Michigan’s online casino gaming plans might be at risk of a significant delay.
MI Bets has learned that Gov. Gretchen Whitmer’s administration is opposing a major component of the online gambling bill. According to a new legislative proposal obtained by MI Bets, the Michigan Department of Treasury wants the online casino bill, which has been years in the making, to exclude the authorization of online slots because they might be too similar to games already offered by the state iLottery. It’s not a moral objection, but rather boils down to a cannibalization fear.
The legislation, sponsored by state Rep. Brandt Iden, passed the legisuare in 2018 with online slots included. The bill was vetoed shortly before the New Year by former Gov. Rick Snyder, much to the dismay and surprise of many industry observers and members of the legislature.
Iden told MI Bets earlier this year that he hoped to get the legislation to Whitmer’s desk this summer.
That’s probably now off the table.
At a hearing on the online casino bill, H 4311, in March, the Michigan Lottery, the Michigan Department of Treasury, and the State Budget Office all opposed the bill in its current form, but were supportive of the concept of regulating online casino gambling. That remains the case today.
The legislation contains a mention of online sports betting, with a full-fledged sports betting bill for the Wolverine State expected any day now. However, the position of Whitmer’s administration on the online casino proposal could delay the introduction of a sports betting bill.
In addition to excluding online slots, Whitmer’s administration wants a higher tax rate on online table games and poker. The bill in its current form calls for an 8% tax rate, with the Detroit casinos forking over an additional 1.25% to the city. The legislation would also allow tribal casinos to offer online gambling under the regulation of the Michigan Gaming Control Board.
Here’s what the administration wants for online table game/poker taxes.
- Up to $2.5 mm: 8%
- More than $2.5 mm, up to $4 mm: 16%
- More than $4 mm, up to $8 mm: 32%
- More than $8 mm: 40%
She also wants a flat 15% tax rate for sports wagering revenues.
Under the tax structure, the administration anticipates an online table/poker market of $78.75 mm annually, along with a $187.5 mm sports betting market.
The three Detroit casinos pay a nearly 20% effective tax rate on their brick-and-mortar gaming revenue. About 80% of their win comes from slot machines.
A state fiscal analysis found that the School Aid Fund “likely would realize reduced revenues” under H 4311 as written. Whitmer’s proposal, dated June 4, calls for a greater share of tax revenue to the fund.
At a hearing in early May, the administration pointed out that New Jersey, which is the dominant iGaming state right now, has a higher rate for online than it does for brick-and-mortar gaming.
The Detroit casinos currently contribute more than $100 mm each year to the School Aid Fund.proposal
Outlook for bill in 2019
It’s no secret that slots are the cash cow for an online casino. The position of the administration is sure to ruffle the feathers of the Detroit casinos, which have long sought online casino gaming.
Iden has so far indicated that he’s not willing to remove online slots from the legislation.
The legislation was teed up for a committee vote this week, before the administration revealed its proposed changes. There could be delays in getting the bill out of committee and to a House floor vote with the governor opposing online slots. There will need to be negotiations before the bill can move forward.
Whitmer could be playing hardball on the slots, but calling for them to be prohibited is likely not a policy decision that was arrived at hastily. With proponents of the bill in its current form and the administration being at odds over slots, the legislation could face long odds of passage in 2019.
The silver lining is that Whitmer has a relatively solid position on sports betting with the proposed 15% tax. She also is open to gambling on Michigan college teams, something some states have shied away from for their respective colleges and universities. Whitmer has also indicated an interest in three online gambling skins per casino. It’s unclear where she stands on remote registration.