A casino and a city that should not be enemies

BALLY'S CHICAGO is not, as far as can be determined, pausing construction on its hotel and amenities. A competing headline suggested otherwise, but the more recent reports show 1,000 workers on the River West site, the 34-storey casino structure topped off in April, and the interior fit-out under way. The project, valued at $1.7 billion, is targeting an opening in early 2027. The truth is less dramatic, but no less instructive. What is happening is a quarrel between a casino and a city that should have been designed to prevent exactly this kind of quarrel.

The dispute centres on video gambling terminals, or VGTs: small, slot-machine-like devices that have long operated in Illinois taverns and convenience stores outside Chicago but were banned inside the city limits. In late 2025, the City Council included VGT legalization in its 2026 budget, a stopgap aimed at a municipal deficit of $1.15 billion. The measure took effect on January 1st. Bally's has responded by threatening to sue the city, void its Host Community Agreement and halt payments it owes under that contract. Chicago has yet to issue local VGT licences, leaving dozens of approved bars and restaurants in limbo. The standoff has not shut down the construction site. It has, however, revealed a flaw in how cities deal with gambling monopolies.

The structure of the original deal is worth examining. In 2022, during the Lori Lightfoot administration, Chicago signed a 214-page Host Community Agreement with Bally's Corporation. The city granted Bally's a monopoly on slot machines within its boundaries. In return, Bally's paid $40 million up front, agreed to $4 million in annual community payments, and committed to creating at least 3,000 permanent jobs, mostly union-represented. A renegotiation clause stated that if the city later allowed VGTs and Bally's demonstrated a negative impact on operations, the annual fees "shall be subject to good-faith renegotiation." The language is deliberate. It anticipates precisely this scenario.

The incentives on both sides are obvious. Chicago is short of money and the city's financial analysis office projects VGT licensing will eventually yield $64 million a year once some 20,000 machines are operational. Bally's, meanwhile, needs exclusivity to make a $1.7-billion bet on downtown Chicago look rational rather than ruinous. Its vice-president of corporate development, Christopher Jewett, told the City Council in June that VGTs in nearby bars and supermarkets could cannibalize up to a third of the casino's slot revenue. Mr Jewett is probably right about the direction, if not the magnitude. VGTs attract what casino operators call "low-end" players, who are price-sensitive and proximity-driven. A machine at the corner gas station is a direct competitor to a floor seat at the casino, not a substitute. Casino operators across the country know this from experience.

The trouble is that the city's arithmetic is wrong, and it should have known it before it voted. The tax rate on casino revenue is 23.2%. The rate on VGT revenue is 5.15%, a fraction of the casino rate. As the Chicago Tribune calculated, the city would need roughly four times as much VGT revenue as casino revenue just to break even on a dollar-for-dollar basis. If Bally's exercises its contractual right to stop the $4 million annual payment — which it has signalled it will — the net effect of VGT legalization starts at minus $4 million, before one considers lower casino tax receipts, fewer permanent jobs or the cost of enforcing a new licensing regime. The city is trading a high-tax monopoly for a low-tax scramble. That is a bad deal in any ledger.

To be sure, VGT advocates have a point about enforcement. Some 7,000 unregulated sweepstakes machines, which sit in a legal grey area created by Chicago's home-rule status, already operate in the city. Alderman Anthony Beale, a supporter of VGTs, has argued that residents already drive to neighbouring suburbs — Oak Lawn recorded 15 VGT-targeted burglaries this year — and that legalization would at least bring revenue and oversight to an existing activity. The argument has surface plausibility. But legalizing a different product to solve the enforcement failures of a loophole is not policy; it is triage.

Bally's bargaining position is stronger than it looks. The company is bleeding money. Bally's reported a quarterly loss of $2.69 per share in the first quarter of 2026, and its revenue has yet to reach the levels the Chicago project was supposed to prop up. The temporary casino at the Medinah Temple, which has operated since September 2023, generated $125 million in adjusted gross receipts last year, below the city's initial budget of $35 million in tax revenue alone. Bally's has been granted a 12-month extension on its temporary licence, pushing the deadline to September 2027. The company cannot afford to lose Chicago. Yet that does not weaken its contractual case. If the city promised exclusivity and then broke it, the market consequence is not that Bally's should quietly absorb the loss.

The mayor finds himself in an awkward position. Brandon Johnson opposed VGT legalization and has asked the City Council to repeal the ordinance. His effort collapsed on 24 June, when a heated committee hearing ended with Alderman Beale adjourning the meeting and refusing to debate the substance. The mayor is caught between a council majority that passed the VGT budget measure and a casino operator that has the law on its side. His instinct to protect the Host Community Agreement is the correct one, even if his political control over the council is thin.

The better path forward is simple. The city should keep its promise, leave VGTs banned and wait to see whether the casino delivers on its commitments. If it does, and the $200 million in annual tax revenue for police and firefighter pensions materializes, there will be no deficit problem worth fixing with gambling expansion. If it does not, the city can renegotiate from a position of strength, with a functioning casino to evaluate, rather than from the weak position it would occupy if VGTs had already fractured the market.

Bally's, for its part, should be wary of a legal threat that amounts to an ultimatum. The company has offered to build slot lounges at O'Hare and Midway airports — a proposal that Alderman Beale dismissed by noting that airport revenue is ring-fenced for airport operations, not general funds. The gesture was probably more political than practical. But it underscores the point: when a company holds a monopoly, every concession looks like leverage, and every lever looks like extortion.

The deeper lesson is institutional. Gambling agreements between cities and casino operators are inherently unstable when they rely on promises not to create competing forms of gambling. Budget deficits are cyclical; contracts are not. Chicago would have been wiser to build in a mechanism that adjusts fees and revenue-sharing as the market evolves, rather than a binary monopoly-or-chaos arrangement that forces both sides into litigation when the politics change. The next city to negotiate a casino deal should learn from this one. That bargain is breaking, and the pieces do not favour either side.