CDI's Illinois OTBs and ADW Platform Under Fire

Churchill Downs Inc. is hitting regulatory roadblocks in its efforts to continue doing business in Illinois despite closing Arlington International Racecourse and putting that property up for sale.

The Illinois Racing Board Nov. 18 deferred action on a request to grant Arlington a license to operate off-track betting parlors in 2022.

And horsemen at FanDuel Sportsbook and Horse Racing, the former Fairmount Park, have withheld their consent to allow CDI's Twin Spires advance-deposit wagering platform to operate in Illinois.

The IRB added the OTB issues to already-scheduled hearings about the ADW controversy and will take both issues up again at its Dec. 16 meeting.

Although Arlington will not conduct live racing in 2022 while it works to finalize sale of the property to the Chicago Bears, Arlington president Tony Petrillo argued at the Racing Board's November meeting the Illinois Racing Act and precedent qualify the track to conduct OTB operations. The IRB legal staff agreed with that interpretation.

Petrillo said CDI continues to search for "another location" in Illinois to resume racing. "We continue to pursue this each day," he said, arguing the continued operation of Arlington's OTBs also will protect jobs in the state.

Several commissioners were skeptical.

"Mr. Petrillo, I heard you reference the loss of jobs several times in your presentation," said commissioner Beth Doria. "But I'm just wondering where that concern was when you actually closed the racetrack itself." 

"In the closing of any business," Petrillo answered, "there are certain negative outcomes from that. But, again, it is our intent and commitment to seek other locations and to seek a Thoroughbred license at some other location with hopes that those jobs would come back."

Commissioners specifically mentioned CDI's earlier closures of tracks in California and Florida as evidence of a lack of commitment to racing versus the company's casino interests. Commissioner Alan Henry specifically asked Petrillo, "Would you acknowledge that closing Arlington Park has caused fairly dramatic damage to the Illinois racing industry?"

"I think any business closing in any part of the industry has an impact that can be construed as negative," Petrillo responded, adding that is somewhat mitigated by the expectation Hawthorne Race Course, as the sole remaining track in the Chicago area, will derive significant benefit from Arlington's demise.

Michael Murray, counsel for Hawthorne, and David Albers, lawyer for the Illinois Thoroughbred Horsemen's Association, argued that "plain language" interpretation of the law does not entitle Arlington to an OTB license.

"Arlington wants in 2022 to continue to obtain OTB revenue streams but is not going to incur the required statutory burden of running its own races," Albers said. "It has walked away from Illinois racing."

"What it would lead to, ultimately, if you separate actually running races from OTBs is you might as well have no Illinois racing and just have all OTBs. That's what this is leading to and that's what Arlington is asking you to do."

Hawthorne president Tim Carey said his track is poised to move quickly to fill any void left by the closing of Arlington-run parlors.

Hawthorne is limited by law to 16 OTBs and currently operates 15. Carey said the track will seek an amendment to lift that limit and, if necessary during the interim, could juggle closure of underperforming facilities to maximize overall revenue production and jobs protection.

"We don't believe that this revenue is going to go away. We don't believe that the jobs will go away. We believe that we could operate them in the future and, like we said, we could manage the numbers (of parlors) that we have. The intent is to go down to the legislature, lift the cap so that we have the appropriate number of OTBs moving forward so that we can generate the commissions and purses that we need for this industry."

Although the decision to postpone action was based on legal arguments, it was clear from discussion that industry animosity toward CDI will play a large role in the outcome of both the OTB and ADW discussions.

The ADW issue turns on requirements that any wagering platform have a contractual agreement with a racetrack within the state and that the horsemen's association at that track consent to such an agreement. CDI turned to the former Fairmount Park, across the Mississippi River from St. Louis, in seeking its 2022 license but the Illinois Horsemen's Benevolent and Protective Association has refused its consent.

The law provides that consent may not be "unreasonably withheld" and empowers the Racing Board to determine, after hearings, whether the "reasonability" threshold has been met. 

The board has set a Dec. 3 deadline for briefs and a Dec. 10 deadline for responses on the ADW matter and agreed to wrap discussions on the OTBs into that schedule.