SB1656 103RD GENERAL ASSEMBLY

LRB103 25082 AMQ 51417 b

103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB1656

Introduced 2/8/2023, by Sen. Cristina Castro

SYNOPSIS AS INTRODUCED:

New Act
5 ILCS 100/5-45.35 new

Creates the Internet Gaming Act. Authorizes an Internet gaming operator to offer Internet gaming in accordance with the provisions of the Act. Provides that Internet gaming shall only be offered by an Internet gaming license or an Internet management services provider that has contracted with an Internet gaming licensee. Provides that an internet gaming licensee shall offer no more than 3 individually branded Internet gaming skins. Provides that an Internet management services provider may conduct Internet gaming on its own Internet gaming platform pursuant to the agreement between the provider and an Internet gaming licensee and in accordance with the rules of the Board and the provisions of the Act. Includes provisions for: requirements of an Internet gaming platform; Internet waging accounts; license requirements; age verification, location, and responsible gaming; diversity goals in procurement and spending by Internet gaming licensees; acceptance of out-of-state wagers; and limitations on home rule units. Provides that a 15% privilege tax is imposed on Internet gaming to be deposited into the State Gaming Fund. Authorizes the adoption of emergency rules to implement the Act and makes conforming changes in the Illinois Administrative Procedure Act. Effective immediately.

A BILL FOR

AN ACT concerning gaming.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Internet Gaming Act.

Section 5. Definitions. Unless otherwise provided in this Act, the terms used in this Act have the same meaning given to those terms in the Illinois Gambling Act. Further, as used in this Act:

"Adjusted gross gaming revenue" means the total of all sums actually received by an Internet gaming licensee from Internet gaming operations, excluding voided wagers, free play, and promotional credits, less the total of all sums actually paid out as winnings to patrons, which includes the cash equivalent of any merchandise or thing of value awarded as a prize, and the total of successfully disputed credit or debit card charges that were previously included in the computation of gross gaming revenue. "Adjusted gross gaming revenue" does not include the dollar amount of non-cashable vouchers, coupons, or promotions redeemed by participants on an Internet gaming platform.

"Board" means the Illinois Gaming Board.

"Internet game" means an Internet-based version or substantial equivalent of a gambling game, slot machine, poker, table game, or any other game approved by the Board, including, but not limited to, simulcasted live-dealer versions of casino games in which an individual wagers money or something of monetary value for the opportunity to win money or something of monetary value, and which is accessed by an Internet-connected computer or mobile device. "Internet game" includes gaming tournaments conducted via the Internet in which players compete against one another or in one or more of the games authorized in this Act. "Internet game" does not include sports wagering conducted pursuant to the Sports Wagering Act or fantasy contests in which one or more players compete against each other and winning outcomes reflect the relative knowledge and skill of the players and are determined predominantly by accumulated statistical results of the performance of individuals, including athletes in the case of sporting events.

"Internet gaming" means conducting Internet games.

"Internet gaming licensee" means the owners licensee or organization licensee that holds an Internet gaming license under this Act.

"Internet gaming operator" means an Internet gaming licensee that operates an Internet gaming platform or, if an Internet management services provider operates the Internet gaming platform, the Internet management services provider.

"Internet gaming platform" means the combination of hardware and software or other technology designed and used to manage, conduct, and record Internet gaming and the wagers associated with Internet gaming.

"Internet gaming skin" means a distinctly branded Internet gaming platform operated by an Internet gaming operator, which may encompass a website, mobile application, or other portal to the Internet gaming platform. The brand may be that of the Internet gaming licensee or its affiliate, the Internet management service provider, or another brand as agreed upon by the Internet gaming licensee and its Internet management service provider.

"Internet management service provider" means a licensed business entity that operates an Internet gaming platform pursuant to an agreement with an Internet gaming licensee.

"Internet wagering" means the placing of wagers with an Internet gaming operator by persons who are either physically present in the State or in another permissible jurisdiction with which the Board has entered into a reciprocal agreement when placing a wager or otherwise permitted to place a wager by law.

"Internet wagering account" means a financial record established and accessible through an Internet gaming platform for an individual patron in which the patron may deposit and withdraw funds for Internet gaming and other authorized purchases and to which the Internet gaming operator may credit winnings or other amounts due to that patron or authorized by that patron. Nothing in this Act shall prohibit the use of the same Internet wagering account for sports wagering conducted and authorized under the Sports Wagering Act.

"Organization licensee" has the meaning given to that term in the Illinois Horse Racing Act of 1975.

"Owners licensee" means the holder of an owners license issued under the Illinois Gambling Act.

"Permissible jurisdiction" means another jurisdiction from which wagers may be accepted pursuant to Section 60.

"Supplier" means (i) a seller or lessor of gaming equipment, systems, or other items to conduct Internet gaming, including a manufacturer, distributor, wholesaler, or retailer; (ii) a provider of Internet gaming equipment, maintenance, or repair services; (iii) a provider of security services at designated gaming areas; or (iv) any other purveyor of goods, data, or services to an Internet gaming licensee or Internet management service provider licensee, as deemed necessary by the Board if the Board determines that the goods, data, or services impact the integrity or security of the Internet gaming operation.

Section 10. Board powers and responsibilities. The Board has the same powers and responsibilities with respect to the offering of Internet gaming as it has with respect to non-Internet gaming pursuant to Section 5 of the Illinois Gambling Act, except where the exercise of such powers or responsibilities is incompatible with the offering of gambling games over the Internet or with this Act.

Section 15. Rulemaking.

(a) The Board shall adopt emergency rules within 90 days after the effective date of this Act to administer this Act in accordance with Section 5-45 of the Illinois Administrative Procedure Act. For the purposes of the Illinois Administrative Procedure Act, the General Assembly finds that the adoption of rules to implement this Act is deemed an emergency and necessary to the public interest, safety, and welfare.

(b) In adopting rules and regulating the conduct of Internet gaming, the Board shall to the greatest extent possible utilize existing rules adopted under the Illinois Gambling Act and amend existing rules or adopt new rules or standards only as reasonably necessary to implement Internet gaming under this Act. The Board shall look to the Internet gaming rules of other regulated jurisdictions in the United States and shall implement consistent rules to the greatest extent practicable.

Section 20. Internet gaming authorized.

(a) Notwithstanding any provision of law to the contrary, Internet gaming is only lawful when conducted by an Internet gaming operator in accordance with the provisions of this Act and the rules of the Board.

(b) Internet gaming shall only be offered by an Internet gaming licensee or an Internet management services provider that has contracted with an Internet gaming licensee. An Internet gaming licensee shall offer no more than 3 individually branded Internet gaming skins. The Internet gaming licensee may operate the platform and contract with up to 3 Internet management service providers to conduct Internet gaming in accordance with the rules of the Board and the provisions of this Act. An Internet management services provider may conduct Internet gaming on its own Internet gaming platform pursuant to the agreement between the provider and an Internet gaming licensee and in accordance with the rules of the Board and the provisions of this Act.

(c) The primary servers necessary to the placement or resolution of wagers on an Internet gaming platform shall be located within a facility that is secure and inaccessible to the public. The primary servers may be located anywhere in the United States that is in compliance with federal law for a period of one year following the effective date of this Act. Beginning one year after the effective date of this Act, the primary servers must be located in the State. All wagers placed by a person physically located in the State are deemed to be placed in this State. The intermediate routing of electronic data in connection with Internet gaming, including across State lines, shall not determine the location or locations in which a wager is initiated, received, or otherwise made.

Section 25. Requirements of Internet gaming platform.

(a) An Internet gaming operator may accept wagers on an Internet gaming platform only as follows:

(1) the wager is placed directly with the Internet gaming operator through an Internet wagering account; and

(2) the Internet gaming operator has verified that the person placing the wager is the holder of the Internet wagering account and is physically located within this State or a permissible jurisdiction using technological requirements in compliance with this Section.

(b) An Internet gaming platform shall include age and location verification mechanisms and requirements that are designed to preclude knowingly accepting wagers from individuals under 21 years of age, persons not physically within the State or a permissible jurisdiction, and persons otherwise excluded from Internet gaming from establishing Internet wagering accounts or from engaging in Internet gaming under this Act. The Internet gaming platform's age, location, and eligibility detection mechanisms shall monitor attempts to access the system and shall use commercially reasonable attempts to block unauthorized attempts to access the system.

(c) An Internet gaming operator shall implement commercially reasonable data security standards to prevent unauthorized access by any person whose identity has not been verified or cannot be verified, in accordance with rules adopted by the Board. The Internet gaming platform's identity verification mechanisms shall monitor attempts to access the system and shall use commercially reasonable attempts to block unauthorized attempts to access the system by persons who are not the wagering account holder.

(d) An Internet gaming operator shall implement commercially reasonable standards to protect the privacy and security of patrons to a reasonable degree of certainty. Internet gaming operators shall establish and offer patrons the option to protect their accounts with multi-factor authentication or authentication features such as personal identification numbers or biometric data.

(e) An Internet gaming operator shall establish internal and accounting controls applicable to Internet gaming and shall ensure that the security and integrity of all financial transactions in connection with Internet gaming shall comply with this Act and any rules adopted by the Board.

(f) Each Internet gaming operator shall collect, report, and pay all applicable taxes and fees and shall maintain all books, records, and documents pertaining to the Internet gaming operators gaming operations in a manner approved by the Board.

(g) All books, records, and documents concerning Internet gaming shall be available for inspection upon commercially reasonable notice by the Board during ordinary business hours in accordance with the Board's rules and shall be maintained by each Internet gaming operator in a manner and during periods of time as the Board shall require.

(h) Each Internet gaming operator shall maintain a file containing samples of the types and forms of advertising and promotional materials that it has used for Internet gaming in connection with this State for a period of 2 years. Such advertising samples shall be made available or produced for inspection upon the Board's request. The Board shall allow for Internet gaming operators to advertise beginning on the date of their licensing approval, including a temporary licensing approval. Nothing in this Section shall require Internet gaming operators to obtain advertising preapproval from the Board.

Section 30. Internet wagering accounts.

(a) Eligible persons seeking to establish Internet wagering accounts may do so in person at a casino or racetrack or over the Internet without appearing in person. An Internet gaming operator shall adopt reasonable procedures to ensure that individuals have no more than one Internet wagering account with the Internet gaming operator. However, nothing in this Act prohibits the use of a single account for a sports wagering account under the Sports Wagering Act and the Internet wagering account set forth under this Act.

(b) A participant may deposit and withdraw funds from the participant's Internet wagering accounts in-person at a casino or racetrack or over the Internet through electronic means to the extent allowed by federal law, including debit and credit cards; automated clearing house transfers; wire transfers; deposits and withdrawals of cash or gaming chips at cashiering locations in a river boat, a casino, or any property or facility owned, maintained, or leased by an organization licensee, an owners licensee, an Internet gaming operator, an Internet gaming licensee, or any other facility where a gambling game, a casino game, slot machines, table games, or other gambling operation occurs; deposits and withdrawals of cash at retail locations in the State approved by the Board; reloadable prepaid cards; gift cards; cash complimentary, promotional credits, or bonus credits; winnings; digital, crypto, and virtual currencies; or other means as approved by the Board.

(c) An Internet gaming operator shall include, as part of the Internet gaming operator's internal controls, mechanisms and procedures for reasonably detecting unauthorized access to Internet wagering accounts, unauthorized attempts to access Internet wagering accounts, and suspicious Internet wagering activity constituting cheating, theft, embezzlement, collusion, money laundering, and other illegal activity.

(d) As permitted by federal law, nothing in this Act prohibits Internet gaming operators from linking or otherwise commingling Internet wagering accounts with an eligible person's Internet wagering account in another jurisdiction. However, each Internet gaming operator must retain records of all deposits, withdraws, wagers, and wager results that take place within this State and pursuant to this Act and ensure all taxes and fees due under this Act are properly documented and paid.

Section 35. License requirements.

(a) No person may offer Internet games in this State unless all necessary licenses have been obtained in accordance with this Act and the rules of the Board. The Board may issue the following licenses to persons, firms, partnerships, or corporations that apply for licensure upon a determination by the Board that the applicant is eligible for the license under this Act and rules adopted by the Board:

(1) Internet gaming license;

(2) Internet management service provider license;

(3) supplier license; and

(4) occupational license.

(b) The Board shall issue an Internet gaming license upon request to any owners licensee or organization licensee that meets the conditions of subsection (i). The fee for a license shall be $250,000. An Internet gaming license shall be valid for the same period of time as the requester's owners license or organization license and shall be renewed as a matter of course upon renewal of the owners license or organization license and for the same period of time as the owners license or organization license. The fee for renewal of an Internet gaming license is $100,000. If an Internet gaming license is received after the issuance or renewal of an owners license or organizational license, the Internet gaming license fee shall be prorated for the remainder of the existing term.

(c) An entity may apply for an Internet management service provider license in the form as may be required by the Board consistent with the requirements of this Act. The Board shall provide an abbreviated application for entities that hold or have a pending application for a management services provider license under the Sports Wagering Act or other types of gaming under Illinois law. Before issuance of an Internet management service provider license under this Act, the applicant shall pay to the Board a licensing fee of $100,000 or, for applicants holding a management service provider license issued under other State law, a licensing fee of $50,000. An Internet management service provider license issued under this Act shall be valid for 4 years, subject to renewal upon payment of a fee of $50,000.

(d) An applicant for a supplier license shall apply in the form as may be required by the Board consistent with the requirements of this Act. The Board shall provide an abbreviated application for entities that hold or have a pending application for a supplier license under the Sports Wagering Act or other types of gaming under State law. Before issuance of a supplier license under this Act, the applicant shall pay to the Board a licensing fee of $75,000 or, for applicants holding a supplier license issued under other Illinois law, a licensing fee of $50,000. A supplier license issued under this Act shall be valid for 4 years, subject to renewal upon payment of a fee of $50,000.

(e) An applicant for an occupation license shall apply in the form as may be required by the Board consistent with the requirements of this Act for individuals who can directly change critical components of Internet game system hardware or software and meet 2 of the following requirements:

(1) have access to wagering account holders' personally identifying information;

(2) have the ability to make adjustments to Internet wagering accounts; or

(3) have direct interaction with wagering account holders.

Before issuance of an occupational license under this Act, the applicant shall pay to the Board a licensing fee of $150 or, for applicants holding an occupational license issued under other State law, a licensing fee of $100. An occupational license issued under this Act shall be valid for 4 years, subject to renewal upon payment of a fee of $100. An Internet gaming licensee may pay an occupational licensing fee on behalf of its employees.

(f) The Board shall issue any license under this Act upon payment of the license fee to an applicant that meets the conditions of subsection (i), if applicable, and a showing that the applicant holds an equivalent license under the Illinois Sports Wagering Act or, otherwise, has an equivalent license to conduct Internet gaming in another U.S. 3jurisdiction with licensing standards similar to those established under this Act and accompanying rules.

(g) The Board shall issue any license under this Act on a temporary basis within 30 days after receiving an application to any applicant that holds an equivalent license or temporary license under the Sports Wagering Act or, otherwise, has equivalent licenses in connection with Internet gaming in another U.S. jurisdiction with licensing standards similar to those established under this Act and accompanying rules. The Board shall issue the temporary license under this subsection within 30 days after receiving a completed application unless it is aware of credible information that may prevent the issuance of a license or require certain conditions on a license to ensure compliance with State gaming law, subject to due process. The temporary license shall be valid for a period of one year. The Board may revoke a temporary license at any time if it becomes aware of credible information that may prevent the issuance of a license or require certain conditions on a license to ensure compliance with State gaming law. A temporary license shall otherwise be deemed to be the equivalent of a full license for all purposes. A temporary license shall be renewed if a final determination has not been made by the Board on permanent licensure within one year. The Board shall adopt a process for ensuring an equal opportunity for all licensees to initially launch on a date set forth by the Board.

(h) The Board may require background investigations for any officer, director, or shareholder with 10% or more equity interests of an applicant for an Internet management service provider license. The Board may recover the actual and reasonable costs of an investigation conducted under this subsection from any license applicant. The Board shall waive a background investigation upon a showing that a background investigation has previously been conducted on the applicant under the Sports Wagering Act. The Board may accept a background investigation conducted by another state with licensing standards similar to those established under this Act and accompanying rules.

(i) The Board may not issue an Internet gaming license to an owners licensee or organization licensee that has reduced the size of its workforce by 25% or more since February 28, 2020. The Board may not renew the Internet gaming license of any owners licensee or organization licensee that has reduced the size of its workforce by 25% since the date its last Internet gaming license was issued or renewed.

Section 40. Age verification; location; responsible gaming.

(a) An Internet gaming platform's internal controls shall include one or more mechanism to reasonably verify that a participant is 21 years of age or older, that wagering on Internet games is limited to transactions that are initiated and received within the State or a permissible jurisdiction, and that the participant is physically located within the State or a permissible jurisdiction.

(b) The Board shall develop responsible Internet gaming measures, including a statewide responsible gaming database identifying individuals who shall be prohibited from establishing an Internet wagering account or participating in Internet gaming offered by an Internet gaming operator. The Board shall adopt rules for the establishment and maintenance of the responsible gaming database, which shall include allowances for individuals to self-exclude from Internet wagering, including making self-exclusion elections through an Internet gaming operator on an Internet gaming platform or in person at casinos or racetracks. The Board shall maintain the responsible gaming database in a confidential manner and Internet gaming operators shall not knowingly accept wagers from anyone listed on the responsible gaming database. Notwithstanding any law to the contrary, a self-exclusion election and the responsible gaming database are not public records subject to copying and disclosure under the Freedom of Information Act.

(c) Each Internet gaming platform shall display the words "If you or someone you know has a gambling problem, help is available. Call (toll-free telephone number)" or some comparable language approved by the Board, which language shall include the words "gambling problem" and "call (toll-free telephone number)", to be displayed on the home page accessible to any person initially logging into the Internet gaming platform. Similar information shall be accessible to account holders when logged onto the Internet gaming platform.

(d) Each Internet gaming platform shall include mechanisms for temporary and permanent self-exclusion through the Board's statewide responsible gaming database from Internet gaming. Each Internet gaming platform shall include mechanisms for termination of a patron's Internet wagering account. Additionally, each Internet gaming platform shall include player self-imposed wagering and deposit limits, including a deposit limit offered on a daily, weekly, and monthly basis that allows patrons to specify the maximum amount of money they can deposit into the Internet wagering account during the particular time period; and a spend limit offered on a daily, weekly, and monthly basis that allows patrons to specify the maximum amount of the deposits that they may put at risk during the particular time period. Self-imposed wagering or deposit limits shall take effect immediately but increases to a previously imposed limit shall not take effect until the expiration of the limit per the terms of the patron's original election. A licensee under this Act shall not knowingly mail or otherwise forward any gaming-related promotional materials or electronic mail to a participant during any period in which the patron has elected to temporarily or permanently suspend oneself from all Internet gaming or permanently terminate Internet gaming through the account.

(e) A patron shall continue to have the ability to withdraw funds, notwithstanding any temporary or permanent suspension or limits placed upon the account pursuant to this Section.

Section 45. Tax.

(a) A privilege tax is imposed on an Internet gaming operator based on the adjusted gross gaming revenue wagered on Internet gaming platforms authorized under this Act at a rate of 15% of adjusted gross gaming revenue. This privilege tax is the exclusive tax in relation to Internet gaming. No local government of this State, including home rule municipalities, may impose or levy taxes on adjusted gross gaming revenue.

(b) All moneys collected under this Act by the Board shall be deposited into the State Gaming Fund. The taxes imposed by this Section shall be paid by the Internet gaming operator no later than the last day of the month following the calendar month in which the adjusted gross gaming receipts were received and the tax obligation was accrued.

(c) If the taxpayer's adjusted gross gaming revenue for a month is a negative number, the taxpayer may carry over the negative amount to a return filed a subsequent month and deduct such amount from its tax liability for such month, provided that such amount shall not be carried over and deducted against tax liability in any month that is more than 12 months later than the month in which such amount was accrued.

(d) The tax revenue deposited into the State Gaming Fund under this Act shall be distributed according to Section 13 of the Illinois Gambling Act, wherein the Internet gaming operator shall be treated as the owners licensee or organization licensee that holds the Internet gaming license under this Act.

Section 50. Diversity programs.

(a) As used in this Section only, "licensee" means an Internet gaming licensee under this Act.

(b) The public policy of this State is to collaboratively work with companies that serve State residents to improve their supplier diversity in a non-antagonistic manner.

(c) The Board shall require all licensees under this Act to submit an annual report by April 15, 2024 and every April 15 thereafter, in a searchable Adobe PDF format, on all procurement goals and actual spending for businesses owned by women, minorities, veterans, and persons with disabilities and small business enterprises in the previous calendar year. These goals shall be expressed as a percentage of the total work performed by the entity submitting the report, and the actual spending for all businesses owned by women, minorities, veterans, and persons with disabilities and small business enterprises shall also be expressed as a percentage of the total work performed by the entity submitting the report.

(d) Each licensee in its annual report shall include the following information:

(1) an explanation of the plan for the next year to increase participation;

(2) an explanation of the plan to increase the goals;

(3) the areas of procurement each licensee shall be actively seeking more participation in the next year;

(4) an outline of the plan to alert and encourage potential vendors in that area to seek business from the licensee;

(5) an explanation of the challenges faced in finding quality vendors and offer any suggestions for what the Board could do to be helpful to identify those vendors;

(6) a list of the certifications the licensee recognizes;

(7) the point of contact for any potential vendor who wishes to do business with the licensee and explain the process for a vendor to enroll with the licensee as a businesses owned by women, minorities, veterans, or persons with disabilities; and

(8) any particular success stories to encourage other licensees to emulate best practices.

(e) Each annual report shall include as much State-specific data as possible. If the submitting entity does not submit State-specific data, then the licensee shall include any national data it does have and explain why it could not submit State-specific data and how it intends to do so in future reports, if possible.

(f) Each annual report shall include the rules, regulations, and definitions used for the procurement goals in the licensee's annual report.

(g) The Board and all licensees shall hold an annual workshop and job fair open to the public in 2024 and every year thereafter on the state of supplier diversity to collaboratively seek solutions to structural impediments to achieving stated goals, including testimony from each licensee as well as subject matter experts and advocates. The Board shall publish a database on its website of the point of contact for licensees it regulates under this Act for supplier diversity, along with a list of certifications each licensee recognizes from the information submitted in each annual report. The Board shall publish each annual report on its website and shall maintain each annual report for at least 5 years.

(h) A licensee under this Act that is also subject to the diversity program requirements of Section 7.6 of the Illinois Gambling Act shall include its Internet gaming activities within the supplier diversity goals and accompanying reports. Compliance with Section 7.6 of the Illinois Gambling Act shall be in lieu of compliance with the reporting requirements under this Act.

Section 55. Applicability of the Illinois Gambling Act and the Uniform Penalty and Interest Act. The provisions of the Illinois Gambling Act, and all rules adopted under that Act, shall apply to this Act, except where there is a conflict between those Acts, including the incompatibility of any provision to the conduct of gaming remotely, without a brick-and-mortar facility, or over the Internet. All provisions of the Uniform Penalty and Interest Act shall apply, as far as practicable, to the subject matter of this Act to the same extent as if such provisions were included in this Act.

Section 60. Acceptance of out-of-state wagers. Notwithstanding any other provision of law to the contrary, wagers may be accepted under this Act from persons who are not physically present in this State if the Board has determined that out-of-state wagering is not inconsistent with federal law or the law of the jurisdiction in which the person is located or if out-of-state wagering is conducted pursuant to a reciprocal agreement to which this State is a party that is not inconsistent with federal law. The Board may enter into agreements with other jurisdictions to facilitate, administer, and regulate multijurisdictional approved Internet games, including, but not limited to, poker.

Section 65. Home rule. The licensure and conduct of Internet gaming conducted by a person or entity pursuant to this Act are exclusive powers and functions of the State. A home rule unit may not regulate or license Internet gaming. This Section is a denial and limitation of home rule powers and functions under subsection (h) of Section 6 of Article VII of the Illinois Constitution.

Section 95. The Illinois Administrative Procedure Act is amended by adding Section 5-45.35 as follows:

(5 ILCS 100/5-45.35 new)

Sec. 5-45.35. Emergency rulemaking; Internet Gaming Act. To provide for the expeditious and timely implementation of the Internet Gaming Act, emergency rules implementing the Internet Gaming Act shall be adopted in accordance with Section 5-45 by the Illinois Gaming Board. The adoption of emergency rules authorized by Section 5-45 and this Section is deemed to be necessary for the public interest, safety, and welfare.

This Section is repealed on January 1, 2027.

Section 99. Effective date. This Act takes effect upon becoming law.