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Pending a signature from Gov. Rick Snyder, Michigan will become the fifth state to legalize online gambling.
As the clock ticked down on its 2018 legislative session, the Michigan Senate passed a flurry of gambling bills. Among the bills were an amended version of H 4926, a bill passed by the House earlier this year that legalizes Michigan online poker, casino games and ostensibly sports betting. The final vote tally in the Senate was 33-5.
The amended bill returned to the House and received a final vote of concurrence in the wee hours of the morning. It passed the House by a vote of 71-35.
Prior to passage, the Senate amended the bill in three substantial ways.
At least two amendments were aimed at finding a compromise between tribal and commercial casinos in the state.
As initially written, H 4926 required tribes to amend their compacts with the state — typically a long, drawn-out process. In the new version, tribes would be licensed through the Michigan Gaming Control Board as commercial MI online casino operators.
As commercial operators, there’s no longer a need to amend tribal compacts (although the language in the bill seems to allow tribes to go down that route if they want to), and the bill expressly says it has no impact on existing compacts.
This act only regulates internet gaming as provided in this act and does not extend to the division, or any other agency of this state, any jurisdiction or regulatory authority over any aspect of any gaming operations of an Indian tribe described in section 4(4)(b) beyond those rights granted to this state under the compact with the Indian tribe.
Missing from the new bill is Sec. 16, a piece of the original legislation believed to be a major sticking point for tribes.
Sec. 16 in the original version of H 4926 said that if federal law prevented the tribes from offering online gaming to people outside their reservations, the commercial casinos could continue to operate.
A third amendment that set a 15-month moratorium on the launch of online gambling websites may have also been added to appease tribes.
The 15-month hold sets up a New Jersey-style synchronized launch, easing tribal concerns that commercial casinos would beat them to market.
Another significant change was the addition of a 1.25 percent tax (on top of the 8 percent tax) on the three commercial casinos in the Detroit area.
“In addition to payment of the tax and other fees as provided in this act, and to any payment required pursuant to an existing development agreement described in subsection (3), if a city has imposed a municipal services fee equal to 1.25% on a casino licensee, the city shall charge a 1.25% fee on the gross gaming revenues of an internet gaming operator that holds a casino license under the Michigan gaming control and revenue act,”
Tribal casinos are not required to pay this additional 1.25 percent tax.
The bill legalizes online poker and casino games (and possibly sports betting down the road) to anyone 21 years of age or older and located within the state of Michigan.
With low licensing fees and tax rates, it’s fair to call this is an industry-friendly bill.
Other tidbits include:
Detroit lawmakers were also able to deliver significant portions of the eight percent internet gaming tax to their constituents.
The tax revenue generated through online gaming will be allocated as follows:
The bill also states:
Interestingly, legal concerns appear to have caused the legislature to pass a second online gambling/sports betting bill.
The existence of this parallel legislation was first spotted by Chris Krafcik, of Eilers & Krejcik Gaming, who called it CYA bill (you can Google that acronym if you need to) in case the main bill is struck down in court.
CSIG has all but promised to challenge the legislation.
When Michigan launches (likely sometime in H1 of 2020) roughly ten percent of the US population will have access to legal online poker.
That could create multiple tipping points.
First, online gambling is now legal in five states, including three with significant populations. That will force other states (particularly bordering states) to take notice.
It will also be a boon for legal online poker in the US. Online poker is an industry that is currently struggling with liquidity issues.
If Pennsylvania and Michigan join the existing Multi-State Internet Gaming Association, the five states will create a player pool of 36 million people, nearly the size to California. The current pool of players from New Jersey, Nevada and Delaware are just 13 million.
Finally, with Michigan on board, ongoing federal efforts to prohibit online gambling will face an even tougher climb.
In addition to the 10 percent of the country that will have access to legal online gambling, 11 states offer online lottery products, and the number of online sports betting states is set to explode in 2019.
These states will not appreciate the federal government’s attempts (largely believed to be at the behest of a single person) to undermine their gaming industries and cut off much-needed revenue streams.