Slots might end up being a sacrificial lamb in Michigan, slaughtered for the greater good of a controversial online gambling bill.
Speaking to Online Poker Report at the National Council of Legislators from Gaming States summer meeting, Rep. Brandt Iden indicated that Gov. Gretchen Whitmer refuses to compromise on MI online gambling. Whitmer’s Treasury Department recently published an analysis recommending increased taxes and the elimination of online slots from the package.
Now the administration seems to be dodging the sponsor’s calls entirely.
“I’d love to have a direct conversation with her about this,” Iden said. “She refuses to engage with me directly. I’ve been talking to her staff. I welcome the opportunity, for the record, to sit down with the governor any time and talk about this issue.”
At a Ways and Means Committee hearing in May, representatives of the administration made it clear that Whitmer would veto the bill as it stood. The governor is concerned that moderate taxes and fees on internet gambling would cannibalize revenue from both brick-and-mortar casinos and the state lottery.
Iden was prepared to compromise in June, willing to raise the tax rate and allocate a larger share to the School Aid Fund. He even told OPR of a planned hearing in his committee to advance the amended package.
Then came the Treasury’s analysis. Its proposal includes tiered licensing fees of up to $1 million and tax rates topping out at 40%. The gap between the state’s demands and Iden’s vision is a vast chasm.
“When you propose something like a 40% tax rate, it just clearly shows that you have no knowledge of what’s happening in the industry,” Iden said.
He said he would be willing to further raise the taxes into double digits and dedicate all iGaming revenue to education if that creates enough compromise. It’s not clear if the governor will get on board with slots, however, which represent the majority of online gambling revenue in established markets like New Jersey.
The Treasury is worried that online slots are too similar to — and will therefore cannibalize the sale of — Michigan online lottery scratch-off tickets. It’s an industry worth protecting, in fairness. Lotto revenue reached $941.3 million in the last fiscal year, with 100% of proceeds used to fund education.
Iden refutes the concerns over cannibalization, but he’s also prepared for the possibility that the governor won’t budge.
“If the Treasury really has a problem with slots, there may be an opportunity to move forward with other games,” Iden conceded. “I think that remains to be seen.”
While online poker and table games could stand on their own, excluding slots would remove about three quarters of the total revenue potential in Michigan.
After listening to panels on the lottery, gaming expansion, and emerging markets, Iden asserted that industry experts broadly validate his arguments. All evidence indicates that online gambling is an additive — not cannibalistic — source of gaming revenue.
“One of the things I continue to ask is for the administration to better educate themselves on the issue,” Iden said. “The fact that the governor’s office is ignoring the experts and simply listening to Treasury, who is not an expert in this issue and has very little knowledge, is problematic.”
Iden points to NJ online gambling for proof of the positive impact. While New Jersey doesn’t have an online lottery, retail revenue continues to reach all-time highs despite growing competition from online casinos (including online slots) over the past six years. And land-based casino revenue is on the rise too.
Here’s more from Iden:
“Michigan’s Treasury ignores what’s happening in New Jersey. And to me, it’s sort of ridiculous that the Treasury won’t focus on the state that’s been doing this the longest successfully and is bringing in revenue month after month.”
House and Senate Republicans are currently embroiled in a larger standoff with the Democratic Whitmer over her budget and infrastructure funding. And the animosity could affect online gambling if it lingers throughout the session.
Iden has long seen iGaming as a bipartisan issue. His 2018 bill passed with support from both parties before running into a surprise veto from the outgoing Republican governor. The sponsor understands that Democratic support might be tenuous this year if their leader openly intends to reject the bill.
“We have the votes now,” Iden said. “What I get a little nervous about is putting this up for a vote without the governor’s blessing. The Democrats may not support it. They’re with us now, but they may not be if it goes up for a vote and the governor wants to play politics on this issue.”
Iden relies on the minority vice chair in Ways and Means, Rep. Rebekah Warren, to act as a go-between with the governor’s office. He also has a Democratic sponsor on the Senate side in Sen. Curtis Hertel Jr.
“Rebekah’s very supportive of this issue, very close to the governor, and she’s been trying to help spearhead the conversation with the Democrats,” Iden said.
The plan is to turn the administration’s attention back to iGaming in the fall, once the budget issues settle out. Until then, Iden will continue to push the governor to have a dialogue on the issue.
“There’s a lot of money here on the table that it’s disappointing the governor is walking away from,” he said. “Maybe she thinks that schools are funded fine at the moment. I’m looking for more money for schools.”