Video Gaming Terminal Laws And Regulations In Illinois

A comprehensive discussion about legal gambling in Illinois cannot exclude the mention of video gaming terminals (VGTs). These forms of gaming are most recognized by tourists and business owners in the Prairie State.

The legality of Video Gaming Terminals (VGTs) has consistently been a contentious issue, not just in Illinois, due to their similarity in appearance and function to slot machines. However, opponents have presented additional arguments against them.

No matter what one’s viewpoint may be, video gaming terminals are undeniably legal in Illinois. The recent expansion package in gambling has also included VGTs, indicating that this legality is unlikely to change in the near future.

The Illinois Gaming Board is in charge of regulating VGTs, indicating that there are guidelines both operators and players need to be aware of. The primary one is the state’s definition of these gaming devices.

What are video gaming terminals?

In some places, video gaming terminals are also referred to as video lottery terminals because they are regulated by the state lottery. Essentially, they are simple devices comprising an exterior console with controls and an internal computer.

Players have the ability to bet money and depending on the game’s outcome, they could either lose their bets or get a return on their stakes. The games cannot be played without placing a minimum bet.

The way games are presented differs across various consoles. While some consoles provide players with multiple game options, the majority are designed around virtual versions of physical card games or slot reels.

The Sports Wagering Act, which amended Illinois’ VGT laws, was enacted in June 2019. The impacts of this law were as follows:

• VGTs are authorized at the DuQuoin and Illinois state fairs.
• Raised the maximum wager amount.
• Increased the allowable number of terminal licenses on a licensee’s premises.
• Included provisions that limit licenses in malls.
• Included provisions regarding licensed large truck stop establishments.
• Increased the terminal tax.

So, having understood what a VGT is, the next crucial aspect to grasp is how to operate it from a player’s viewpoint. It’s as straightforward as operating a slot machine at a casino.

How do I play a VGT?

If you’ve ever used a slot machine at an Illinois casino, you’ll quickly understand how to operate a VGT. The operation of most gaming machines is virtually the same.

Once you’ve placed a bet suitable for the game you’re currently playing, you’ll press a button to initiate the game. The internal computer calculates the outcome of your play using the operator’s algorithm, and then exhibits that result on the screen.

You have the freedom to play for as long as you desire, but state regulations govern the maximum bets and earnings. One play cannot exceed a wager of $4. Moreover, the state law limits the highest cash prize for a single play to $1.19.

Some games have progressive jackpots, which means the prize pool increases as players play without winning. The maximum cash payout for such prizes is set by the state at $10,000. However, individual operators can offer additional prizes depending on their specific locations.

Much like in a casino where you play a slot machine, these machines give out tickets that players can exchange for cash. Although state law permits establishments to take up to three days to pay out certain prizes, players are usually able to claim the majority of prizes immediately.

Illinois doesn’t just regulate the legal standards for VGTs. The state oversees almost every aspect, from their installation and operation to their delivery and transportation.

What are the Illinois laws regarding VGTs?

In simple terms, numerous rules and laws oversee video gaming terminals. Additionally, some local authorities within the state also maintain their own criteria for these machines.

However, the key legal requirements for players interested in gambling responsibly involve having a minimum age, self-exclusion and the appropriate licensure.

If you are under the age of 21, you are not permitted to enter the gaming areas in buildings where VGTs are in operation. Furthermore, if you have self-banned from gambling in Illinois, it is your responsibility to avoid these areas.

In conclusion, playing these games is only lawful if the operator and site have a valid license. Engaging in illegal VGTs exposes you to potential local and state prosecution.

Certain cities, counties, and towns in Illinois have restricted or banned VGTs within their boundaries, despite their legality at the state level. The Illinois Gaming Board keeps an up-to-date list of local governments with such laws.

Since the Video Gaming Act was passed in 2009, legalizing VGTs in IL, that body has been in charge of regulating them in the state. However, in 2019, the most recent gambling legislation updated several parts of the original act.

The Video Gaming Act has jurisdiction over numerous facets of VGTs, such as:

• Who is eligible to play on a VGT?
• Who can operate it.
• Who is able to service the machines?
• How to handle payouts.

A brief history of VGTs in Illinois

Prior to the implementation of the Video Gaming Act in 2009, Video Gaming Terminals (VGTs) were referred to as “grey machines” in Illinois. This was due to the fact that, until then, state law had neither specifically prohibited nor officially permitted their use.

The act brought VGTs on par with sports betting in 2019, establishing a regulated and taxed structure for their operation under the supervision of the IGB. This is the current state of the industry.

• On June 28, 2019, SB 690 was signed into law by Governor JB Pritzker, introducing several amendments to the VGA.
• The first licensed Video Gaming Terminals (VGTs) began operations in the state in October 2012.
• On July 13, 2009, HB 255, including the Video Gaming Act, was signed into law by Governor Pat Quinn.

Who can host VGTs in Illinois?

A variety of physical establishments in Illinois are legally allowed to host VGTs, according to state law.

However, the accounts for the VGT operations must be kept separate from those of any nonprofit or for-profit organizations operating within the same buildings.

Furthermore, gaming sections must be distinct from other areas of the building. You can typically find Video Gaming Terminals (VGTs) in Illinois at locations such as:

• Adult entertainment boutiques
• Bars
• Lodges, which are the meeting places of fraternal organizations.
• Gas stations
• Liquor stores
• Nightclubs
• Restaurants
• Taverns
• Truck stops
• Meeting places for veterans’ organizations, for example, VFW halls.

Operators who wish to operate must acquire and keep a license with the Illinois Gaming Board (IGB). The IGB also limits the game providers that operators can collaborate with, currently identifying only five such firms.

The IGB keeps an updated list of establishments that are licensed to provide VGTs.

From June 2019, VGTs will also be available for players at the DuQuoin and Illinois state fairs. They are expected to be available for the first time in 2021.

VGT revenue in the Prairie State

As of July 2020, the state imposes a 34% tax on the total revenue from VGTs, which is the remaining amount after the operators pay out players’ winnings. The state further requires that these winnings must be no less than 80% of the handle.

The law mandates operators to equally divide any profit (remaining revenue after paying off expenses and taxes) with providers. The relevant legislation stipulates that taxes collected from VGTs are allocated to the Capital Projects Fund.

According to a report by Accel Entertainment, a game provider recognized by the IGB, VGT operators in Illinois generated over $145.6 million in net terminal income in 2019.

However, a report by ProPublica in January 2019 presented a contrasting perspective on VGTs in Illinois. The report demonstrated that the costs involved in regulating these terminals have exceeded tax revenues and significantly fallen short of projections.

The ongoing underperformance in revenue estimates is partly due to the COVID-19 pandemic. It negatively affected this business, as it did all other forms of gambling in Illinois.

How COVID-19 is affecting VGT gaming in IL

In March 2020, Pritzker mandated the closure of all VGT areas to the public as a measure to curb the spread of COVID-19. These areas stayed closed until early July, when Pritzker permitted their reopening under certain restrictions.

Facilities across the state still have restrictions in place. These include creating more space between machines for social distancing and limiting capacity to either 50 people or 50% of the fire code capacity, depending on which is smaller.

In the gaming areas, both employees and guests are required to wear face masks correctly at all times. However, this situation remains uncertain and is applicable only to specific regions within the state.

Should any of the 11 regions that the Illinois Department of Public Health (IDPH) has segmented the state into exceed a certain limit, such as a positivity rate of 8% or higher for three consecutive days, Pritzker may enforce additional limitations on VGT rooms. This incident has already occurred once before, specifically in Region 4 in the middle of August.

Residents of Illinois can access information about these levels in their local areas on the IDPH website. However, COVID-19 isn’t the only new development in the VGT industry in Illinois that 2020 has brought.

How has video gaming impacted Illinois businesses?

Which businesses you’re considering determines the answer. For businesses that run them, it has become an additional source of income. However, for others, the outcomes have been underwhelming.

An Accel Entertainment report proudly states that the operation of VGTS in Illinois has generated millions of dollars in revenue and created thousands of jobs. However, it’s important to note that opinions on this can vary depending on whom you ask.

However, the company has a vested interest in those numbers. It is one of the five firms licensed by the IGB to supply games and machines to VGT operators.

According to a report from ProPublica, the state is redirecting millions of dollars in casino taxes, which should have been used to bolster local businesses, to cover VGT administrative costs. As a result, the overall effect on the state can be perceived as either positive or negative, depending on one’s perspective.

Casinos have traditionally been against the operation of VGTs, asserting that VGT rooms encroach on their business. However, measuring this is challenging.

Do VGTs cannibalize Illinois casinos?

When objectively examining this question, a few variables are challenging to control. One of the main issues is the difficulty in determining whether and how many VGT players would have chosen to visit casinos if VGTs had never been introduced in certain parts of the state.

Moreover, it’s challenging to calculate the conversion rate of VGT players to casino patrons, should legal VGT machines suddenly vanish. Finally, there is limited data on the number of VGT players in IL who also gamble at casinos.

Having said that, it’s equally unwise to think that IL casinos aren’t negatively impacted by the existence of VGTs. It’s reasonable to believe that if VGTs were not available, some VGT players would opt to play slots at casinos instead.

Determining an exact number for that effect is challenging. However, due to the similarities between casino slots and VGTs, they are undoubtedly in competition.

VGT rooms in the same or nearby jurisdictions are also in competition with each other. The recent controversy revolves around the existence of varying local regulations for VGTs.

What’s the deal with the ‘push tax?’

Counties, cities, and towns are permitted by the state to implement their own regulations for VGTs. Indeed, 63% of the residents of Illinois reside in areas where VGTs are either prohibited or subject to regulations more stringent than state law.

Several towns hurried to sanction a one-cent “push tax” each time a player uses a VGT, following the enactment of HB 3136.

This is referred to as a push tax because it is essentially a tax charged every time a player presses the button for a play.

In Oak Lawn, they charge a penny per push. A similar tax has been implemented in Waukegan as well. However, operators are resisting this and refusing to pay the extra taxes. This defiance in Oak Lawn has resulted in the city imposing fines.

Increasing taxation to a certain extent may not be wise, as it could motivate businesses to operate machines illegally. In Illinois, this is currently not a significant problem.

What about illegal VGTs?

These are indeed found in IL, but it’s difficult to accurately determine their prevalence. Unlicensed VGTs, however, do not appear to be operating very prominently.

This is due to the fact that the majority of manufacturers will only sell to a business or individual if they have the necessary licensing from relevant regulatory bodies to own the machines. Additionally, the presence of these machines in the secondary market is extremely limited.

Also, for players in IL, the risk simply isn’t worth it. The taxes are covered by the operators from their earnings, not by the players from their winnings. Due to these factors, the occurrence of illegal VGTs in IL continues to be minimal.