The bidder linked to the Mexican gaming company is the sole remaining applicant for an Illinois online sports betting license.  But he may be forced to leave.

The fledgling sports betting industry is booming in Illinois, becoming the third largest market in the US after just two years of operations interrupted by the pandemic.

But the state may soon be left empty-handed in its efforts to add three new online-only sportsbooks to an already packed roster of national players like DraftKings, FanDuel and BetMGM, the segment’s increasingly dominant leaders. online.

Four companies applied to the Illinois Gaming Board in December for the three online licenses, which are not tied to casinos, race tracks or sports venues but carry a hefty $20 million license fee, double the maximum for houses. online sports betting with physical companies. . Since then, three companies have either folded or been eliminated. And the remaining applicant, Tekkorp Digital Acquisition Corp., faces increasing odds of hitting the mark.

Tekkorp Digital, a Las Vegas-based blank check company seeking to acquire Caliente Interactive, a Mexican gaming company linked to a controversial Tijuana businessman, will hold a shareholder vote on October 13 to determine whether to extend the term of merger or dissolve the company. according to a Securities and Exchange Commission filing.

The company declined to comment on the merger extension vote, but the SEC filing said that if it is not approved, Tekkorp will begin winding down operations on October 26. Morris Bailey, who founded New York-based JEMB Realty, is the largest shareholder and chairman. from Tekkorp Digital.

“We don’t comment on individual pending applicants,” said Joe Miller, a spokesman for the Illinois Gaming Board.

If the state voids all three online-only licenses, it can reopen the competitive application process, Miller said.

Overcoming setbacks has been the name of the game since the state first bookmaker open at Rivers Casino Des Plaines at the start of the pandemic in March 2020, only to close within days amid statewide stay-at-home orders. In June 2020, BetRivers became the first Illinois sportsbook to offer online betting, with the state temporarily waiving the in-person registration requirement as casinos began to reopen with capacity limits.

Since then, online sports betting has led the way for Illinois’ fast-growing market.

Guests and media pack into the sports betting area on March 9, 2020 at Rivers Casino in Des Plaines.

Illinois sports betting generated $8.5 billion in bets and $611 million in adjusted gross receipts (money put away after winnings are paid out) in fiscal 2022, according to an annual wagering report released by the state this month. . That represents a 61% increase in revenue during the fiscal year, which ended June 30. At a 15% tax rate, the state collected $92 million in tax revenue, along with another $50 million in license fees.

The state has nine operating retail sportsbooks, seven of which offer online sports betting. In March, Illinois permanently eliminated the in-person registration requirement, allowing online platforms to compete for customers across the state. Online wagering accounted for 96% of the sports betting revenue generated in Illinois during fiscal year 2022.

FanDuel, which is associated with the Fairmount Park horse racing track near St. Louis, was the state’s top sports bookmaker, with more than $253 million in adjusted gross receipts for the year, according to the report. DraftKings, which is associated with Casino Queen in East St. Louis, was the No. 2 sportsbook in the state with nearly $148 million in adjusted gross receipts, followed by BetRivers with about $99 million.

Fans walk past a Fanduel sports betting spot at the Footprint Center before Game 5 of the Western Conference first round NBA playoffs between the Phoenix Suns and the New Orleans Pelicans on April 26, 2022 in Phoenix. .

Nevada was the only state with legal sports betting until a 2018 Supreme Court ruling opened it up to other states. It is now legal in 30 states, with 22 offering online gambling.

Illinois ranks third in total handling among states that have legal sports betting, according to a September report from Eilers & Krejcik Gaming, a California-based research and consulting firm. New York, which launched online sports betting in January, tops the list, followed by New Jersey. Nevada ranks fourth.

The Illinois Sports Betting Act was passed in 2019, allowing the state’s 10 largest casinos, three racetracks and seven sporting venues to acquire a sports gaming license for an initial fee of no more than $10 million each.

With six new casinos scheduled to open, including Bally’s, which submitted an application With the gaming board last month to build Chicago’s first casino, the number of brick-and-mortar sportsbooks could reach two dozen in the next few years. In December, the city of Chicago approved sports betting at sports facilities, with plans for a DraftKings sports book at Wrigley Field and a FanDuel sports book at the United Center in the works.

The DraftKings Sportsbook logo is displayed on the right field wall at Wrigley Field as Philadelphia Phillies players prepare for a game against the Chicago Cubs on September 27, 2022.

However, getting all three online-only sportsbooks up and running has proven challenging.

Tipico, a Malta-based international sports bookmaker, applied after the December 3 deadline and was rejected by the gaming board.

Digital Gaming, a Florida-based company, withdrew its application after submitting it. The company did not respond to a request for comment.

Fubo Gaming, a new division of the New York-based streaming service FuboTV, was notified in April that it “did not meet the minimum requirements and was disqualified from the selection process,” according to the gaming board. In an email, the gaming board referenced the relevant rule, which states that an online sports betting applicant is ineligible if “any key person…has been convicted of an offense relating to dishonesty or baseness.” moral”.

On Tuesday, a Fubo spokeswoman referred to an April 28 statement in which the company “respectfully disagrees with the decision” and offered no further comment.

“Fubo Gaming has received operating licenses from gaming regulators in other states, each following extensive background investigations into the company and its directors,” the company said in its April statement. “The basis for which the company has now been disqualified in Illinois did not prevent its licensing by these other states.”

That left Tekkorp/Caliente as the only remaining applicant, which didn’t turn out to be a success either.

In May, a Washington, DC-based nonprofit organization called Stop Predatory Gambling sent a letter to Gaming Board Administrator Marcus Fruchter expressing concern that Caliente Interactive is part of Grupo Caliente, a Mexican-owned gaming company. by Jorge Hank Rhon, former mayor of Tijuana. The group raised decades-old allegations that Rhon was involved in everything from money laundering and drug trafficking to the illegal transport of endangered wildlife, and asked the board to reconsider its decision to move forward on the license application.

Incidents cited by the group included Rhon’s arrest in 1995 at the Mexico City airport after a customs inspection found suitcases full of carved ivory and rare animal skins that he had not declared. In 2011, Rhon was arrested by Mexican federal authorities after a raid on his Tijuana compound revealed 88 weapons and nearly 10,000 rounds of ammunition. In both cases, the charges were dropped.

Caliente Interactive was established in 2014 as an independently operated entity through an agreement between Grupo Caliente and Playtech, a technology company listed on the London Stock Exchange, according to Tekkorp’s disclosure statement filed with the London Stock Exchange. game board.

“Caliente Interactive is not part of Grupo Caliente, nor is it owned by Grupo Caliente or any person or entity involved in the ownership of Grupo Caliente,” said Gilbert Brooks, an attorney representing the Tekkorp/Caliente offer.

Miller said Tekkorp’s pending application is “being processed and investigated per the requirements” of the gaming board’s competitive selection code. But financial difficulties may make that decision moot.

In its September 13 proxy filing, Tekkorp said that “capital market conditions have deteriorated significantly since the transaction was initially contemplated” and that the merger with Caliente “is no longer being pursued in the same manner.” While Tekkorp is exploring “alternative opportunities” with Caliente, there isn’t enough time to strike a new deal before the Oct. 26 merger deadline, the company said.

If not enough shareholders agree to the merger extension, the state’s fourth and final online sports betting applicant will be dissolved, according to the filing.

While the state is likely to reopen the competitive process for online licenses after Tekkorp’s application is settled, short-term economic and competitive hurdles may produce a similar outcome, according to Chris Grove, a partner at Eilers & Krejcik Gaming. .

Grove cited the high cost of capital amid the credit crunch and the huge market share that DraftKings and FanDuel “aspired to” as major deterrents to potential Illinois applicants.

“People are a little bit more cautious and a little bit more judicious when it comes to attacking the online gambling opportunity than when Illinois passed their bill,” Grove said. ‘There’s a good chance you’ll see more interest in entering the Illinois market over time. Right now, I think, it’s an exceptionally difficult time to convince someone to put up $20 million.”

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