Michigan is the latest state with legal online gambling, as a full package of bills officially became law just as 2019 was drawing to a close.
A similar bill made it through the legislature in 2018, but ended in disappointment. Former governor Rick Sndyer vetoed that year’s bill at the last moment, as one of his last acts in office. Gov. Gretchen Whitmer did not spoil the holiday party in 2019. She signed the bills into law on Dec. 20, so online gambling is now officially a done deal.
In addition to online poker, the Michigan package legalizes online casino, daily fantasy sports, and sports betting.
The success of the Michigan online lottery may have been a factor in the state's decision to pursue other forms of online gambling.
The Michigan Gaming Control Board estimates the rule-making process for online poker, casino gambling, and sports betting will take about a year.
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Legal online poker is coming to Michigan! Gov. Whitmer has signed a package of gambling bills, including online casino gaming and sports betting.
After failed attempts to regulate online casinos in 2016 and 2017, the issue was back on Michigan’s radar in 2018.
The legislature faced numerous hurdles in crafting a bill that merged state law governing commercial casinos in Detroit with components of existing tribal casino regulations. Over the start of the year, Rep. Brandt Iden had been working with stakeholders to craft a bill that would appease everyone. That bill was H 4926.
Iden’s work was the continuation of that bill from 2017, when he brought the state’s commercial casinos on board. Tribal gaming interests have remained a tougher sell. Late in 2017, the bill moved out of committee and to the House floor, where it had been dormant for months.
All hurdles appeared to have been cleared with passage of a bill late in 2018, but then-Governor Rick Snyder exercised his veto powers to kill the bill just before leaving office.
Michigan first threw its hat into the online gambling arena in April 2016, when State Sen. Mike Kowall introduced SB 889. The bill, titled “The Lawful Internet Gaming Act” would have regulated both online poker and casino games within state lines.
The core arguments for passage, as stated in the bill, were to create new revenue streams for the state and to offer consumers and the state protection from offshore gambling sites.
SB 889 moved through the legislative process at a rapid clip. In May, the Michigan Senate Regulatory Reform Committee held an information hearing, where it was revealed that SB 889 had been three years in the making.
Optimism rose in June when the bill sailed through a Senate Regulatory Reform Committee vote 8-1. Unfortunately, that would prove the apex of the 2016 effort, as the ensuing months were marked by inaction.
There were rumblings that the legislation would tackle online gambling upon reconvening in November, but with a limited number of session days left the prospect of the Senate passing what was ultimately a nascent and flawed bill seemed bleak.
This despite, assurances from Kowall that there was “plenty of time” in 2016 for SB 889 to push through the various legislative chambers.
In the end, the bill was never brought up for a full Senate vote.
Under the version of H 4311 which ultimately passed, license holders have to pay a $50,000 application fee, followed by $100,000 licensing fee at the time the license is issued. The cost to renew is $50,000 annually thereafter.
License applicants are limited to the state’s commercial casinos and federally recognized tribes which presently operate a Class III casino operation in Michigan. There is no hard cap on the number of licenses, however. With three commercial and 25 tribal casinos, it’s likely that many licenses will eventually be issued. Thus, the upfront revenues for the state should be significant, probably to the tune of two or three million depending on how many tribal casinos apply.
As far as recurring tax revenue from gross gaming revenue, the best means of predicting this figure to turn to the performance of the NJ online gambling industry.
New Jersey makes a convenient comparison, as it’s a relatively mature market and its population of 8.9 million is almost as large as Michigan’s, at 9.9 million. In 2014, its first year, NJ online gambling generated $122.9 million, spiking to $196.7 million by 2016.
Based solely on this, Michigan online gambling operators can expect to gross somewhere in the vicinity of $135 – $140 million in the industry’s first year.
In reality, the number could be much higher. There have been big improvements in geolocation services, payment processing, and marketing efforts since 2014. Accounting for this, Michigan’s first year tally from online gambling could be more in line with what New Jersey generated in its third.
The bill features a tiered tax structure, so estimating tax revenue is a little harder to do. State tax is on a sliding scale, from 8% up to 23%. The three commerical casinos would also be required to pay 3.25% to the city of Detroit. Conversely, tribal operators would get a tax break. Exactly how much tax is generated depends on how revenues are distributed between the various operators, but it’s unlikely to be less than $15 million annually and could easily be twice that.
Michigan is presently home to three commercial casinos in Detroit (MotorCity Casino, Greektown Casino, and MGM Grand Detroit). The first tribal compacts were signed in 1993, and by the end of 1996, 17 tribal properties had spouted up. Since then, that number has grown to more than two dozen.
In November 1996, a public referendum (Proposal E) to enact the Michigan Gaming Control & Revenue Act was passed by voters. The Act enabled the licensing and development of three commercial properties in Detroit.
The Michigan Gaming Control Board was granted authority to license and regulate the new casinos in Detroit. These opened in 1999 and 2000.
Notably, the launch of the MGM Grand Detroit marked the opening of the first luxury casino resort in a major city outside of Las Vegas. It remains the largest of the three commercial properties in terms of revenue.
On the topic of revenue, Detroit’s commercial casino industry has consistently generated over $1 billion annually since 2001, peaking at $1.424 billion in 2011. Revenue for 2016 was $1.385 billion, representing a year-on-year increase of 0.67 percent.
Unlike Atlantic City, where casino revenue was effectively slashed in half from 2006 – 2016, Detroit’s casino industry has been a rock solid performer. That being said, a 2012 effort to expand commercial casino gambling outside of Detroit proved unpopular, and was never brought to a vote.
Beyond its casinos, Michigan also supports other forms of legalized gambling, including the state lottery, and horse racing.
Furthermore, it one of only a few states to have legalized online lottery sales. Early indicators suggest that the state’s online lotto has been a stunning success.
The state is in need of money, and online gambling would provide a consistent revenue source. Also, competition from surrounding areas threatens the future prosperity of Michigan’s land-based industry. Online gambling expansion is viewed as a way to remain competitive.
Beyond that, lawmakers realize that online gambling is already prevalent in the state, thanks to the presence of black market operations. By legalizing online gambling, the state hopes to curtail black market activity, whilst bringing in substantial tax revenue.
Along the same lines, legal online gambling is seen as a means to provide players with consumer protection benefits that are not offered by offshore sites.
With the passage of Bill 4311, all gambling verticals will be legal, online and off. That includes poker, casino games and slots, sports betting, and daily fantasy sports (DFS). DFS operators were already serving customers from the state. It could take a year or more before operators are ready bring other online products to market. The timeline for retail sports betting is considerably shorter, and casinos may be taking their first bets by March.
Legislation states that only commercial casinos and federally recognized Michigan Indian tribes that presently operate a class III casino in Michigan are eligible for licensure.
Unfortunately, a last minute change to the bill removed permission for the Michigan Gaming Control Board to enter into interstate partnerships. The implications of this aren’t entirely clear. The change wasn’t made for the purpose of thwarting interstate poker. Nonetheless, a side effect of the change may be to impede that possibility.
Quite likely you will have to be physically present in the state in order to play. That is the way it works in other states with legal online poker at the moment. There’s no reason to believe it will be different in Michigan.
Michigan has three commercial casinos and many tribal casinos offering a standard array of slots and games. Michigan also has legal horse racing, a state lottery, online lottery sales and daily fantasy sports. Retail sports betting should be available in a matter of months.