August 20, 2026
Video Gaming in Chicago: Where Things Stand
The 2026 Chicago City budget authorized video gaming within the City of Chicago (Chicago or the ‘City’) and relied on the projected revenue from licensing fees to help balance the alternative budget ultimately passed into law in December 2025 by the City Council without the signature of the Mayor. Since passage, the video gaming revenue has been the subject of recurring debate and controversy between the Mayor, the City Council, Bally’s, and others. However, that debate has occurred without full public-facing information and analysis needed to make informed policy decisions. This report breaks down what video gaming is, how it became legalized in Chicago last year, how the political debate played out, and what is needed from a public and fiscal policy perspective at this fragile moment as the City approaches an already complicated FY2027 budget season.
What is Video Gaming?
Video Gaming Terminals (VGTs) are devices similar to the slot machines commonly found in casinos but can be placed in non-casino establishments. VGTs allow users to play multiple electronic games that simulate casino games such as video poker, slots, and other games of chance. Players insert cash, and winnings are paid out in cash through a ticket-based redemption system.
Unlike casino slot machines, VGTs are designed to be installed independently in a diverse range of non-casino establishments, such as bars and truck stops. Since casinos typically have hundreds of machines, their machines host only one type of game. In contrast, licensed gaming establishments have only a handful of VGTs - often just one or two, but six at most - so VGTs are designed to host multiple different kinds of games on the same physical platform. In essence, VGTs make slot machine gambling more accessible by allowing businesses to offer it, rather than confining it only to casinos.
The State of Illinois (Illinois or the ‘State’) legalized video gaming in 2009 via Public Act 96-0034. As of 2025, Illinois had more than 49,000 VGTs. By State law, VGTs are legal in municipalities throughout Illinois; however, the law allows individual municipalities to ban VGTs within their borders. Until recently, Chicago had prohibited the machines, but VGTs were legalized as part of the City’s FY2026 budget.
Video gaming tax and fee revenue were among the new revenue sources tapped by a group of alderpeople who crafted an alternative to the Mayor’s budget proposal. Projected revenue from introducing VGTs in Chicago - estimated in the first year to be derived primarily from application and licensing fees - was used to balance the Council’s budget. However, VGT legalization constituted only a small portion of the budget solution, with a projected net revenue of only $6.8 million in the final budget ordinance.
How does Video Gaming Generate Revenue?
Video gaming terminals generate revenue for local governments in two main ways. First, VGTs are taxed on every dollar of their net terminal income - the total income of the machine, i.e., money paid in by patrons less its payouts. The total state tax rate for VGTs is 35% of net income. Of that amount, only 5% of net income is remitted to the municipality or county where the terminal operates. The remaining 30% goes to the State. A small portion of the state allocation (0.85%) funds the Illinois Gaming Board (IGB), while the remaining 29.15% is deposited in the State’s Capital Projects Fund, where it supports infrastructure costs. In 2024, net taxable income from VGTs across the state was approximately $3 billion. This resulted in $884 million in State revenue and $152 million in local revenue.
In addition to taxes based on a terminal’s net income, counties and municipalities have the ability to charge annual fees on VGTs. Non-home rule governments may not charge above $250 per machine, but home rule governments, which have more authority and flexibility to raise taxes, have no cap. Both Chicago and Cook County are home rule units of government. Cook County, for example, charges a $500 application fee and an annual $1,000 per-machine fee for establishments in unincorporated areas using VGTs. Chicago now charges the same fees within its boundaries.
The Debate Around Video Gambling in Chicago
Legalizing video gaming in Chicago was already a contested issue before emerging as a question during the FY2026 budget process. Arguments centered around the fiscal implications of legalization and whether or not VGTs would serve as a reliable revenue source.
From October to December 2025, City Council battled over VGT legalization. The Mayor and his aligned Council alders opposed legalizing VGTs on the basis that it could undermine the City’s strategy to generate revenue from Bally’s casino, which is currently operating from a temporary location while a much larger permanent casino and resort is under construction. Proponents argued that the revenue from fees and taxes would outweigh any reduction in casino-based revenue.
In the final budget package, the Council passed an ordinance legalizing VGTs, but with a net revenue estimate of $6.8 million based principally on licensing fees in the first year, rather than actual gaming revenue, which was projected to rise in future years. But after passage, the Mayor’s Office was slow to implement the law, prompting the Council to notify the Illinois Gaming Board directly that VGTs were legal in Chicago. The ensuing debate has, on both sides, focused on the immediate implications for the 2026 budget, rather than the social costs of gambling and the revenue implications for future years.
Sweepstakes Machines
One factor complicating the rollout of VGTs in Chicago is the City’s existing population of sweepstakes machines. VGTs are different from the more than 7,000 sweepstakes machines operating in establishments across Chicago, including bars, restaurants, and gas stations. Sweepstakes machines offer games and rewards in a similar fashion to VGTs but evade statutory and regulatory restrictions by providing non-monetary coupons and prizes rather than cash rewards. As a result, sweepstakes machines are not licensed or taxed; neither the City nor the State gain any revenue from sweepstakes machine usage.
Sweepstakes machines operate in a legal grey area. They use a legal loophole to avoid being classified as gambling machines, even though they mimic the function of VGTs. This means that unlike VGTs, they are not banned by default across Illinois. The exact legal status of sweepstakes machines is an open question, but they are operating across many municipalities in Illinois, including Chicago, and attempts to close the legal loophole at the state level have thus far been unsuccessful. Many municipalities throughout Illinois that have not chosen to legalize VGTs have also banned sweepstakes machines, but Chicago has never taken this step, despite maintaining a ban on VGTs until just last year.
Sweepstakes machines are natural competitors with VGTs, as they offer similar gambling experiences yet do not generate any tax revenue for the City. As a result, proponents of legalizing VGTs pushed this past summer to pass a ban on sweepstakes machines throughout the City. This motion failed 15-33, leaving the fate of sweepstakes machines in a continuing limbo within Chicago.
The Role of Bally’s Casino
The Chicago City Council authorized Bally’s to build Chicago’s first casino in 2022, and construction started in 2023 when Bally’s received its license from the State. While construction continues on the main casino project, Bally’s has operated a temporary casino in the Medinah Temple building. Since 2023, the City has received tax revenue from the temporary casino's operations, all of which is dedicated to Chicago’s underfunded pensions. Revenue from the temporary casino has consistently underperformed expectations, but it is projected to increase significantly when the permanent casino opens in early 2027.
The agreement governing the opening of the new casino included a host community agreement (HCA) between Bally’s and the City of Chicago. One clause of that agreement requires the casino to pay an annual $4 million fee to the City. That fee is contingent on Chicago not authorizing new forms of gambling that could offer competition to Bally’s, including VGTs. This is because competition from legalized VGTs could have a negative impact on Bally’s slot machine revenue. Bally’s has made clear that it intends to withhold the 2026 fee in September due to the legalization of VGTs.
In early August 2026, Bally’s announced it was pausing construction on the non-casino amenities that it contractually committed to construct as part of its overall development plan and agreement with the City. These amenities include a hotel, events center, and restaurants in a larger entertainment complex featuring the casino. Bally’s cited the City’s violation of the HCA as justification for the construction slowdown, even though only the $4 million annual fee is contingent on the VGT restrictions. The City Council has since demanded that Bally’s restart construction. Several days after the construction pause, Bally’s issued a going concern warning relating to liquidity challenges, indicating substantial doubt that the business will be able to survive the coming year and pay its debts.
Social Implications
The decision to legalize VGTs follows a common pattern in Illinois. Policymakers often legislate and tax activities based on the revenue gained for government, without accounting for the social costs imposed on their constituents.
There is extensive literature suggesting adverse societal consequences from many forms of legalized gambling, some of which may also require increased government expenditures to mitigate. By legalizing VGTs throughout the City, Chicago will significantly broaden access to gambling, lowering barriers to entry and making frequent gambling more convenient for gamblers across Chicago. Additionally, gambling taxes, such as those levied on both VGTs and casino gambling, tend to be regressive and often have a concentrated impact on vulnerable and low-income populations.
The social impact critique applies equally to VGTs and sweepstakes machines. However, the Council has refused to ban sweepstakes machines even after legalizing VGTs, which will compete with them. Although VGTs will likely carry negative social impacts associated with the expansion of access to gambling across Chicago, it is unclear whether those impacts will be new or will simply substitute for the negative impacts already generated by sweepstakes machines.
Fiscal Implications
The 2025 debate in City Council mainly centered around the fiscal impacts of legalizing VGTs. Some opponents of video gambling have warned that it may further tamp down revenue projections in a regional gambling market that has become significantly saturated since Bally’s was selected in 2022 to build and operate the City’s first casino. At first this may seem counterintuitive: taxing VGTs should raise revenue directly for the City. But Chicago also levies taxes on other types of gambling—most importantly on gambling done at Bally’s casino. VGTs and casino slot machines are substitute goods, meaning that someone who previously gambled at casino slot machines might instead choose to use VGTs at other establishments. This could lead to some of Bally’s revenue being ‘cannibalized’ by the newly legalized VGTs.
The Mayor’s Office and Bally’s have also argued that legalizing VGTs could cause the City to lose money because casino and VGT revenues are taxed differently. While VGT owners pay 35% of net income in taxes, the Chicago casino pays a graduated tax based on the gross revenue of its slot machines ranging from 22.5% to 74%. (Similar to net terminal income, gross revenue is the total amount wagered at slot machines less the payouts of those machines.) As with VGTs, this revenue is split between the City of Chicago and the State. However, even at its lowest end, the breakdown of the casino tax is more favorable to the City, which gets a minimum of 10.5% of slot machines’ revenue, compared to just 5% from VGTs. As a result, the City could see a net loss in revenue, since each dollar shifted away from the casino towards VGTs generates less revenue for the City.
Studies of casino revenue in other parts of Illinois have shown that the introduction of VGTs does lessen casino gambling, but not at a one-to-one ratio. When VGTs are introduced, a locality sees more gambling overall. Some of the money spent at VGTs is cannibalized from casinos, while some is altogether new. The rate of new gambling and the scale of cannibalization are what determine whether or not the legalization of VGTs is profitable, and by how much.
The question of what the balance between new gambling and casino cannibalization will be for Chicago has been evaluated but not made generally available. In 2025, the City contracted Christiansen Capital Advisors to study the implications of legalizing VGTs. The resulting report analyzed the revenue VGTs would bring in taxes over a ten-year period, as well as potential offsets from revenue losses at Bally’s. It found that City revenue from taxes on VGTs would likely just barely exceed the revenue lost from Bally’s and the cancellation of the $4 million annual payment. The report projected that the increase in net gambling revenue would never exceed $10 million and, in some years, would drop overall, though only slightly. Additionally, the report may have slightly underestimated net VGT revenue, as it did not include revenue that the City would receive from licensing fees. Although the fiscal impact of legalizing VGTs in Chicago will most likely be positive for the City, a revenue loss is still possible if the terminals underperform expectations. Either way, the impact will likely be quite small.
The Christiansen report was finalized in July of 2025. However, not made public, nor was it provided to the City Council. Thus, when the Council wanted to consider legalizing VGTs to close the budget deficit, alders had to estimate VGT revenue without access to the comprehensive research that had already been done on the topic, while the Mayor’s Office was able to selectively choose evidence from the report that favored their position.
Much of the political controversy around the legalization of VGTs stems from the conflicting revenue estimates provided by both sides. This situation is directly caused by the fact that the data and analysis to understand the revenue proposal were withheld from the City Council and were never subjected to public scrutiny. As the Council is not equipped to act as a co-equal branch of government to the Mayor, it was neither able to compel the release of information controlled by the Mayor’s Office pertaining to VGT revenue, nor able to order its own independent analysis from Council budget office or from a professional, independently chaired finance committee. The Council does have the power to change this dynamic; it could introduce rules requiring the executive branch to provide information upon Council request. However, despite multiple disputes over information sharing in the 2026 budget process, the Council has yet to make this reform.
Where Things Go From Here
With video gambling legalized in Chicago and the Illinois Gaming Board formally notified of the change, eligible establishments can now apply for licenses. Once received, they can pay local fees, install VGTs, and start to accrue revenue, some of which will be remitted to the City as tax dollars. But eight months into Chicago’s fiscal year, hundreds of applications remain unprocessed by the IGB. This may be because the Mayor’s Office has indicated it will not issue city licenses, essentially refusing to execute the budget ordinance passed by the City Council.
It is increasingly unlikely that Chicago will see any of the projected $6.8 million in net revenue from VGTs in 2026. As discussed, several troubling factors contribute to this:
- The Mayor’s continuing refusal to execute the VGT provisions of the budget as passed by the Council;
- The City Council's inaction regarding sweepstakes machines;
- The IGB’s delays in both moving hundreds of applications for legalized VGTs and offering any guidance on the legality of sweepstakes machines; and
- Bally’s stated intention to withhold the 2026 community benefit fee.
With eight months of the 2026 fiscal year behind us, the Council’s concern should be less the marginal consequences of VGTs on the current year budget, and more the consequences for the rapidly approaching FY2027 budget cycle. Given the expectations of a large budget deficit for FY2027, the question of whether VGTs are a meaningful net revenue benefit for the City needs responsible, fact-based public-facing resolution. The Christiansen report should be made public and its analysis vetted and debated in the Council. Additional public analysis should include not just the VGT-casino dynamics, but also the VGT-sweepstakes machine dynamics and both revenue and social externalities.
The Mayor and the City Council should aim to come out of the FY2027 budget season with a clear understanding of which types of gambling are legal and illegal in Chicago, as well as publicly available and agreed-upon revenue estimates for City gambling taxes. That means understanding the fate of Bally’s, the future of VGTs, and the legality of sweepstakes machines. Clear and transparent analysis of these issues will be crucial if Chicago is to pass a balanced and trustworthy budget for 2027.