Stars Aligning For Online Gambling in Michigan

Last year, Michigan’s efforts to push through online poker legislation ground to a halt after a bill (HB 4926) introduced by Rep. Brandt Iden got stuck in the House Regulatory Reform Committee. It appears that the bill has now been given a new lease of life, though, with a number of amendments made in order to garner the support of Native American tribes, including sports betting over the internet.
Commenting upon the present situation in terms of the interests of the state’s Native American gaming interests, Iden told Sports Handle recently:
“Conversations with the tribes have been going on for one-and-a-half years, and I think we’re in a good spot. They are still opposed to the bill, but not as staunchly as they were. … Right now, for me, it’s about educating my peers. And I do believe we are going to reach a middle ground with the tribes.”
Gambling Big Business in Michigan
Gambling represents a significant source of income for Michigan, and in 2017 Detroit’s three commercial casinos (MGM Grand Detroit, MotorCity Casino, Greektown Casino) generated $1.4 billion in revenue, while its 14 tribal casinos contributed a further $1.5 billion that year. The 10.9% tax rate levied on its commercial casinos currently makes up a massive 15%-20% of its general fund revenues, and this fiscal year’s tax revenue estimate is forecast to reach $179 million.
In March, Detroit’s casino market also produced a record $138.6 million in revenue, while the $124 million collected in April was still 2.5% higher compared to a year ago. Last month, MGM Grand Detroit saw its revenue rise by 3.2% to $51.2 million, followed by MotorCity Casino Hotel up 3.7% to $43.7 million, while Greektown Casino-Hotel bucked the positive trend slightly after its revenue fell by 0.5% to $29.1 million.
Possible Impact of the iGaming Legislation
In November 2014, Michigan succeeded in legalizing online lottery sales, which have since contributed tens of millions extra in revenues, with a legalized online gambling market estimated to provide another $300 million per annum.
Michigan has a population of close to 10 million, ranking 10th in the nation. It’s therefore a sizable market for all kinds of online wagering activities, and so the passage of HB 4926 could generate significant income for the state, the tribes, and the commercial casino companies.
It would also have a beneficial effect on the nascent regulated U.S. online poker ecosystem assuming the relevant multi-state accords were signed. The three states that have already entered into a volume sharing arrangement, New Jersey, Nevada and Delaware, have a combined population of around 13 million, and so the addition of Michigan to the pool would increase this by roughly 75 percent.
Because poker is a peer-to-peer game, more active players leads to more games running, which in turn entices more users to join. This network effect makes the total size of the market much larger and more valuable than it would be if each state managed a ring-fenced internet poker economy by itself. The entry of Michigan, and possibly Pennsylvania, into this combination in the near future would seriously enhance its viability and profitability going forward.
Michigan HB 4926
HB 4926 proposes setting up a subordinate branch of the Michigan Gaming Control Board (MGCB) called the Michigan Internet Gaming Division (MIGD), which would be responsible for licensing and supervising all legal online gambling operations in the state. Detroit’s commercial and tribal casinos would then be allowed to secure a 5-year online gaming license for $200,000, with a further $100,000 renewal fee charged each year.
As one might expect, players are required to be 21+ years old in order to gamble, with online operators providing a range of responsible gambling options to their customers, including temporary or permanent self-exclusion, and the ability to set deposit and gambling limits.
Revised Bill
In HB 4926’s recently resurrected version, taxes paid on gross gaming revenue (GGR) would be reduced from 15% to just 8%, while the revised bill contains no “bad actor” clause, meaning sites that flaunted the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), such as PokerStars, will be permitted to apply for an iGaming license.
Attracting a great deal of interest, however, is the inclusion of online legal sports betting, with the addition made in order to profit from a potential positive outcome should New Jersey win its PASPA challenge in the US Supreme Court this summer. The tribes previously showed little appetite for legalizing online gambling in the state, but following the inclusion of sports betting have shown a greater willingness to discuss online regulation. According to Iden, sports betting and iGaming are two measures that are intertwined, and as he explains:
“I see the issues as combined. The bill certainly started out as internet gaming, but as the reality of sports betting became more of an issue, I think it’s really going to become the main issue.”