Sports Betting Legalization Gives Renewed Hope To Online Gambling Efforts In Michigan

Online gambling legislation in Michigan has a fighting chance, especially if it's paired with sports betting.
MI House Passes iGaming Bill

Thanks in part to the federal ban on sports betting being struck down by the US Supreme Court last month, the Michigan legislature finally began moving forward again on an internet gambling bill that has been in limbo for months.

And now back into limbo it goes, for at least the rest of the summer.

Legal background

History of iGaming legislation

The first effort to legalize online gambling in Michigan dates back to early 2016, when Sen. Mike Kowall introduced a bill (S 889) that would set a 10% tax and $5 million licensing fee on the industry, also limiting the number of licensees to eight commercial and tribal casinos. The bill gathered some early momentum, passing through the Senate Regulatory Reform Committee in June 2016, but never came up for a full Senate vote.

In September of 2017 House Bill 4926 was proposed, itself considered an improvement on the senate bill S 203 introduced earlier in the year with stipulations that were meant to remove opposition from tribal casino operators. After minor amendments to the tax structure and server location requirements HB 4926 finally moved out of committee by December, with the hopes that a vote could take place in early 2018.

Recent stall

Then…nothing happened. Though the commercial casinos in the Detroit area supported the newest version of the bill, the tribal operators were mixed, and the legislature seemed unmotivated to schedule the bill for a vote.

Speculation abounded that the state had little interest in advancing an online casino industry that could cut into its extremely lucrative and successful online lottery. A model for other states, Michigan’s online instant games borrow heavily in form and function from slot machines, and some believe that tax revenues from casinos may not be enough to offset a decrease in lottery activity.

At the same time, Michigan was awaiting the results of New Jersey’s Supreme Court battle to legitimize sports betting, the positive outcome of which would require a whole other legislative process if a limited online gambling bill had already been resolved.

The current bill

The delays proved beneficial for the advocates of iGaming, as the anticipation of sports betting seems to have tipped the scale (and possibly helped decrease tribal opposition). The revised language of HB 4926 references the possibility of sports wagers but does not directly allow them, so while online casinos could begin development with capacity for sports bets in mind it will take additional action by the legislature to fully accommodate this.

The current version of the bill passed 68-40, and plans to allow Detroit’s three commercial casinos to operate sites – as well as the 23 tribal casinos (though they will be required to negotiate new compacts with the state to secure licenses). The operators would pay an 8% tax on revenues, divided clearly in four directions:

  • 55% of that going to Detroit (or the city the tribal casino is located)
  • 35% to a fund to administer the program
  • 5% to schools
  • 5% to transportation.

This tax is also significantly lower than the current 19% that Detroit’s brick-and-mortar casinos currently pay. Licenses will wind up costing operators $800,000 over the course of five years.

In addition to online slots and table games, the bill also provides for online poker rooms. While not expressly discussed in the legislation, a successful poker network operator would most likely need to join the growing interstate liquidity compact that currently connects Nevada, Delaware, and New Jersey (and, hopefully, soon Pennsylvania).

Future prospects

With the House approving the now-coined Lawful Internet Gambling Act, it must now move on to the state Senate before being sent to the governor. Unfortunately, passage of LIGA occurred on the final day of the most recent legislative session, which means no further progress can occur until the next session begins this autumn.

The delay could provide enough time for the Senate to analyze the bill and send it right back to the House with changes to fully incorporate sports betting, or it could simply die in the Senate if opposition is too heavy.

Critics continue to argue that easy access to online gambling creates a risk that gambling addictions would increase, particularly among the youth. Hopefully the fact that the bill’s provisions require the administrative fund to allot $1,000,000 to help combat gambling addiction will help remove this argument.

In any case, the desire to not be left out of potential sports betting revenues gives LIGA a better chance than before of completing its journey into law.


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