantage to building a customer base with their mobile sportsbook without having to compete with DraftKings Sportsbook and FanDuel Sportsbook.
The problem revolves around an “advisory opinion” in 2015 by former Attorney General for the state of Illinois, Lisa Madigan. In her opinion, Madigan said she believed that FanDuel and DraftKings, as well as other online fantasy sports operators that allowed players to win money, were operating illegally in Illinois.
As expected, the fantasy sports sites filed suit, asking the courts to declare that they were not illegal gambling operations. Years later the state and fantasy sports sites settled without a ruling. This allowed the sites the right to sue the state again should any authority use the former Attorney General’s opinion to prosecute them for illegal gambling.
Neil Bluhm, the billionaire owner of Des Plaines’ Rivers Casino in Illinois, is a huge supporter of the “bad actor” provision that will essentially keep FanDuel and DraftKings out of the state. Bluhm’s Rush Street Interactive has recently launched a mobile sportsbook in New Jersey to try and compete with FanDuel and DraftKings. It is assumed that he will be looking to launch in Illinois as well, assuming mobile betting become legal. Bluhm is in support of the bad actor provision aimed to keep DraftKings and FanDuel out of Illinois, thus giving his sportsbook a better chance at success.
Illinois casinos have seen the dominance of FanDuel and DraftKings in New Jersey, giving the cause for concern. The two sites have accounted for 82 percent of the $2 billion in sports gambling tax revenue that the state has generated since legalization.
Would The “Bad Actor” Amendment be Legal?
Lawyers on the side of DraftKings and FanDuel believe that the proposed “bad actor” amendment would go against a number of rulings. The Cook County Record pointed out legal issues that the lawyers for DraftKings and Fanduel have with a potential “bad actor” provision.
Attorneys are from the firm of Jenner & Block, of Chicago. The authors included Anton R. Valukas, a former U.S. Attorney for the Northern District of Illinois and former chairman of Jenner & Block; Ian H. Gershengorn, who served as Principal Deputy Solicitor General and Acting Solicitor General, under former President Barack Obama; Thomas J. Perrelli, who served as Associate U.S. Attorney General under Obama and now serves as chair of Jenner & Block’s Government Controversies and Public Policy Litigation Practice Group; and Clifford W. Berlow, a former Illinois Assistant Attorney General and is now a partner in Jenner & Block’s Appellate and Supreme Court Practice Group.
– The Illinois state constitution’s Special Legislation Clause. This prohibits state lawmakers from writing a law specifically designed to benefit one group. “Here the amendment would exclude FanDuel and DraftKings from obtaining a license that is available to their competitors, ostensibly because of a legally inconsequential Advisory Opinion,” wrote the lawyers.
– The Constitution’s Equal Protection Clauses. “The proposed amendment specifically and narrowly excludes two identifiable entities – FanDuel and DraftKings – from a right it grants to a larger class, purportedly based on the fact that they were the subject of the Advisory Opinion declaring their past conduct to be illegal,” the attorneys wrote. “… There is ample evidence that the true purpose of the statute is to protect local competitors, including Illinois casinos, against competition from FanDuel and DraftKings in the sports wagering market.”
– Constitutional protections against punishment for criminal activity without a trial. “The proposed amendment categorically excludes FanDuel and DraftKings from the market based on an extra-judicial finding of guilt of the crime of gambling,” they wrote.
– Constitutional rules that require states to treat in-state and out-of-state businesses “on equal footing.”
– The Constitutions Due Process Clauses. “There is a strong argument that proposed amendment turns the constitutional requirement of due process on its head by requiring FanDuel and DraftKings to prove their innocence of criminal allegations if they wish to be licensed in Illinois,” the attorneys wrote.
The lawyers pointed out that supporters of the amendment believe it is constitutional under the state’s “police power.” They believe that because the state has the power to regulate gambling that it has the power under the constitution to regulate the markets as they see fit. Thus allowing them to exclude entities they believe should be excluded. The lawyers disagree.
“Constitutional constraints do not disappear because the State has taken action in a theater where its police powers are robust,” the Jenner attorneys wrote. “Were it otherwise, Illinois could ban only Capricorns from buying lottery tickets or require only Democrats to comply with traffic laws or prohibit only African-Americans from buying cigarettes or ban only Canadian nationals from owning pit bulls.
“Each of these rules, though ostensibly tethered to the State’s police power, would be stricken by any court as unconstitutional.”
Governor Asks FanDuel and DraftKings To Remove Ad
As reported by the Chicago Tribune, FanDuel and Draftkings have taken their 30-second TV ad off of the air. This decision comes a day after launching a campaign to make their case in the battle over legalized sports betting in Illinois.
The two companies had planned to launch a $1 million ad campaign targeting Des Plaines Rivers Casino and Bluhm himself. The ad went up on broadcast TV in Chicago on Thursday but is not coming down Friday, according to a spokesman.
“At the governor’s request, the ad is being suspended for the time being while we engage in productive discussions to deliver smart sports betting legislation before the (spring legislative) session ends,” Marc LaVorgna, a spokesman for Betonillinois.org, the FanDuel- and DraftKings-backed group behind the ad, said in a statement.
Although the TV ad never mentions Bluhm by name, it is clear who the ad was targeting.
“Illinois is in debt, but there’s hope in a significant amount of tax revenue with online sports betting,” said the ad’s narrator. “In order to benefit from this, we must allow those who are experienced in the digital gaming arena to compete in our state. But there is a casino owned by a billionaire that wants to keep them out, which will compromise tax revenue for Illinois.”
What We Can Expect Going Forward
The state of Illinois is in need of more revenue. Whether it is state works pensions, health care, education or other infrastructure, the state is seeing a hefty demand in spending. Illinois has been looking to a number of different bills to help bring more revenue into the state. Legalizing sports betting is one option that the state has been considering. Governor JB Pritzker believes that legalized wagering could generate more than $200 million for state coffers.
There is only about a week left in the current legislative session, so time is of the essence. No matter what ends up happening in Illinois in that time, one side will be left unhappy. In a utopian world, Illinois will be able to bridge the gap between FanDuel, DraftKings and Rush Street Gaming. That, however, seems unlikely.
Illinois needs this revenue, it is too important to miss out on. The best case scenario for Illinois at this point may be to bring legalized sports betting to the state immediately and reap the rewards. The addition of DraftKings and FanDuel to the state will help generate tax revenue for the state. Governor Pritzker needs to realize the needs of the state over the want of one specific casino owner. Allowing FanDuel and DraftKings to operate in Illinois seems to be the most logical option at this point.