On Friday, outgoing Michigan Gov. Rick Snyder, a Republican, gave a lump of coal to many in the online gaming industry and community when he vetoed a package of bills related to gaming, including a measure that would have authorized online casino gaming and paved the way for a comprehensive sports betting bill this year.
It was a surprise to most, including the bill’s sponsor, who wears the same political jersey as Snyder.
Snyder wrote a letter explaining the veto, effectively saying that he doesn’t agree with expanding gambling in Michigan at this time. Snyder is a controversial figure in Michigan politics for reasons beyond gaming, and so his veto of the legislation on his way out the door resulted in a flurry of vitriol on social media. Rightfully so, as online casino players in the state will continue to have no other option but black market sites that are readily accessible from their homes.
However, why would Snyder veto an online casino bill with stakeholder support?
It is possible that Snyder vetoed the legislation for the reasons he stated and not because he was persuaded to do so. He cited several “concerns” when shooting down the legislation.
- Online casino gaming could take a bite out of state lottery revenues
- The online casino state tax rate was too low
- If online casino reduces lottery revenues, there could be less money for the School Aid Fund
- Michigan would be making gambling “much easier to do”
- The state might not have resources to deal with the social impact of more gambling
If you take the reasons at face value, it sounds like Snyder isn’t very fond of the casino industry in general.
As many have pointed out since the veto, Snyder will be allowing the black market online sites to continue to do business in Michigan. The primary motivation for the legislation, according to the bill’s sponsor, was creating sound public policy centered around consumer protection.
So, even if you give Snyder credit for his concern about a potential uptick in problem gambling, his position is short-sighted.
Handful of gaming bills were vetoed
Snyder shot down more than just the Lawful Internet Gaming Act (HB 4926). He rejected several other measures that were all approved by the legislature as the session came to a close.
- SB 35/HB 4801: The bills sought to make changes to the state’s charity gaming rules that were favorable to the charities. Michigan casinos have historically opposed the growth of the state’s charity gaming industry, which has largely centered on poker. In 2012, Snyder cracked down on what he believed to be the proliferation of unlicensed poker rooms. The Michigan Gaming Control Board opposed the legislation to relax some of the rules restricting charity gaming.
- HB 6419/6420: The legislation would have regulated fantasy sports in Michigan. The legislation was supported by both DraftKings and FanDuel, as well as all three Detroit casinos. The Lawful Internet Gaming Act was tie-barred with fantasy sports regulation, meaning online casinos couldn’t happen without fantasy sports regulation.
- HB 5881: The legislation would have removed some gaming regulations that the Detroit casinos see as red tape. It wouldn’t have authorized any new form of gambling, but the legislation couldn’t have become law without the Lawful Internet Gaming Act becoming law as well.
- HB 4927/4928: The bills would have fleshed out the law enforcement components of implementing HB 4926, which they were tie-barred to.
- HB 4611: The legislation effectively would have allowed racetracks in Michigan to offer betting over mobile devices. All three Detroit casinos, as well as a tribe, opposed the measure. HB 4611 was tie-barred t0 the Lawful Internet Gaming Act, as well as HB 5881.
As one can see, vetoing the Lawful Internet Gaming Act effectively killed many other proposed changes to the state’s gambling law.
It was really a mixed bag for the Detroit casinos after Snyder’s flurry of vetoes. They missed out on an online casino law, favorable tweaks to gaming regulations and a path toward sports betting, but they avoided laws that likely would have increased competition from gaming offered by charitable organizations and the horse racing industry.
Michigan Sen. Rick Jones, a Republican who sponsored the charity gaming bill, was especially displeased to see the casinos score a victory.
"After his veto of this common sense bill, Gov. Snyder has shown he is the King of the Grinches. Keep the big casinos happy and harm the little charities," said Jones. "Bah Humbug on you Mr. Nerd! Go back to Ann Arbor!" Quote from Senator Rick Jones on Snyder veto. From @MIRSnews
— Steve Brubaker (@SteveBrubaker) December 29, 2018
Casinos might want to cut out horse racing entirely
While there was compromise among the tribal and commercial casinos with regard to internet betting, the devil could have been in the details for the Detroit casinos. A rebooted effort at legalizing and regulating online casinos may need to include provisions to keep tracks away from betting over the internet, especially involvement with online sports betting.
“It has been my experience that casinos don’t like any competition, and horse racing in particular is a target in many states,” said Brubaker, a fantasy sports and horse racing industry lobbyist who has worked in Illinois and Michigan. “If the casinos can choke out tracks, they have less competition, for existing and future gambling dollars. I was told in one of my first discussions with Michigan legislators that the three Detroit casinos control everything in Michigan.”
Snyder could have approved the online casino bill and vetoed the measure for advance deposit wagering (mobile betting) for a horse racing industry that’s trying to make a comeback in the Wolverine State, but perhaps he was worried about displaying favoritism. It’s also possible that increased competition from the horse racing industry was effectively poison for the online casino bill.
The Lawful Internet Gaming Act would have sent 5% of the internet gaming tax revenue to bolster the horse racing industry, capped at $3 million annually.
It’s worth noting that none of the casinos put out public statements in reaction to the Snyder vetoes. Neither did the American Gaming Association, of which MGM Resorts, MotorCity Casino Hotel, and Penn National are core members. The FireKeepers Casino Hotel, one of 24 tribal casinos in Michigan, also belongs to the AGA.
In September, a House fiscal analysis of the Lawful Internet Gaming Act stated that MotorCity casino supported the legislation as of July, while MGM Grand Detroit only “support[ed]the concept of the bills” as of May. Dan Gilbert’s Greektown Casino opposed the legislation, but that position was rather old, dating back to when the Lawful Internet Gaming Act was introduced in September 2017.
Pending Detroit casino sale might have played a role
The delivery of the Lawful Internet Gaming Act to Snyder’s desk came during the middle of a sale of one of the Detroit casinos. In mid-November, Penn National Gaming announced that it was acquiring the operations of the Greektown Casino from Gilbert’s Jack Entertainment for $300 million.
It was a welcomed development for Michigan’s gaming industry in the long-run (Penn National opened Pennsylvania’s first sportsbook, for example), but it might have thrown a wrench in the numerous gaming modernization proposals that Snyder was tasked with making a decision on.
According to Brubaker, Penn National might not have had the opportunity to participate in online casino gaming on the same timeline as its competitors. The Greektown deal is expected to close in mid-2019. The online casino bill did mandate a 15-month window before operators could launch, but Penn National still might have been behind.
The Michigan Legislature had tried to pass online casino gaming legislation for several years without success. It is possible that its last-minute success in the Michigan Senate at around 10 p.m. in the evening on the final day of the session was not the cause for celebration that we thought it was.
According to Brubaker, it is possible that some lawmakers voted to move the legislation to the lame-duck governor knowing that he was likely to veto it. Michigan is home to some contentious partisan politics, so politicking in this manner isn’t out of the realm of possibility, especially if there was some uncertainty about stakeholder support.
The good news is that Michigan has a new governor, who has stated she is interested in compromising with a divided state legislature. Gov. Gretchen Whitmer is on the record agreeing with sports betting in Michigan, though her position is slightly ambiguous at the onset of 2019.