SB 889 creates a Lawful Internet Gaming Act which will allow state to offer regulated online poker and casino games. SB 890 is a one-clause bill amending the Michigan penal code to make an exemption for gambling authorized under SB 889.
Mike Kowall is the senate majority floor leader. Tory Rocca, who chairs the Regulatory Reform Committee, is also a Republican.
Kowall’s bill contains several elements which indicate that lessons have been learned from the experience of gambling regulators.
Although the up front licensing fee of $5 million will deter any small companies from entering the market, the larger operators will find this no barrier to the commercial viability of the market.
Michigan’s population is almost the same as New Jersey, although income per capita is considerably lower.
Michigan can expect gaming revenues perhaps 20 percent lower than New Jersey as the result of these demographics, but SB 889 proposes a substantially lower tax rate of 10 percent. The rate in New Jersey is 15 percent plus a 2.5 percent contribution to a redevelopment fund.
Licenses will be restricted to tribal casinos and Michigan commercial casinos already in possession of a license. A maximum of eight licenses will be issued.
Given the market size, eight seems to be a sufficient for the likely demand.
One option the bill has left open is for licensees to attract online players from anywhere in the world where local laws legally allow.
This is more likely to facilitate compacts with other states that have enacted online gaming legislation, but does hold open the possibility that online poker liquidity will be less restricted than is currently the case in U.S. states.
Experience in New Jersey has shown that casino game revenues make up the bulk of both operator income and gaming taxes, so sensibly, the bill allows casino games.
One of the themes present in international gaming regulation is that unless the regulated system offers a full range of games, players will remain exposed to black market operators. This is an issue which has been low on the discussion agenda in California and New York, where proposals have only referred to legalizing online poker.
Michigan is also looking at legislation to regulate daily fantasy sports, and the state already offers online lottery sales.
There is much to be optimistic about in the progress of Kowall’s bills, and there is even academic support from Michigan State University (MSU).
Last June, the university produced the first academic research report on the impact of the Unlawful Internet Gambling Enforcement Act of 2006.
“The online gambling industry is at the point where it wants controlled regulation,” said Mark Johnson, MSU finance professor and study co-author. “We conclude that both the industry and individuals – including underage and problem gamblers – would be better off if regulation exists.”
On the other hand, the Michigan Gaming Control Board (MGCB) has not shown much flexibility in dealing with the issue of charity poker tournaments.
It imposed severe restrictions on charity events which led to many charities complaining that they would lose valuable income, as the events would become unprofitable under the new rules.
At least Michigan does not have a gambling lobby quite as fractured as that in California.
The restriction of licenses to tribal and state licensed casinos is unlikely to be a stumbling block. Nevertheless, there is a considerable distance to go before Michigan is likely to join the short list of states which permit U.S. online poker and casinos.