Michigan Online Gambling Law — Explainer And History

Legal Michigan online casino gambling — including and online/mobile sports betting and peer-to-peer poker — are on the way to the Wolverine State under a gambling expansion package signed into law by Gov. Gretchen Whitmer on Dec. 20, 2019. 

The legislation was the result of a years-long push by iGaming proponents to bring the activity out of the shadows of the unregulated market, which will help Michigan capture additional tax revenue. Consumer protections will also be in place to protect player funds and those with problematic gambling behavior.

What follows is a brief look at the long road toward the legalization of internet gaming in Michigan.

Inside the provisions of HB 4311

The Lawful Internet Gaming Act authorized a wide array of online casino games for the casinos in the state. It was a much-needed shot in the arm for the industry, spelling out the following:

  • Wagering is available to anyone 21 or older within Michigan borders
  • Commercial and tribal casinos can offer online poker, slots, and table games
  • A casino operator can have one “skin”–  or online brand — for online poker and one skin for an online casino

Taxes and fees for operators:

  • A tiered tax structure is created for internet gaming
  • There’s a graduated tax rate of 20% for adjusted gross receipts less than $4 million, up to 28% for AGR greater than $12 million; Detroit casinos also pay 1.25% to the city of Detroit
  • Costs include a $50,000 application fee, $100,000 for a five-year license, and $50,000 to renew
  • For an internet gaming supplier, costs are $5,000 for an application fee, $5,000 for a license, and $2,500 for annual renewal
  • 65% of tax revenue is allocated to a newly created Internet Gaming Fund, with the bulk going to the Michigan School Aid Fund, a major sticking point for the governor; another 30% will go to policing and other public safety programs in the state and the remaining 5% will be used to prop up the horse-racing industry
  • Online casinos can deduct 10% worth of free play from their gross receipts for the first three years, and then 6% in year number four and 4% in the fifth year

Inside the provisions of HB 4916

The Lawful Sports Betting Act technically wasn’t needed in Michigan for brick-and-mortar sportsbooks to exist. However, the Detroit casinos didn’t want to pay a nearly 20% tax on sports wagering revenue, like they do for slots and table games. Hence, they waited for a new law with a lower tax.

The new law also allowed for online/mobile sports betting as another key component. Online betting could not have taken place without the Lawful Sports Betting Act. Among the other provisions:

  • Anyone 21 or older within Michigan borders may set up an online sports betting account
  • Collegiate and professional sports are legal for betting, pending MGCB approval
  • Commercial and tribal casinos can offer online/mobile sports betting under regulation of the Michigan Gaming Control Board, a novel setup and “compromise” in the nascent non-Nevada U.S. market, bringing both federally-recognized tribes and commercial entities together under one regulatory body
  • Both tribal and commercial casinos can open retail (physical) sportsbooks/lounges
  • One sports betting skin is available per casino operator

Taxes and fees on operators:

  • The state tax is 8.4% on sports betting revenue, plus 1.25% to Detroit for the city’s commercial casinos; the more than 20 tribal casinos will not pay the additional 1.25%
  • An Internet Sports Betting Fund is created
  • Costs are $50,000 for an application fee, $100,000 for a one-year license, and $50,000 annually to renew
  • It requires “official league data” for in-game wagers

Michigan online gambling legislative timeline

Michigan started to emerge as a contender for online betting around the time New Jersey threw its hat into the ring, but it took a few years for efforts to materialize in Lansing.

2016

Michigan kicked things off with an internet casino gambling bill in April from Sen. Mike Kowall, a Republican. The bill allowed both commercial and tribal casinos to offer online betting. Under the proposal, online betting revenues would have been taxed at 10% and operators would have paid a $5 million licensing fee, though that was an advance on taxes owed. The legislation had some success in committee, but it ended up falling by the wayside in the Senate in December of 2016.

2017

Kowall was back at it in early 2017, and a handful of other proposals surfaced in the early spring. Legislation again cleared the Senate Regulatory Reform Committee despite concerns about cannibalization of existing gambling revenue and how the legislation would square with tribal gambling compacts.

Legislation from Rep. Brandt Iden, a Republican, surfaced in the House in September. Michigan commercial casinos were still in support of the general concept of online casino gambling in the state, though they had problems with some of the details of the proposals. Iden’s bill advanced through the House Regulatory Reform Committee in December, setting up optimism for the bill’s prospects in 2018 despite a lack of tribal support. The Detroit casinos had warmed to Iden’s bill. Kowall, who previously led the online betting charge, was set to retire in 2018 after hitting his term limit.

2018

Iden’s bill stirred to life in May with a new proposed tax rate of 8% and provisions allowing tribes to offer online gambling under their respective compacts. The law ended up putting the tribes under the regulation of the Michigan Gaming Control Board for online gambling only. Iden’s bill didn’t gain traction until clearing a full House vote in June and moving to the Senate. The high-profile PASPA ruling of May 2018 resulted in Iden’s online gambling bill also including provisions for the MGCB to regulate online sports betting.

In Michigan, the commercial casinos could have offered retail sports betting in the absence of a new state law, but the tax rate for slots and table games (nearly 20%) was too high for the properties. Iden’s bill called for a less than 10% rate on all forms of online wagering.

The bill was taken up in the fall when lawmakers returned to Lansing, and it passed the Senate just several days before Christmas. It was finally on the desk of Republican Gov. Rick Snyder. However, Snyder surprised many by vetoing the legislation, citing concerns that it would impact the iLottery and the state’s School Aid Fund. He left the issue up to Whitmer, a Democrat who would take office in 2019.

2019

Iden continued the push in March 2019 by sponsoring the Lawful Sports Sports Betting Act in addition to a reboot of the Lawful Internet Gaming Act. Sports betting had its own bill this time around. Whitmer ended up asking for significantly higher tax rates than those in the bill that Snyder had vetoed. She wanted 15% for sports betting and up to 40% for online casino.

At one point in the summer, Whitmer was seeking the exclusion of online slots out of concern that they would cannibalize iLottery revenue. Iden argued that online casino and online lottery have different customer bases.

In late October, both bills cleared the House despite Whitmer not yet being in full support. Negotiations with the governor continued and a final deal was reached, enabling the gambling expansion package to overwhelmingly clear the Senate on Dec. 11. Whitmer signed it a little over a week later.

Michigan land-based casino history

Michigan was the sixth state in the country to authorize some form of online casino play (Nevada is just poker). Its rich, land-based casino history helped pave the way to make it an early mover in the next frontier for the industry, involving the ubiquitous use of smartphones.

The Detroit gambling market turned 20 in July 2019, marking two decades since MGM Grand Detroit opened its doors. MotorCity Casino Hotel opened in December 1999, followed by Greektown Casino Hotel in November 2000. In 1996, Michiganders voted in favor of a ballot question to allow three casinos in Detroit. The state later enacted the Michigan Gaming Control and Revenue Act. It took a few years before the first property was built.

The state has had some form of tribal casino-style gambling for more than 30 years. Official casinos on tribal land were made possible by the 1988 Indian Gaming Regulatory Act, as well as early moves by Michigan to create revenue-sharing through negotiated compacts in 1993. Michigan now has 24 Class III casinos. The properties are operated by 12 Native American tribes with compacts. The closest is about 100 miles from Detroit, so tribal and commercial casinos will compete for the first time — in cyberspace — once the state approves regulations and issues licenses. The MGCB is expected to adopt regulations in 2021.

With a robust tribal casino industry and one of the largest commercial gambling markets in the nation for a single metro area, Michigan is one of America’s most casino gambling-friendly jurisdictions. With gaming revenues plateauing over the last decade, officials were looking for a serious boost.

Michigan is eyeing an online gambling industry that is comparable with New Jersey’s, which began in 2013. Garden State online casinos took in a whopping $482 million in 2019, so Michigan online gambling will have a steep hill to climb to catch up.