Neil Bluhm mulls bid for Chicago casino amid a changing gambling industry
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Neil Bluhm, the longtime king of legalized gambling in Illinois, isn’t much of a gambler. While he might hit the craps tables every few years in Las Vegas, his big bets, he says, are “when I try to do one of these deals.”
Bluhm means the bidding for Chicago’s first casino. His Rush Street Gaming is widely considered by industry insiders to be the leading contender, but Bluhm says he hasn't decided whether to submit a bid.
That's not the only vexing question facing the real estate billionaire turned casino mogul. His expanding gambling empire confronts an array of new challenges: the rise of mobile sports betting companies like FanDuel and DraftKings, the emergence of potentially lucrative stadium-based sportsbooks and the possibility that the new city casino would draw customers away from his successful Rivers Casino in Des Plaines.
The trends underlying these challenges also represent potential opportunities for Bluhm. Positioning Rush Street for success will require a professional gambler's knack for calculating odds.
“We’re all guessing,” says Chris Grove, a gambling industry analyst at Eilers & Krejcik Gaming. “Sports betting is new; sports betting at sports stadiums is new. A casino in Chicago is also new.”
As Bluhm mulls his next moves, FanDuel and DraftKings are inking partnerships with sportsbooks at Chicago’s stadiums. The most potentially lucrative and furthest along is a DraftKings sportsbook at Wrigley Field. The Chicago Cubs have already received the OK from the city’s Landmarks Commission to build a betting parlor at the corner of Addison Street and Sheffield Avenue.
But the City Council hasn't approved stadium-based wagering yet. Ald. Walter Burnett, 27th, whose ward includes the United Center, got the ball rolling last month when he introduced an ordinance allowing betting at stadiums. City Hall sources say people in Bluhm's camp argued against the bill, which has been sidelined in the rules committee.
Bluhm confirms that he opposes the stadium-betting bill. He warns that stadium-based sportsbooks would generate little money for the city beyond a licensing fee of $50,000 for the first year and $25,000 per year following, while cutting into the action at a Chicago casino that city leaders hope will generate about $200 million in tax revenue annually to shore up sagging municipal pensions.
“If you think that that revenue would be hit by, call it 15 or 20 percent, that could cost the city, I’d say, anywhere from $25 (million) to $35 million a year in tax revenue,” he says.
Stadium sportsbook proponents say the argument is disingenuous: Money will flow to the city, just via vertical capital spending through the state’s “Rebuild Illinois” program. Chicago is expected to receive hundreds of millions to improve university and community college facilities as the state’s gambling expansion takes off.
Bluhm says he considered bidding for sportsbooks at Wrigley and the United Center, which went with FanDuel, but ultimately decided both were too expensive. “We were never a serious bidder,” he says of the Wrigley sportsbook. DraftKings estimates the Wrigley project will be the largest individual sportsbook in the country.
Rush Street has entered into a marketing agreement with the Chicago Bears that includes signs at Soldier Field and social media ads promoting sports betting at Rivers Casino and on the BetRivers app. However, Bluhm says he has no interest in a physical betting operation at Soldier Field.
Rush Street Gaming’s brick-and-mortar portfolio includes the Des Plaines location and Rivers casinos in Schenectady, N.Y., Pittsburgh and Philadelphia. But Bluhm’s digital gambling unit is growing faster. Rush Street Interactive, which went public in December, offers online sports betting in eight states, retail sports betting in five and online casinos in four.
Launched nearly a decade ago, RSI expects plenty of growth as more budget-strapped states legalize various forms of digital gambling. The company has operating agreements to launch in four new states—including New York—and could enter seven more that recently authorized sports betting. RSI’s most recent quarterly earnings show a big recovery from last year’s COVID doldrums: Revenue shot up 89 percent to $122.8 million during the second quarter.
While RSI is smaller than digital competitors DraftKings and FanDuel, Grove says the company has top-shelf technology and strong operational teams. “Rush is executing really well on the online gambling side,” Grove says, adding that brick-and-mortar casinos help pull in digital bettors. “Being a strong retail operator is a cornerstone advantage.”
Still, Bluhm's online and in-person sports betting trails DraftKings and FanDuel in his home state. BetRivers logged $94 million in adjusted gross receipts in Illinois between March 2020 and June 2021. DraftKings, which takes bets online and in person at Casino Queen in East St. Louis, posted $104 million in the same span, according to Illinois Gaming Board records. And FanDuel, which has a partnership with Fairmount Park Par-A-Dice in East Peoria, raked in $129.5 million.
Another potential source of competition for Bluhm is in the works as Chicago seeks bidders for a gambling house that city officials call “one of the most attractive casino-resort development opportunities in the country." That's debatable, as at least two major casino companies have taken a pass on bidding for a casino that would saddle its operators with a high tax rate.
“It's a tough deal because the tax rates are high and there's plenty of competition,” Bluhm says.
Bluhm's incentives are complex when it comes to a city casino that could siphon business away from Rivers in Des Plaines. He acknowledges that a Chicago casino—regardless of who owns it—“definitely will have an impact” on Rivers' bottom line. Bluhm would get that business if he wins the city casino license. If not, Rivers could lose market share to a competitor.
Yet a city casino would require an investment of as much as $1 billion. If Bluhm were to bid, he would team up with real estate firm Related Midwest at the site of the 78, the 62-acre site south of downtown along the Chicago River.
“Everyone kind of sees (Chicago) as the golden goose. There’s definitely some gold in there, but it’s not an endless supply. It has to be balanced with the risk of having that much capital invested,” says Mark Dvorchak, a managing partner of Pro Forma Advisors.
Would a Chicago casino subject to a 40 percent tax rate generate an adequate return on such a huge investment? The lack of interest from major players such as MGM and Wynn suggests they may have concluded the answer is no.
Gambling analysts note that any new casino would compete in an increasingly crowded market with Illinois' 10 existing casinos; nearby gambling houses in Indiana, Michigan and Wisconsin; and five new casinos yet to open across the state, including in Waukegan and the south suburbs.
Further complicating the picture are ties between Chicago Mayor Lori Lightfoot and members of Bluhm's family. Daughters Meredith Bluhm-Wolf and Leslie Bluhm each contributed more than $100,000 apiece to Lightfoot's campaign. Leslie Bluhm, a law school classmate of Lightfoot's, also hosted a fundraiser for the mayor. Both have a financial stake in Rivers casino, and Leslie Bluhm is a member of RSI’s board. Lightfoot could face criticism for favoring political donors if Bluhm wins the license.
Bluhm dismisses such concerns, calling Lightfoot a "principled person" who will pick the best bidder for the project. Lightfoot, too, has said there would be no "hometown favorite" when the city considers bids.
