It's back to square one for online sports betting in Illinois, after the Illinois Gaming Board (IGB) revealed last week that Tekkorp withdrew its mobile sports betting license application.
Las Vegas-based Tekkorp, which partnered with Caliente Interactive (Mexico's largest sportsbooks), was the last of the initial online-only license bidders left in the running. As a result, the IGB announced that it was reopening the application process as of November 1 and that prospective operators would have until March 1 to submit their bids for one of the state's three available licenses to strictly be an online sports betting site — and not tethered to existing Illinois casinos, racetracks, or sports venues.
The Tekkorp withdrawal comes after Betway withdrew in February, Fubo Sportsbook was disqualified (and has since shuttered operations entirely), and a fourth brand (believed to be Tipico) was also disqualified from applying after the submission deadline.
Smaller operators being squeezed out of major markets
The empty list of bidders in Illinois could well be a red flag signaling the onset of a long-expected contraction and consolidation phase in a maturing legal sports betting industry.
Major operators — FanDuel, DraftKings, BetMGM, and Caesars — have taken advantage of their financial clout to seize as much as 90% of the market share in the top markets — such as New York, where the big four accounted for roughly 94% of last week's sports betting handle in the Empire State.
This leaves smaller sportsbooks on the outside looking in, with only marginal slices of the remaining wagering pie in play — an operating share that may not be sustainable over the long term. This helps explain the 100% dropout rate for online-only bidders, who may also have concluded that the prohibitive $20 million licensing fee Illinois is imposing on new entrants could no longer be justified under current market conditions.
There is also the matter of the entrenched online operators that dominate the Illinois gaming industry. Currently, there are nine retail sports betting outlets operating in lllinois, seven of which offer mobile wagering too. The top seven operators controlled over 98% of Illinois' $564.8 million in August wagering handle: with FanDuel ($180.2 million), DraftKings ($172.2 million), and BetRivers ($74 million) eating up more than 75% of the action alone.
It is hard to see how new online-only sportsbooks can make any dent in a market where brand identification has already been established — and bettors have tended to lock in their affiliations already.
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Illinois the new No. 2
That said, there is still a lot of allure in Illinois, which is one of the most lucrative markets currently active in the country.
During the fiscal year 2022, Illinois sportsbooks generated $8.5 billion in total handle, with online betting activity representing 96% of total state sports wagering revenue for FY2022, which ended on June 30.
In August, Illinois overtook New Jersey as the second largest sports betting market in the U.S. after reporting $8 million more in gross gaming revenue than the Garden State that month. This represented a 41% YoY increase over August 2021 and a 9% increase over July GGR figures, when Illinois crossed the $1 billion mark in all-time sports betting handle.
Illinois sportsbooks saw their YTD GGR reach $453 million, putting them in third place behind New York ($926 million) New Jersey ($517 million), with the total YTD handle of $5.8 billion also third behind New York ($11.5 billion) and New Jersey ($7.7 billion).
Illinois, which imposes a 15% tax rate on gaming revenue, collected $92 million in tax receipts for FY2022 — in addition to $50 million in licensing fees.
