Illinois Gaming Board Seeks To Levy $5M Fine Vs. Accel Entertainment

The Illinois Gaming Board is seeking to administer a $5 million fine to Accel Entertainment for alleged violations of the state’s Video Gaming Act, the Illinois Gaming Act, and state rules over incentives offered to establishments related to Accel’s short-lived agreement with DraftKings to promote the sports betting titan on its video game terminals across Illinois.

The eight-page complaint by the state’s regulatory agency, filed Friday and signed by Administrator Marcus Fruchter, lists three counts of violations alleging Accel offered and provided “payments and other things of value to licensed video gaming establishments as illegal inducements to locate, keep, or maintain Accel’s video game terminals (VGTs).”

Per board policy, the IGB does not comment on any pending disciplinary complaints, though the proposed fine is substantially higher than any previous complaint filed since 2019 that is available on its website. The complaint is the second against Accel this year, with the previous one filed in February seeking a $50,000 fine and alleging the company misrepresented an Accel employee “who procured a user agreement for Accel with a licensed video game establishment and failing to timely disclose an Accel sales agent” in October 2018 in violation of board rules.

Accel released a statement through a company spokesperson that read, “The Company disagrees with the Illinois Gaming Board’s alleged violations in the Disciplinary Complaint. We are always committed to conducting ourselves in accordance with all relevant gaming laws and regulations. The Company intends to vigorously defend itself against these allegations.”

Video gaming has been suspended in Illinois since Nov. 18 as a mitigation measure for COVID-19 and was also suspended from March 16 to June 30. Even with those lengthy periods of inactivity, more than 37,000 terminals in over 7,200 establishments across the state have generated $1.13 billion in net income, resulting in more than $325 million in state tax revenue.

The crux of the IGB’s complaint

The agreement between Accel and DraftKings announced in September provided potential advertising space to more than 11,000 VGTs spanning 2,300 locations across Illinois. In the terms of the agreement dated Aug. 28, the IGB notes “DraftKings would pay Accel a $200 payment for each qualified new patron Accel referred to DraftKings who created a sports wagering account and met certain requirements.”

The agreement allowed Accel to utilize the establishments as subcontractors for the referrals, and the IGB alleges in its complaint that Accel had “sole discretion to share payments with the establishments.” In emails quoted from the company’s chief commercial officer, one circulated internally and one to both parties, the IGB pointed out two specific instances where Accel sought to make itself merely a “pass through” on the payments from DraftKings.

From an internal email dated Aug. 21:

“There is one clause we would like you to add which would make clear that the commission DK is paying will be shared with the location for their efforts. We don’t want to specify the exact amount because it will be fluid, but we want it in the agreement so the gaming board can see that we are operating as a pass through for the commissions.”

From an email sent to DraftKings dated Aug. 27:

“We’d like to use the language of ‘participating partner establishments’ and clarify that we are passing these funds from DK to the PPE. This is essential as we are not allowed to provide compensation to the partner from our funds as it could violate the IGB inducement rules.”

In a third email dated Aug. 28 circulated internally among executives at Accel, the chief commercial 0perator explained a strategy to leverage the agreement with DraftKings at the company’s competitors’ locations, looking to take advantage of Illinois Gov. JB Pritzker’s use of Executive Order 2020-41. The order suspended the in-person provision required to obtain access for mobile sports betting as part of the Sports Wagering Act that legalized sports betting in 2019.

“We’ll pay the location $100 for every new player sign up we track back to the location. … After the executive order expires, we’ll only provide access to the DraftKings relationships to partners of Accel. … Ideally this could serve as an opening for us to have the longer term conversation with the location to convert them to Accel.”

The IGB, acting on “information and belief,” noted Accel made 211 payments totaling more than $21,000 in relation to the agreement as of Dec. 1. The board reached out to Accel “on or about” Dec. 11 regarding the company’s conduct in relation to the agreement, which was mutually terminated by Accel and DraftKings on Dec. 16.

Where it runs afoul of laws and rules

The IGB alleges Accel’s arrangement violated Section 25(c) of the Video Gaming Act and Board Rule 250(l). The former “prohibits a terminal operator from giving anything of value to an establishment as an incentive or inducement to locate VGTs in that establishment” and makes it a Class 4 felony that could result in a termination of Accel’s license.

Board Rule 250(l) states that licensed terminal operators may “(o)ffer or provide nothing of value to any licensed video gaming location or any agent or representative of any licensed video gaming location as an incentive or inducement to locate, keep, or maintain video gaming terminals at the licensed video gaming location(.)”

According to the complaint, Accel Entertainment has 21 days from the date of the service of the complaint that fully complies with the board’s rules. If those conditions are met, a hearing officer will be appointed to conduct a hearing.