IGB Meeting Update: January 2022

Every month, the Illinois Gaming Board (“IGB”) meets to discuss any changes in the Illinois gaming market and issue licensing and disciplinary decisions. What follows is a repost of the notes by our friends at Fox Rothschild in their “At Stake” Newsletter. You can also find official IGB meeting minutes on the IGB website. The minutes of each IGB meeting are typically posted following the next scheduled meeting of the Board.

After a frigid, snowy start to the week, the IGB’s first (virtual) meeting of 2022 on Thursday, January 27 brought with it a welcome warm-up. Board members present included Chairman Schmadeke, Member Hayden, Member Garcia and Member Bell.

The meeting began with the approval of the Regular Board Meeting Minutes from December 8, 2021 and continued with the Administrator’s report. There were no board member comments.

The Administrator began by providing a status on the casino expansion and the finding of suitability for eight of the nine casinos/racinos, noting that the City of Chicago is conducting its own, still ongoing proceedings before presenting applications to the IGB. There was no new information since December’s meeting, but if you would like to hear the Administrator’s comments, audio will be available at Illinois Gaming Board - Board Meetings And Documents.

Administrator Fruchter next gave a legislative update on HB3136, which recently became law (December 17, 2021). See Illinois General Assembly - Full Text of HB3136 (ilga.gov). He highlighted the law’s impact on video gaming, specifically two items: the simplification of the license renewal process by extending the terms of video gaming licenses and licensure of sales agents. Regarding the first, establishment, handler, and technician licenses now have a term of two years while suppliers, distributors, manufacturers and terminal operators have a term of four years. The IGB is working through this new renewal process, but note that (1) annual license fees still will be required every year, and 2) you may still get a license with a one year expiration date or you may receive renewal notification next year. That said, the renewals granted at today’s meeting will be for two or four years, respectively.

The law also added a sports wagering pilot program, through June 1, 2023, for limited wagering on Illinois collegiate activities, as long as the wagers meet three requirements:

• The wager is a Tier 1 bet;
• The wager is not based on an individual’s performance; and
• The wager is made in person.

The law also set a March 5, 2022 deadline for the existing condition that requires in-person registration for online sports wagering at one of the State’s licensed casinos. Finally, the law established that the occupational licenses for casino/racino employers are equivalent for sportsbooks within the same venues.

The Administrator turned next to Video Gaming Rules 250(p) and 270(f), which provide that video gaming terminals (VGTs) that are inoperable or deactivated must be removed within 72 hours. He admitted that in past IGB had not been consistent or rigorous about enforcing the 72-hour deadline, but said that starting today it would be renewing an emphasis on compliance with the 72-hour deadline. According to the Administrator, the impetus for this is due to the increase in organized retail theft. Licensed establishments have been victimized and such machines make them a target. We expect there will be a “learning curve,” but licensees should do their diligence to comply with this (and all other, obviously) IGB rules, and be sure to maintain accurate records in case the IGB has questions.

The Administrator then mentioned that the public comments regarding the Central Communication System are available to the public on the IGB’s website under the Video Gaming FAQ’s, Illinois Gaming Board - Video Gaming Frequently Asked Questions.

The Administrator also provided his revenue report. He stated that currently there are 42,349 live VGTs in 7,924 licensed locations across the State. He also provided his monthly summary of taxable revenue generated by the gaming industry. For your convenience, a chart with the breakdown is below. Please note that the December sports wagering numbers are not included and that the numbers below are approximate.

Video Gaming

November

• NTI: $205.4 million
• Total taxable revenue: $69.8 million
• State portion: $59.5 million
• Municipal portion: $10.2 million

December

• NTI: $216.8 million
• Total taxable revenue: $73.7 million
• State portion: $62.8 million
• Municipal portion: $10.8 million

Casino

November

• AGR: $103.9 million
• Total taxable revenue: $33.6 million
• State portion: $27.7 million
• Municipal portion: $5.9 million

December

• AGR: $109 million
• Total taxable revenue: $36.1 million
• State portion: $29.9 million
• Municipal portion: $6.2 million

Sports Wagering

November

• AGR: $79.3 million
• Total taxable revenue: $12 million
• State portion: $11 million
• Municipal portion: $794,000

The Administrator concluded by stating that the combined (video gaming, sports wagering and casino) gaming industry total tax revenue for January 1 through December 31, 2021 (exclusive of December sports wagering amounts) is approximately $1.037 billion to the State and approximately $194.7 million in tax revenue to localities, for a grand total of approximately $1.2 billion.

A reminder as we begin 2022 and new revenue running totals: the IGB’s Annual Report and other yearly analyses are available on the IGB’s website: Illinois Gaming Board - Annual Reports. As of this posting, however, the 2019 annual report is the most recent one available.

In Public Commentary, James P. Murphy of Clark Hill PLC addressed the Board. He expressed concerns that the existing Rule 320 Petition process is inconsistent with the goals of the Illinois Supreme Court’s J&J Ventures v. Wild case. (We are all probably familiar with the case by now, but contact us if you have questions.) Mr. Murphy’s concerns related to:

• Inconsistent application/enforcement of the petition and other rules, such as inducements
• IGB decisions not following the common law of contracts
• General fairness and arbitrary granting of extensions of time
• Appearance of favoritism or conflicts of interest
• Not recognizing contested case process - meaning there is no discovery and no neutral Administrative Law Judge (ALJ)
• Lack of or sporadic enforcement of the inducement policy
• Retroactive application of rules.

After Mr. Murphy spoke, the Administrator stated that, while he might disagree with the comments, the IGB takes allegations of the appearance of favoritism or conflict of interest very seriously and encouraged anyone with evidence of such to provide it to the IGB for review and investigation.

Casino

The Board began the Casino portion of the meeting by approving the final owner’s license for 815 Entertainment, LLC d/b/a Hard Rock Casino Rockford.

Next, the Board approved the request to amend the owner’s license application of Full House Resorts, Inc., the selected final applicant for the Waukegan casino location. Specifically, the Applicant requested to amend its application to change the entity that will hold the IL license. Full House Resorts, Inc. created a subsidiary, FHR Illinois LLC, a Delaware limited liability company, to hold the IL license. This IL LLC is 100% owned and managed by Full House Resorts, Inc.

The Board also approved the waiver of Illinois Gambling Act Section 6(d) for purposes of the written disclosure required in Section 7.12(c). For those not familiar, Section 7.12(c) states that the IGB has to provide a written decision as to why it did not award an owner’s license to an Applicant if the Applicant was the highest bidder in its application materials. Section 6(d) states that information within applications and disclosures is confidential and that such confidential information will not be distributed or disclosed to the public. The IGB had found Full House Inc. to be preliminary suitable for the Waukegan casino license on December 8, 2021, though Lakeside Northpoint was the highest bidder. As such, the IGB will be providing a written explanation for its decision. The Administrator and Chair both stated that their decision was based on confidential information within the application. As such, the Board needs to approve waiving Section 6(d) to allow the disclosure of confidential information in its written decision, as required by Section 7.12(c).

Next, the Administrator approved 95 Level 2 and 138 Level 3 occupational licensees, issuing renewals to those occupational licensees that were up for renewal and had provided updated information, timely paid their renewal fees, and complied with all other requirements. Also approved was one supplier license, for AGS, LLC.

Sports Wagering

The Sports Wagering section of the meeting began with the Board approving the following Key Persons of BetMGM, LLC:

• Gary Deutsch
• Gary Fritz
• Adam Bryce Greenblatt
• Robert Hoskin
• Keith Meister
• Jette Nygaard-Anderson
• Robert Wood
• MGM Sports & Interactive Gaming, LLC
• MGM Resorts International
• GVC Holdings (USA), Inc.
• Entain Holdings (UK) Limited
• Entain PLC
• IAC/InterActiveCorp.

Next, the Administrator approved 119 Level 2 and one Level 3 occupational licensees, and granted renewals to the Level 1, 2, and 3 licensees that were up for renewal and had provided updated information to the IGB, timely paid their renewal fees, and complied with all other requirements.

Video Gaming

The Administrator reiterated that the licenses of establishment, handler, and technician licensees now have a term of two years, while suppliers, distributors, manufacturers, and terminal operator licenses now have a term of four years and that though new licenses’ terms would begin today, annual fees are still due on an annual basis. He also mentioned that due to technical difficulties, including auto-generated notices and programming and system enhancements, licensees may receive letters or notices with one-year expiration dates, adding that IGB will be providing updates on the Sci Games portal and to please make notes of any discrepancies.

The Video Gaming session began with the Board approving the terminal operator license of Lakeview Gaming, LLC for a period of four years.

Next, the Administrator renewed the respective manufacture, supplier, supplier, or terminal operator licenses of the following entities for a period of four years:

• AGS, LLC
• Admira, LLC
• Andy’s Video Gaming Co.
• Heck Gaming, LLC
• Illinois Gold Rush, Inc.
• Illinois Video Slot Management Corp.
• JHey Enterprises, LLC
• J&J Ventures Gaming, LLC
• WG-Illinois, LLC
• Lucky Lady, LLC
• Midwest SRO, LLC
• Quad Gaming, Inc.
• Sparrow Gaming, Inc.

Next, he renewed the terminal hander, technician, and location licensees that were up for renewal and had provided updated information to the IGB, timely paid their renewal fees, and complied with all other requirements. The following three locations were issued a notice of nonrenewal:

• Joken Inc. d/b/a Kens Viaduct Lounge
• Post Time Sports Bar and Grille LLC d/b/a Post Time Sports Bar and Grille LLC
• Mac’s Convenience Stores LLC d/b/a Circle K #4710131

The meeting continued with initial licenses being issued to 132 terminal handlers, one terminal technician, and 113 video gaming locations. There was also one location, Hatoom Inc. d/b/a VIP Food & Liquor, that was granted a location license after the Board voted to rescind the previous denial.

The Board denied the applications of the following fifteen 15 locations, including two denied for statutory ineligibility:

• Primal Matter Inc. d/b/a Springers Bar N Grill
• Gerry’s Pizza Inc. d/b/a Gerry’s Pizza
• 101 S. Commercial, LLC d/b/a Kay’s Place (200701694)
• 101 S. Commercial, LLC d/b/a Kay’s Place (200701729)
• 101 S. Commercial, LLC d/b/a Kay’s Place (Harrisburg)
• 101 S. Commercial, LLC d/b/a Kay’s Place (Lincoln)
• CJ’s Gaming, LLC d/b/a CJ’s Gaming
• Dee’s Place South Elgin Inc. d/b/a Dee’s Place South Elgin Inc
• Jum Group LLC d/b/a Jum Group LLC
• Moe’s Café, Inc. d/b/a Moe’s Café
• Niko’s R & R Supper Club LLC d/b/a Niko’s R & R Supper Club
• SS Red Apple LLC d/b/a Red Apple
• Taco Madre Mendota, LLC d/b/a Taco Madre Mendota
• Taxco Restaurant Too Inc. d/b/a Taxco Restaurant
• Wild West Grill Inc. d/b/a Wild West Grill Inc.

The Board next discussed the following five Rule 320 Petitions:

• 19 UP 004
• 19 UP 14
• 19 UP 18
• 19 UP 24
• 19 UP 27

In all cases, the Board voted to adopt the ALJ’s recommendation as a final board order. In four of the five cases, the ALJ granted a request to withdrawal from one of the parties. In the remaining case, the ALJ granted a request to dismiss the case. While any movement by the IGB on Rule 320 Petitions is encouraging, it appears that they are mostly clearing cases that can be decided on procedural grounds rather than taking them on a first come, first serve basis.

The meeting continued with a robust discussion of the Rule 340(a) request of Accel Entertainment, Inc. (Accel) in which Accel contested the administrator’s denial of its Rule 340 request in relation to Gold Rush Amusements, Inc. Not surprisingly, the Board affirmed the Administrator’s decision.

Litigation

The meeting concluded with the Board adopting the ALJ’s recommendation to remand the disciplinary complaint against Villa Napoli Ltd to the Board. By way of background, there had been concern that prior to voting on the disciplinary complaint previously issued to Villa Napoli Ltd, the IGB as then constituted was not given a complete record to review.

To conclude our comments today, we want to take a moment and point out that disciplinary complaints are no longer on the agenda of monthly meetings but are available on the IGB’s website: Illinois Gaming Board - Video Disciplinary Complaints. Pursuant to the Rules, notification is sent to the involved parties via email, but the allegations are publicly available. Please note that, as stated on the IGB’s website: “Disciplinary Complaints are merely allegations, and respondents are entitled to a hearing under applicable Statutes and Gaming Board Rules.” If you, your employees, or your locations receive notification, please contact us as soon as possible to discuss the options and potential next steps.

Stay Warm!