This week, the Michigan Senate’s Regulatory Reform Committee once again took up the issues of iGaming, sports betting, and the proposed tax rate for both.
With only nine days left in the legislative session, one of the biggest questions lawmakers are discussing with regard to iGaming is whether Governor Gretchen Whitmer will agree to the tax rate of 8.75% that is currently written into House Bill 4916.
Also at issue is the need to add sports betting to the 1993 tribal-state compacts, which currently allow seven tribes in Michigan to provide brick-and-mortar gaming.
Tax rate tug of war
Since late October, after Michigan’s House Ways and Means Committee pushed its iGaming and sports betting packages to the House floor and passed both for Senate consideration, Whitmer has been looking for a higher tax rate from the new bill. Whitmer is looking for 15%, arguing that both forms of wagering, including mobile sports betting, could draw customers away from the state’s lottery, from which important tax revenue is used to assist Michigan schools as well as portions of state and local government entities.
But time is running out in 2019 and bill sponsor Rep. Brandt Iden (R) is not looking for a repeat of the events of 2018. It was just last year that a comprehensive iGaming bill passed both the House and Senate and simply needed a signature from then-Governor Rick Snyder. However, in one of the last acts in office, Snyder surprisingly vetoed the bill. This sent Iden back to the drawing board, having to start from the ground floor. For the duration of this year, Iden has worked on getting his iGaming and sports betting bill back to consideration.
Negotiations on the tax rate continue between Iden and the governor’s office. Iden’s concern with raising the tax rate into double digits is the burden it will place on what would be the newly legalized iGaming industry and those that provide it.
“If we don’t do something to make us competitive in this marketplace, we are going to lose out,” Iden testified this week. “I implore this committee to take a deep dive into these bills.”
How the tribes factor in
The other issue at heart of the iGaming issue is the inclusion of the state’s tribes.
In 1993, when the tribal-state compacts were agreed to, technology like mobile sports betting simply was not something that needed to be considered. Now, however, the tribes will need for Whitmer to agree to include sports betting in the definition of Class III gaming in order to allow the tribes to participate.
According to Iden, he’s been working with the tribes for four years and they are in support of the bill as long as they are included. Should the bill leave the tribes out, the legalization of sports betting could actually have a negative fiscal impact on the state.
According to a report by the House Fiscal Agency earlier this year, if the tribes are not included in the ability to take sports wagers, they could view any new law as an unsanctioned expansion of gambling and a violation of the tribal-state compact. In that case, they could “simply stop” making their revenue-sharing payments, which in 2018 totaled over $53 million.
The good news is that adding additional games, including sports betting, is straightforward and simply requires a formal request from the tribal chairperson on behalf of the tribes to the governor and for the governor to approve it.
In order for the bill to proceed, the Senate’s Regulatory Reform Committee will need to approve it and send it to the Senate floor.