Accel Entertainment Slapped with $5 Million Illinois Fine Stemming from DraftKings Deal

Posted on: December 22, 2020, 01:51h. 

Last updated on: December 22, 2020, 02:06h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

The Illinois Gaming Board (IGB) is penalizing video gaming terminal (VGT) distributor Accel Entertainment (NYSE:ACEL) to the tune of $5 million. The penalty relates to an agreement the company inked with DraftKings (NASDAQ:DKNG) in September.

Accel IGB
A video gambling parlor in Illinois. The gaming board there is seeking a $5 million fine from Accel. (Image: Chicago Tribune)

Under the terms of that accord, Accel’s more than 2,300 VGTs across the Land of Lincoln feature DraftKings content, including advertisements, betting lines, and avenues for signing up for the sportsbook operator’s mobile app. The sports betting company is live and legal in the Prairie State.

The IGB contends that deal was reached so Accel could monetarily motivate business owners to feature the company’s machines in their establishments. Under the Illinois Gaming Act, payola to earn or keep VGT business is forbidden.

On or about September 1, 2020 and based on information and belief, Accel sent an email to the more than 2,300 licensed video gaming establishments in Illinois that operated Accel VGTs on their premises at that time to announce the program with DraftKings,” according to the IGB complaint. “Included within the email was a section titled “Incentives for Your Establishment,” which specifically described how video gaming establishments would receive payments from Accel.”

Accel clients include restaurants, bars, taverns, convenience stores, liquor stores, truck stops, and grocery stores. As part of the accord with DraftKings, the sports betting entity would give Accel $200 for each new client it sent to the sportsbook operator.

Accel Plans to Fight the Fines

Shares of Accel are higher by 7.10 percent over the past week, including a 4.19 percent gain today. That perhaps indicates Wall Street isn’t overly concerned about a $5 million fine against a company with a market capitalization of $970.80 million.

However, the Burr Ridge, Ill.-based company isn’t going to simply lick its wounds and cut a check to IGB. Donna More, counsel for the VGT distributor, says Accel disagrees with the IGB decision and plans to “vigorously defend itself.”

The fight could potentially prove contentious, because the regulator obtained copies of emails among Accel executives discussing how the company would share incentive cash received as part of the DraftKings agreement with business owners.

“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,” according to an Aug. 21 email sent by Accel’s chief marketing officer to other executives. “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.”

That message is one of several highlighted in the IGB complaint.

Long Road Ahead for IGB

IGB says Accel violated Section 25(c) of the Video Gaming Act, which qualifies as a Class 4 felony. The agency also notes that as of Dec. 1, the VGT provider made 211 payments worth a combined $21,000 to business owners under the DraftKings deal.

However, getting to the point that Accel is paying a $5 million levy could prove lengthy and difficult.

The regulator has previously filed disciplinary actions against other VGT entities, with the cases inevitably being fought and tied-up in courts for long periods of times.

Because of an expansive VGT industry, Illinois has more places to gamble than any other state, including Nevada.