Series: The Bad Bet How Illinois Bet on Video Gambling and Lost

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This week, we published an investigation into how Accel Entertainment took advantage of shortcomings and underfunding in Illinois’ regulatory structure to become the largest video gambling operator in the state — and now, in the nation. It’s a cautionary tale for other states where Accel wants to expand.

Before we get into what video gambling might mean for those states, here’s some context: Illinois legalized video gambling in 2009 as part of an effort to dig itself out of a financial hole. For years, the state has struggled to generate revenue, balance its budget and maintain its infrastructure. Video gambling was seen as one way to do that. Legalizing marijuana and sports betting, as well as casino expansion, represent newer efforts.

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We’ve reported on how video gambling has not quite worked out as promised: Not only did the state not make as much money from video gambling as it projected, only a fraction of video gambling profits go back to cities and towns — while gambling companies, as well as the politicians they lobby, benefit. Additionally, we’ve shown how Illinois residents who gamble have lost more than $5 billion of their own money since the machines went live in 2012, sometimes sending individuals and families into spirals from gambling addiction. Though state funding to assess and treat gambling addiction often failed to meet the need, Illinois is now allocating more money.

This week’s story reveals how Accel became the first publicly traded, pure-play video gambling operator in the country, raking in an average of $350,000 a day. It’s also a story about the man behind the company: Andrew Rubenstein, who built Accel with the help of investments from wealthy friends and relatives, and a childhood connection to a lawyer for the Illinois Gaming Board. You should read it — not only if you live in Illinois, but if you live in Missouri, Indiana, Mississippi, Georgia or Pennsylvania, where Accel has said it hopes to expand.

In a June 2019 pitch to investors, Accel articulates its strategy: Under a graphic of a U.S. map highlighting various “States with Revenue Shortfalls,” the company describes “growth opportunities as states find that gaming increases tax base especially in times of fiscal constraint.”

Accel Entertainment says growth opportunities exist in states with revenue shortfalls and has identified states with video gambling terminals and/or video lottery terminals. (Accel Entertainment investor presentation, June 2019)

Is video gambling coming to a state near you? If so, here’s what you need to know:

Missouri

A bill to allow video gambling and sports betting passed out of a committee in the Missouri legislature in early February. Under the bill, the state’s lottery commission would regulate video gambling machines that have sprung up in gas stations and bars across the state. The proposal would also pave the way for sports wagering at lottery-like kiosks. Sponsors of the legislation say the measure would generate hundreds of millions for the state and cost just $2 million to implement.

Indiana

Bar and restaurant owners in the Hoosier State pushed last year to legalize video gambling. Although they came up short, the state still passed a massive gambling expansion that included mobile sports betting and allowed a casino to move off the waterfront in Gary to a more lucrative location. The move sparked controversy, after it got out that the casino operator paid more than $50,000 to fly Gov. Eric Holcomb to Republican Governors Association events on a private jet.

Mississippi

The state is exploring mobile sports betting to go along with its large casino industry. Once the third-largest gambling destination in the country, behind Nevada and New Jersey, Mississippi gaming revenue has fallen by $200 million since 2010. The decline has also led four casinos to shutter, shedding about 5,000 jobs in the process.

Georgia

Read More Beginner’s Luck: How One Video Gambling Company Worked the Odds and Took Over a State Funded in part by his wealthy family and aided by a personal connection at the Illinois Gaming Board, Andrew Rubenstein’s Accel Entertainment now owns a third of the state’s video gambling machines, making it the biggest video gambling operator in the nation.

Some powerful lawmakers are angling for a gambling expansion that would include sports betting, casinos and horse racing to generate revenue for health care and education. Although video gambling is not yet on the table, Georgia is home to Pace-O-Matic, a company that designs software for various games that look and act like slot machines.

Pennsylvania

The Pennsylvania Gaming Control Board approved the state’s first five video gambling locations last April, following the passage of a massive gambling expansion bill in 2017 that paved the way for video slots and poker at truck stops. Accel has been pushing hard to get up and running in the state, where the tax on video gambling is much higher than in Illinois.

Accel also has its eyes on Montana, West Virginia, Oregon, South Dakota, Nevada and Louisiana. And, like we’ve said, Illinois is still poised to become the gambling capital of the Midwest. The state now has more places to legally place a bet than Nevada.