By Katherine Sayre and Theo Francis

When Bally's Corp. won a bid to build a $1.7 billion casino on Chicago's riverfront, the gambling company pledged to give women and people of color an opportunity to own a 25% stake in the project.

City leaders said they wanted Bally's to build wealth in Chicago -- among other hiring and construction requirements -- in exchange for the rare opportunity to build the first Las Vegas-style casino there.

Now, that financing plan is challenged by a lawsuit from Edward Blum, the conservative activist behind the lawsuit that ended affirmative action in college admissions. Blum for years has fought to remove racial preferences from college admissions, corporate boards, internships and other aspects of American business and life.

The casino lawsuit argues that Bally's equity offering is discriminatory to white men in violation of federal civil rights law and seeks to broaden the investment opportunity to "anyone, regardless of race." The challenge is representative of a broader rollback of diversity, equity and inclusion programs in America's offices and schools that was bolstered by an executive order President Trump issued this month ending such programs across the federal government.

The lawsuit was filed Wednesday by Blum's American Alliance for Equal Rights and two white men who said they weren't allowed to invest in the project. The suit names Bally's Chicago, the city of Chicago and members of the Illinois Gaming Board.

The lawsuit invokes a provision of an 1866 civil-rights law originally passed to protect the contracting rights of previously enslaved Black Americans. The same provision is cited in other lawsuits challenging corporate and government diversity initiatives.

Bally's, the Chicago mayor's office and the Illinois Gaming Board didn't immediately respond to requests for comment.

In 2022, then-Mayor Lori Lightfoot chose Bally's from a field of contenders vying for a casino license in the city. As part of the agreement with the city, Bally's pledged to provide investment opportunities in the project to women and minorities.

The public offering includes four classes of investments priced as low as $250 and up to $25,000. The offering is limited to minorities and women, and the shares cannot be later sold to white men, according to the lawsuit.

The development plans include a casino, a 500-room hotel, a theater, restaurants and a public park. Bally's, which owns 15 casinos across 10 states, expects the Chicago casino to open in September 2026.

Blum, a financial adviser, has spearheaded legal challenges to race-conscious policies including toppling affirmative action on college campuses. In June 2023, the Supreme Court found it unconstitutional to consider race in university admissions in a pair of cases brought by Blum's organization Students for Fair Admissions.

He has also organized lawsuits against a scholarship, an internship program, business development grants and law firms' diversity programs.

Last year, Fearless Fund, which invests in underresourced entrepreneurs, closed a grant program for Black female entrepreneurs in a legal settlement with Blum's organization, which sued claiming the program violated an antidiscrimination statute. The Smithsonian Institution also settled with Blum's group by agreeing to open an internship to candidates of all races, after previously stating the internship was for Latino applicants, according to the American Alliance for Equal Rights website.

Blum's group is represented by Wisconsin Institute for Law and Liberty, which won a case challenging the federal Minority Business Development Agency.

Write to Katherine Sayre at katherine.sayre@wsj.com and Theo Francis at theo.francis@wsj.com

(END) Dow Jones Newswires

January 30, 2025 12:48 ET (17:48 GMT)

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