Chicago discards proposed ban on unregulated ‘sweepstakes machines’

By Sean Reed | The Center Square
The Center Square

(The Center Square) – The Chicago City Council voted down a proposed ban on a type of prevalent gaming machines, which are not regulated or taxed by either the city or state due to what officials have described as a legal grey area.

The 15-33 vote leaves room for the body to potentially tax sweepstakes machines, bringing in more revenue for the city that has been strapped for cash.

Chicago Alderman Anthony Beale, representing the 9th Ward, revived an effort this week to impose a ban on the machines in the city, which appear similar to other video gambling terminals, but are unregulated because they offer free plays, coupons, and other prizes – as opposed to cash payouts.

Beale told fellow aldermen that the city is aware of at least 7,000 sweepstakes machines operating within city limits, which he said are illegal based on his interpretation of state law and court rulings.

“I talked to a high-ranking state official yesterday and he affirmed to me again that there is no gray area as it relates to the State of Illinois and who regulates these machines,” Beale said. “The state is saying there are no legal sweepstakes machines. So there’s no gray area that we’re talking about.”

Alderman Jason C. Ervin, representing the 28th Ward, opposed nearly every point made by Beale, characterizing sweepstakes machines as “amusement devices” that are legal – as the gaming board hasn’t taken action to regulate them.

“The Illinois Gaming Board is correct. If a machine is illegal, it is within their jurisdiction. These machines are not because they are not gaming devices. They are amusement devices,” Ervin said.

Ervin, siding with Mayor Brandon Johnson’s administration on the matter, also contended that the ban would be a bad decision for taxpayers.

The council last year moved to lift a ban on video gambling terminals, despite opposition from Johnson, leaving the city to trail behind the rest of the state in taxing the profits generated.

The city’s current budget relies on roughly $6.8 million from video gambling terminals, the first of which were only approved by the Illinois Gaming Board last week. The approved establishments still require a separate license from the city before they can legally operate.

Beale argued that, if the city banned sweepstakes machines, it would drive owners toward the legal path of applying to operate the newly legalized gaming terminals and bring in more revenue for the city.

“This is a slam dunk for us to move forward, to do what’s right, to maximize the revenue from video gaming terminals that this body has approved that we’re looking to get revenue from,” Beale said.

Beale said that the Illinois Gaming Board would likely come after the city legally if they tried to regulate and tax the machines.

Ervin disagreed.

“Those who are operating within the confines of the law, those who are asking to be taxed – not at 5 cents on the dollar, which is what we would get from a VGT machine, but at a level higher than that – we have an opportunity to set and regulate,” Ervin said. “We’re tripping over $100 bills to pick up nickels.”

Despite disagreements on a ban, city officials have shown hesitancy in approving video gaming licenses for establishments, in part due to an agreement with the city’s only casino.

Bally’s Casino, which is set to open its permanent location in Chicago next spring, pays the city roughly $4 million annually to operate.

In a letter to the council from Christopher Jewett, Bally’s Chief Development Officer, he stated that the economic cost to the city if they approve new video gaming terminals could be hundreds of millions of dollars, substantially larger than what revenue it would generate.

“Absent urgent action by the City Council, however, we will have no choice but to pursue all available legal remedies,” Jewett said in the letter.