As we get closer to the midterm elections it is becoming even more certain that the state of Michigan will not pass any new legislation to expand gaming verticals this year. The Lawful Internet Gaming Act spearheaded by Representative Brandt Iden and passed by the House in June has still not been addressed by the Senate, and it is increasingly unlikely the Senate will take it up during the lame-duck period after the election.
This is especially true if the results of the election should oust a significant number of incumbents, and the state’s hopes for expansion in the relatively short-term are completely shot if Iden should leave the house. The representative has singularly championed the possibility of iGaming, and he has seen little and slow progress in securing support for the tribal opponents of his legislation. There is no indication any other lawmaker in the state will take up the cause at this time.
This is a shame for the state, since Michigan would stand to benefit immensely from the creation of a new gaming market.
Michigan is the tenth largest state in the nation by population, ahead of New Jersey by 11%. It also has a far greater number of casinos than Atlantic City, 26 in Michigan (including three commercial casinos in Detroit) versus nine for AC. More casinos potentially means more iGaming skins.
Just looking at the state purely in terms of the total potential number of gamblers shows a significant amount of money is being neglected.
In the last 12 months New Jersey has seen its operators earn $256 million in online casino revenue and $22 million from online poker, resulting in $42 million in taxes going to the state. Adjusting just by population, Michigan’s could expect $307 million in casino revenue and $46 million in taxes once the market is comparably mature.
And these figures do not include the substantial revenues from the addition of sports betting. The industry in its infancy will not have a stable annual pattern for a couple of years, but just in the last month New Jersey increased from taking in $9 million at its retail sports books in August to $11 million in September, and an additional $12.5 million from online sources which only became widely available in September (DraftKings Sportsbook was the lone online book for most of August). This instantly demonstrates the strong potential of online sports betting, and together with land-based sportsbooks the two options combined are expected to result in hundreds of millions in revenue each year.
Unique strengths of the market
Beyond its population size, Michigan has a few other traits that could potentially make iGaming even more lucrative in the state.
The first is that the immediate neighbors (Ohio, Indiana, Wisconsin, and if we are being generous, part of the Chicago metropolitan area) have no serious prospects for online gaming at this time, meaning there could be additional players from right over the state line taking advantage of the vertical. One might argue that New Jersey does not appear to benefit from citizens of New York City popping over in the same way, but New Yorkers do not travel to Jersey if they can help it.
The state’s affluence (or lack thereof) is another benefit. Median incomes in Michigan are only about 70% of those in New Jersey. While some might assume this would mean more dispensable money to wager in the Garden State, generally a poorer populace leads to a stronger embrace of gambling.
Finally, the state is much larger geographically with more rural area. This results in a population density of 174 people per square mile. New Jersey has more than 1,200, which presumably means Michigan residents have a little less to do with their time.
All combined there is a plausible argument that an estimate based strictly on the number of possible players may be meaningfully undervaluing the amount of revenue Michigan might enjoy.
Other benefits to Michigan
While it’s easy to look at the positive aspects of iGaming just in terms of monetary gain, one should also consider the specific applications of that money. In Pennsylvania for instance, taxes from casinos are used to subsidize the horse racing industry, which in turn puts a great deal of that money directly back into the state economy as that industry provides many jobs. Michigan’s own thoroughbred racing tracks are nearly extinct and unlikely to recover without some form of help. Alternately the tax revenues could be pumped into the School Aid Fund like the state lottery, or some other similar beneficial area.
Critics of online gambling like to stir up moral panic of an industry preying on poor communities or the underage, but give the recent uptick in illegal betting parlors in the state, having a regulated industry that is beholden to oversight by the government is definitely a more preferential and less predatory options. Online casinos also as a rule have safeguards in place to help protect people prone to addictive behavior, which can’t be said of other gambling options.
Put simply, the states which have pursued iGaming do not appear to have regrets about the decision.