Something has to change.
July was another month of stagnation for the Detroit casino market, as the city’s three casinos reported gaming revenue of $119 mm, according to figures from the Michigan Gaming Control Board. It was down 0.3% compared to July 2018. Through the first seven months of this year, the casinos have won $854 mm from gamblers, up 0.8% compared to the same period a year prior.
While the Detroit gambling market is squarely within the top 10 of its kind in the country, trailing only Las Vegas, Atlantic City, Chicagoland, Baltimore-Washington D.C., and New York City, the market belonging to the city of Philadelphia is fast approaching. Pennsylvania has legal sports betting and online casino gambling, which Michigan does not.
In 2018, the Detroit casino market was worth $1.44 billion, while Philly’s was $1.3 billion, according to the American Gaming Association.
A plan to authorize both those products for the Detroit casinos, as well as extending the opportunity to tribal casinos sprinkled around the state, is currently being worked on behind the scenes in Lansing. Whether online slots should be allowed in the gambling expansion package, as well as what the tax rate on the new games should be, is currently being negotiated between some legislators and the administration of Gov. Gretchen Whitmer, a Democrat.
Commercial casino taxes
The three Detroit casinos paid $9.64 mm in state gaming taxes during July compared with $9.67 mm paid during July 2018. They also forked over $14.2 mm in wagering taxes and development agreement payments to the city of Detroit during July 2019.
As mentioned, a central component to the online casino debate is the tax rate. The bill in its current form, as well as in the form that cleared the legislature last year and was vetoed by the previous governor, calls for an 8% state tax on online slot, table game, and poker revenues. Whitmer wants it to be significantly higher, under a tiered tax structure.
The argument from the administration is that online casino will siphon revenue away from the state’s iLottery, which contributes more handsomely to the state’s School Aid Fund. It’s a cannibalization argument, which proponents of online casino gaming reject, saying the customer bases aren’t the same.
The state’s online lottery recently turned five years old. The Lottery is a booming enterprise for the state. In FY 2018, the Lottery contributed just under $941.3 mm to the School Aid Fund. The three Detroit casinos paid about $117 mm to the state for public education in 2018.
In 2018, the Michigan iLottery produced $93.7 mm in net win. It has 1.1 mm registered accounts for its 79 online games.
Michigan policymakers are set to soon return from a summer break, and there’s a high-stakes budget deal that needs to be hashed out, per a report from BridgeMi.com, a nonpartisan news outlet covering Wolverine State government. Whitmer, must negotiate on a number of issues with the Republican-controlled legislature.
There’s an Oct. 1 deadline for a budget deal, per the report, setting the stage for a possible government shutdown, which hasn’t happened since 2009, if negotiations head south.
“Political observers expect negotiations on roads funding to take priority over most other issues,” said the report. “There’s plenty to tackle: funding for major state departments and government priorities are on the line, along with individual issues less connected with the budget such as criminal justice reform and government transparency.”
A draft of the Michigan sports betting bill was made public this summer, with the official introduction expected sometime in the coming days or weeks.