Michigan has had a form of online gambling for over five years, but that could be at risk of a temporary cessation due to a budget stalemate in Lansing.
As a potential Michigan government shutdown looms, which would be the first in a decade, the Michigan Lottery said in an email that it will be forced to pause all sales in the event that it does happen. Tens of thousands of state employees would be out of work.
“Michigan’s Constitution requires that a budget must be enacted at the start of the fiscal year in order to expend funds to operate state government,” the Lottery said. “Unless a budget is in place by Sept. 30, 2019 at midnight, the Michigan Bureau of State Lottery will be required to cease operations until a budget is approved. In the event of a shutdown, all Lottery sales, including internet ticket sales, must be suspended. Michigan Lottery online account access will also be suspended during this time.”
While a shutdown isn’t the most likely scenario at the present moment, Gov. Gretchen Whitmer, a Democrat battling against a Republican-controlled legislature, could elect to go that route. According to Bridge, a nonpartisan, nonprofit news service in the Wolverine State, Whitmer is most likely to take a line-item veto approach to a nearly $60 billion budget the legislature recently passed.
That would avoid a shutdown.
Whitmer, who took office in January, campaigned on “fix[ing]the damn roads” and education.
Size of the Michigan Lottery gambling market
While the Detroit casinos are stuck in gaming win purgatory and could soon see revenues decline thanks to Indiana kicking off online/mobile sports wagering on Oct. 3, the Lottery is doing quite well.
In an August press release, the Lottery said it has 1.1 mm accounts for its 79 online games. The iLottery has awarded $2.4 billion in prizes since its inception in August 2014. In 2018 alone, Lottery players won $676 mm playing games online. Through last year, the online offerings have generated nearly $240 mm in net win for the Lottery program.
As mentioned, Detroit casino win is not growing, while the Lottery saw a record $3.6 billion in total sales in FY 2018, up about $300 mm from the previous fiscal year.
A temporary shutdown of the Lottery wouldn’t be without a splash of irony, considering Whitmer’s commitment to bolstering, or at least protecting, public education funding. 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.
The SAF is central to the ongoing stalemate over the online casino legislation, a proposal that cleared the Republican-controlled legislature last year only to find a veto from former Gov. Rick Snyder, a Republican. Snyder said in his veto letter he was going to let the next governor make the call on online casinos.
Whitmer thinks a proposed online casino state tax rate of 8% is far too low, and her administration also said this summer that it opposes online slots, out of concern that those games in particular could take money away from the Lottery. Proponents of legalizing online casino play, as well as sports wagering, have consistently argued that Lottery players and online casino players aren’t the same customer pool.
Outlook for Michigan gaming expansion
The budget impasse dims prospects for progress on the gaming expansion negotiations for at least several weeks. A government shutdown on or around Oct. 1 would, of course, make the situation worse.
“We’re in the process of working on our budget … and I had been working diligently to try to include iGaming, sports betting, and everything that I’ve been working on (in the budget), but because of some other things I wasn’t successful,” state Rep. Brandt Iden, the Republican sponsor of the online casino and sports wagering proposals, told Sports Handle last week. “Hopefully, we’ll revisit everything in October.”
Michigan’s 2018 gaming expansion debate went down to the wire, with legislation finding its way to Snyder’s desk shortly before the New Year. That could be the case again in 2019.