Chicago Has One Chance To Get Its Gambling Mix Right. And Sportsbooks Are a Factor.
BGA President David Greising writes a regular column for Crain's Chicago Business.
When the Illinois Legislature approved a huge expansion of gambling in 2019, it set the stage for a long-discussed city-owned Chicago casino. It also made possible the emergence of sportsbooks—betting parlors at the city’s sports arenas.
And if we believe a line of argument that has emerged in recent weeks, the launch of one could pose a mortal threat to the success of the other.
That’s right. In the eyes of Neil Bluhm—a gambling magnate and favorite to win the bidding to build and operate Chicago’s city-owned casino—the team-run sportsbooks could undermine the very business model of the Chicago betting house.
There is little doubt that Bluhm is wheeling and dealing. A self-made, Chicago-born billionaire, Bluhm started in real estate, then morphed decades ago into building and running casinos. He runs Rivers Casino, in Des Plaines, the state’s biggest by far.
Bluhm knows the economics of gambling. And when he crunches the numbers, he projects that sportsbooks at Wrigley Field, the United Center and Guaranteed Rate Field would cannibalize the Chicago casino. The city stands to lose $12 million in tax revenue each year, he claims.
Lost revenue on that scale would pose a threat to Mayor Lori Lightfoot’s plan to use returns from the city-owned casino to help address critical underfunding of the city’s police and fire pension funds.
But Lightfoot isn’t rattled. She seems to have a hunch that Bluhm’s argument does not hold up to scrutiny, and she won’t be slowed by Bluhm’s concerns.
Lightfoot is pushing to pass a Chicago sportsbook ordinance this month. Sports gambling has become so popular it’s “in our DNA and blood system,” she says, and Chicago should not delay.
She also claims that Bluhm has offered no data to prove that the sportsbooks would threaten the city’s casino. “Talk is talk. Facts and data, that’s what I’m about,” she said at a press conference Nov. 29.
Credit Lightfoot with a good rhetorical flourish. But the statement isn’t entirely fair, either.
When I interviewed Bluhm in his residence for this column, he handed me a 20-page presentation he said he shared with Lightfoot in a meeting. It has data to support Bluhm’s case, with more likely available from the consultants who did the math.
There are market indicators that support Bluhm’s concerns. For example: The potential payoff from arena-based sportsbooks must be big enough to justify the $10 million licensing fee the state is charging to run one. And when DraftKings in 2020 agreed to pay a sweet $100 million to the Cubs for the right to run the Wrigley Field sportsbook for a decade—well, there must be a reason.
In fact, Bluhm himself recently tried to put his own skin in the arena sportsbook game. As owner of a big online betting outfit, BetRivers, my reporting indicates, Bluhm sought arena sportsbook contracts with owners of the Cubs, White Sox, Blackhawks and possibly others.
He didn't get the business. But his bid alone undermines Bluhm’s claim he is opposing the teams’ sportsbooks out of concern for the city’s casino plans. Had the impact on Chicago’s casino revenues so worried him, then why did Bluhm bid for those books?
One other oddity is the lack of industry support for Bluhm’s position. No other bidder for a Chicago casino has raised a concern, and Bally’s even issued a statement supporting sportsbooks at Chicago’s arenas.
This is hardly a trifling matter. The city has one chance to get its casino right. And while Bluhm may well be exaggerating to serve his own interests, he just might be spot-on. And if that's the case, the sooner the city knows, and acts on the information, the better for all concerned.
Lightfoot can hardly afford to lose a bet that Bluhm is wrong. Instead, she could consider hedging the city’s position.
Under current plans, Chicago will charge the arena operators a mere $50,000 for a sportsbook license: That’s one-half of 1% of the state’s fee. Surely a sportsbook license at Guaranteed Rate Field is worth more than that.
There also is no city tax on sportsbooks. The state will charge the arena-based sportsbooks 15% on the sports betting revenue they take in. Even Cook County takes 2%. Could Chicago have its own levy?
Lightfoot should not just shrug off Bluhm’s warnings in order to meet her self-imposed December deadline. Instead, she should devote a week or two to crunching Bluhm's numbers, and any others available, then making a more informed decision about the risks, if any, to the city's casino. It's concerning that she is prepared to move forward, even though a full analysis of the impact of sportsbooks on the Chicago casino from city consultants Union Gaming is not yet complete, my reporting shows.
If Chicago gets this wrong, the economic and reputational damage could be substantial.
What we have here is a public-policy poker game, and Lightfoot has cards she can play. With a small measure of careful analysis, including open-minded inquiry into Bluhm’s claims, she can get this right.
The city has no good reason to proceed based only on a hunch and a prayer.