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Sun-Times: Video Gambling Proliferating Across State

video gambling

Sunday, July 10, 2016 || Originally Published: Chicago Sun-Times || By Chris Fusco

The number of video-gambling machines at Illinois bars, strip malls and other small venues is booming, growing from zero to more than 23,000 in the past four years, records show.

That’s nearly double the number of gambling spots the state’s 10 casinos have.

Which has casino owners, who once fought against video gambling, now taking a different tack: If you can’t beat ’em, buy ’em.

The latest example: A Canadian private equity firm that has a 40 percent stake in the state’s top-grossing casino, Rivers Casino in Des Plaines, announced a $32.5 million investment last month in Accel Entertainment Gaming, the biggest operator of video-gambling terminals in Illinois.

That investment comes after two companies that own four casinos in Illinois bought two other big video-gambling operators: Gaming & Entertainment Management and Prairie State Gaming.

“Regional casino revenue is down throughout the country, and Illinois is kind of the forerunner in what’s expected to be the next wave — if there is another wave — in gaming,” says Michael Gelatka, president of the Illinois Gaming Machine Operators Association.

The casinos “see another revenue source out there and see a way to hedge their bets on the future,” says Gelatka, who owns G3 Gaming, a video-gambling company in Lansing. “If you have a regional casino and you feel video gaming is eating your lunch, then you have the ability to be a part of it” by investing in the industry or buying terminal operators outright.

As of the end of May, there were 23,406 video-gambling terminals operating at 5,658  locations statewide — including bars, restaurants, truck stops, gas stations and so-called casino cafés, many of them located in strip malls.

Revenues from those video poker, slot and other types of gambling machines are split roughly in thirds among terminal operators, owners of the sites where the machines are placed and the state, with a portion of the state’s tax share going to local governments.

State law caps the number of terminals at five per establishment. It also places lower limits on wagering and payouts on the machines than the limits at casinos.

Last year, video-gambling terminals took in $913 million, the most yet in Illinois, with $274 million of that going to the state and host communities.

In the first five months of this year, revenues are up 25 percent over the same time last year, to $459 million. That’s almost the same amount as the state’s 10 casinos generated in the same period.

Video Gambling Jackpot_Monthly comparison of video gambling revenues.png

A Chicago Sun-Times graphic based on Illinois Gaming Board data 

The casinos — limited to 1,200 slot-machine and table-game positions apiece — still took in more revenue last year than video-gambling spots, $1.4 billion, and provided more taxes to the state and local governments, $488 million. But their revenues and the number of people visiting them have been decreasing since 2012, when video gambling began taking root throughout the state.

Video Gambling Jackpot_Illinois casino revenues vs video gambling revenues.png

A Chicago Sun-Times graphic based on Illinois Gaming Board data 

Chicago is among 150 municipalities that ban video gambling, though industry advocates have been trying to convince Mayor Rahm Emanuel the machines would produce much-needed tax revenue for the cash-strapped city. Emanuel instead wants a Chicago casino, but plans for that have yet to materialize.

When the state law authorizing video gambling was approved in 2009, “The original intent was to help the bars, restaurants and some of the truck stops earn some revenue for themselves and for the state,” says Tom Swoik, executive director of Illinois Casino Gaming Association, which represents eight of the state’s 10 casinos. “I think what happened was with the advent of the cafés — and also with the liquor stores and gas stations — people realized there were ways it could expand. And it’s just gone crazy.”

To read the rest of this Sun-Times article, click here. VFP

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