Changes coming to Michigan iGaming bill?

Michigan Treasury To Online Gambling Sponsor: Remove Slots, Raise Taxes

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Michigan Rep. Brandt Iden called Tuesday’s request issued by the governor’s office through the Department of Treasury to remove slots from online gambling legislation while nearly doubling fees and taxes for other games a “non-starter.”

During a committee hearing last month, state officials made it clear that Gov. Gretchen Whitmer did not support the bill due to concerns about cannibalization of state iLottery and brick-and-mortar gambling.

Iden pledged to address that concern by raising the tax rate and allocating a larger percentage of revenue to the School Aid Fund. He planned to introduce changes to H 4311 and H 4307 on Tuesday in the House Ways and Means committee, which he chairs, before bringing them to a vote.

“The intent has been for us to increase the tax rate to allow slots in the conversation,” Iden told Online Poker Report. “Increasing tax rates and removing slots is really a non-starter. It can’t be done. That proposal wasn’t meaningful, in my opinion.”

The governor’s position led Iden to put the bills on hold in his committee. He had hoped to pass the bills through the House and Senate this month but is now looking at July or August.

Going up: Michigan online gambling taxes

Missing upwards of 70% of potential iGaming revenue without slots, tribal and commercial casinos in Michigan would be taxed at a tiered rate based on revenue in the governor’s proposal:

  • Under $2.5 million = 8%
  • $2.5 million to $4 million = 16%
  • $4 million to $8 million = 32%
  • $8 million+ = 40%

The Treasury estimates annual tax revenue would bring $27.8 million to the state, $10.8 million to Detroit, and $600,000 to the School Aid Fund. The estimated average tax rate among casinos in the state would range from 8% to 31.2%.

Iden initially proposed an 8% base tax on revenue, plus another 1.25% local share for commercial casinos.

“The fact they continue to believe money will go away from lottery into iGaming, rather than iGaming bringing in new players, is an epic failure to see what is happening in marketplaces across the country,” Iden said. “That’s why it’s disappointing to see that proposal.”

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Initial license fees also get a tiered structure

While requesting that iGaming does not include slots, the Treasury ironically bases the structure for initial licensing fees for iGaming and sports betting on the total number of slot machines at a given casino in 2018.

  • Up to 1,200 = $350,000
  • 1,201 to 1,999 = $700,000
  • 2,000+ = $1 million

All three commercial casinos and four tribal casinos would be slotted into the highest tier. Annual license renewal would be based on online gaming revenue in the previous year.

  • Up to $2 million $175,000
  • $2 million to $5 million = $350,000
  • $5 million+ $500,000

As introduced, Iden recommended a $200,000 application and a $100,000 annual fee for licensure.

Governor’s position opens Michigan up to a lawsuit?

According to Iden, the Treasury argues that online slots represent the most direct competitor to the Michigan online lottery. At least some casino groups are not happy with the proposal, and Iden warns that there could be repercussions if the state continues down this path.

There is an argument to be made that the iLottery is operating illegally in Michigan, having not received statutory authorization from the legislature. Thus far, stakeholders have tried to work with the state rather than offer a legal challenge, but that could change.

“For the governor to continue trying to have a monopoly on iGaming in the state is going to be a problem,” Iden said. “In my opinion, if we cannot find a landing spot, the state is in a very risky position to potentially have a lawsuit challenging our lottery because we’re not allowing other gaming entities to compete in the marketplace.”

- Matthew began writing about legislative efforts to regulate online poker in 2007 after UIGEA interfered with his hobby of playing small-stakes online poker while working as a sportswriter at the Los Angeles Daily News. Covering the topic for Bluff Magazine, PokerNews and now Online Poker Report, he has interviewed four U.S. Congressmen and 40+ state legislators. His poker writing has been cited by The Atlantic, and Matt also has written on a variety of topics for Playboy Magazine, Men's Journal, Los Angeles magazine, LA Weekly and
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