The Wolverine State Prepares for Legal Sports Betting
Like New York, California, Pennsylvania and other states bordering on locations that have made betting on sports legal, Michigan finds itself at a crossroads. Michigan has actually been kicking the idea around for the last three or four years.
Much of the impetus behind making sportsbooks legal involves their neighbor country, not a bordering state. Ontario, Canada permits both physical casino gambling and sportsbook operations. Once across the US-Canada border you can bet on games either at a physical location or online.
Michigan lawmakers realize that bettors are going to bet. The problem is how to keep the windfall financial revenue from walking, literally out of the country. Here’s an overview of the legislative process currently in the works, and what the landscape looks like for both physical and online sportsbook operations in the Wolverine State.
Michigan Sports Gambling Legislation
Even conservative estimates point to a few million dollars in revenue that could be generated on a monthly basis. Too many statistics exist for those states, profitable figures which have already proven lucrative for those who opened their doors to sports gamblers. Michigan lawmakers are no different.
Legislators have discussed the monetary benefits of legalized sports betting for the Wolverines State since 2015. There was a push to relax state laws that inhibited casino operations and online gambling in the state.
In March of this year, Senator Hertel introduced Senate Bill 186. Bill 186, or legislation aimed at specifically established lawful boundaries for internet gaming, was referred to committee. It is known across the state as lawful internet gaming act. This bill addresses everything from online gambling to brick and mortar casinos.
What it means for the future of sportsbooks in Michigan is simple. It means the bean-counters on the state treasury clearly realize that legal sports betting is not only the will of the public majority, but an unprecedented way to generate millions of dollars in state revenue.
Economic experts also note that legal sportsbooks, in casinos or online, will bring in tax revenue. Sportsbooks that operate inside physical locations will add another element to the financial equation.
Cities where casinos and sportsbooks physically open will attract visitors. This will add additional revenue sources from dining, entertainment and lodging. A bill passed in December 2018 legalized online poker and casino games in the state, although the actual launch is still pending.
It also permitted Michigan residents to wager on college or professional games, but not at a physical sportsbook location. There are already amendments being proposed to existing legislation that will remove the block in place against physical sportsbooks.
Plenty of Potential Progress Ahead for 2019
One important consideration is Michigan’s new Governor. No one has a firm grasp of where Gretchen Whitmer stands on the gambling as a whole. There are many supporters behind the push to legalize Michigan sports betting who feel she support the online operations, but with modifications to the existing legislation.
Certainly, as a staunch advocate for public education reform, Whitmer is going to want a chunk of gambling revenue to go towards Michigan schools. To get this goal accomplished, many expect the initial tax rate for casino and sportsbook operators to be increased slightly.
The cost of a gaming license and the tax structure has varied dramatically in the states that have already turned the corner. This probably won’t have any dampening effect on big-name interest to establish gaming casinos and sportsbooks in Michigan.
Nearly everyone involved believes that the eventual outcome is going to be positive. However, there was a reasonably high turnover in both the Michigan State Senate and the House. The new members will need to be enlightened about the benefits of the legislation and why it’s in the state’s best interest.
The whole process to even legalize online sports betting will take at minimum another calendar year. This time will be used to establish regulations and stiff penalties for any illegal manipulation of the actual games, or the betting odds.
Licenses will be issued and a tax framework established for sportsbooks. It seems inevitable that Michigan will be the first state in the Midwest to have legal sports betting, both online and at physical sportsbook facilities.
Where Is it All Leading?
Most Michigan residents anticipate that they will be able to legally bet on sports games sometimes before the end of the year. Of course, NFL gambling fans hope it happens before the start of the next season. The consensus opinion is that the current casinos will be the first to handle sportsbook operations.
There are at present 25 casinos in Michigan. Without much doubt, each of the tribal casinos will immediately apply for a license to operate a sportsbook at their current location. Since Detroit is the hub of Michigan professional sports, three commercial casinos in the Motor City are leading candidates for sportsbooks.
• Greektown Casino – The Greektown Casino is less than five blocks from downtown Detroit. It sits blocks from the stadium home for both the Tigers and the Lions. Little Caesars Arena, home of the Pistons, is only a five-minute drive from the casino front door. Greektown is positioned to be a prime location for a physical sportsbook in Detroit.
· MGM Grand – Not to be outdone by location, the MGM Grand Detroit sits diagonal from the Greektown, both flanking Comerica Park and Ford Field. The MGM Grand is actually within walking distance of the Piston’s home court. Then, you add the MGM name to the equation. This is going to be obviously a prized option for sportsbook operations in Detroit.
• Motor City Casino – The only thing that will inhibit the Motor City Casino is that it’s located on the other side of Interstate-75. It is as proximal to Little Caesars Arena, but has a slightly less appealing closeness to the other professional stadiums. However, the Motor City casino has a solid reputation in Detroit and will certainly push for a physical sportsbook.
The Online Sportsbook Outlook for Michigan
The final passing of legislation for betting at physical sportsbooks has a mechanism to automatically try to level the playing field between all Michigan casinos. Some think this is a way to help keep the tribal facilities viably in competition with the powerful, large casino operators like MGM.
A huge reason for the opening of the physical casinos in Detroit was to keep revenues from crossing over into Ontario. Sure, there were laws to encourage honest reporting of tax winnings by US citizens in Canada, but we all know the truth behind the truth.
No matter how much money was being put in the state revenue coffers, Michigan got nothing form fees and the actual taxing of the casino operations. Ontario has gaming laws that cover both physical casinos and online sports betting.
A safe bet would be Michigan lawmakers will eventually see where the same structure is inevitable to keep US bettors from simply crossing the border. There’s obviously going to be a line at the front door of the Michigan Gaming Commission for physical sportsbook licenses.
However, the biggest battle for a share of the sports betting market in Michigan will come when lawmakers open the door for online wagers as well. Here are a few top names, online sportsbook apps positioning themselves to gain a foothold in the online sports betting market in Michigan.
• DraftKings – Seems the leader in DFS sports knew all along that sports’ betting was going to become a reality. DraftKings has positioned themselves with physical sportsbook operations in every state that has legalized sports betting thus far. Look for the same trend in Michigan.
• FanDuel – When you top the leader board in New Jersey for total revenue from sports bets, you can likewise bank on that online sportsbook to push for a place in every new state. A world-class online casino provider, Betfair, now owns FanDuel. It would be a huge surprise if they’re not part of the Michigan online sportsbook scene.
• playMGM Sportsbook app – With the MGM Grand in Detroit has an obvious leading candidate for a physical sportsbook, no one will be surprised if they push to implement their own online app. The playMGM app was the second sportsbook app in New Jersey, and has proven to be extremely successful.
• 888Sport – Greektown uses Synergy table games, but doesn’t have a specific target if or when online sports’ betting becomes legal. 888Sport is one of the leaders in New Jersey, and has made a concerted effort to be part of every single state thus far. Look for 888Sport to make a connection in Michigan as well.
This is the state of affairs in the Wolverine State for sports betting. No one truly believes that current legislation on the floor will fail. The question is how long it will take to finally get pushed across the finish line.
With sports betting just across the Canadian border, and both Ohio, Indiana and West Virginia proximal US states on the verge of opening up their doors to sports bettors, Michigan lawmakers may begin to feel a stronger sense of urgency. Sports’ betting in Michigan is going to happen; the only question seems to be how soon.
Legislative Consideration of Legalization
In June 2018, the Michigan House of Representatives took the first step towards legalized online gaming in the state, approving a bill that would allow casinos to offer gaming online. Passage of the bill, by a margin of 68-40, came after it was introduced for the first time in September 2017 and subsequently stalled. Prior to this, there had been previous iterations of a gambling legalization bill. The next step for legalized online gaming in Michigan is for the bill to go to the Senate for consideration. It is thought that the legislation has a decent outlook for passage in the Senate as the bill has the support of the Senate Majority Leader.
The Senate had considered online gambling legalization in 2017, but the bill stalled amid opposition from Native American casino operators. The current edition of the bill contains a compromise to gain elusive support from Native American tribes. However, the Native American tribes still have not indicated that they would support the bills, although support from the commercial casinos is clear. The two sides generally have competing interests and it is difficult to bring them under the same umbrella. Currently, the Detroit casinos are lobbying hard for the bill while the Indian casinos are opposed.
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The Michigan gaming bill, H 4926, would legalize both online casino games and online poker. The stated purpose of the bill was to reclaim online gambling from the offshore entities and protect Michigan residents when they wager. Only current Michigan casino licensees may apply for and receive an online casino license. The application fee for a license is set at a low $100,000, and licenses are valid for five years. Licensing fees are $200,000 upfront with $100,000 payable annually thereafter. Indian tribes may offer online gambling provided that they are able to renegotiate their compacts with the state.
Importantly, H 4926 establishes the tax rate for online gaming. Operators are to be taxed at the rate of eight percent. This is one of the lowest tax rates for states that have either legalized or are considering legalization of online gaming. The bill establishes a revenue split for the taxes collected. 55 percent of the taxes are allocated to the city in which the casino is located. 35 percent is allocated to a special state internet gaming fund. The other 10 percent is allocated to schools and transportation.
Many of the specifics of internet gaming in Michigan would be left to be filled in by the Division of Internet Gaming, which is established by the bill. The Division is to establish regulations that would implement H 4926. These regulations would dictate the type of online games that are offered in the state, which at a minimum must include online poker. Online gaming would have a slow and deliberate rollout with games being delayed until one year after enactment of the final bill. For those who are expecting online gaming to begin imminently in Michigan, the timing of the rollout is sure to be a disappointment.
In addition to the Indian casinos in Michigan, there are three other land-based casinos in the state that would be allowed to offer online gaming. They are MGM Grand Detroit, Greektown Casino Hotel and MotorCity Casino Hotel. MGM and Greektown have parent companies that have sought to participate in online gaming in the states where they have a presence and it has been legalized. The casinos have expressed an interest in online gaming pending legalization. The casino industry in Detroit is already in a healthy place. In March 2018, Detroit casino took in record monthly revenue of $138.3 million and, their hope is that online gaming will further increase their revenue. There is a projection that online gaming could result in additional revenue between $45 to $60 million just for the Detroit casinos alone. Each of the three Detroit casinos can be expected to be participants as soon as online gaming begins. There is no word about any potential partnerships that casinos would enter into for online gaming because it is likely that the issue of partnerships would be addressed by the regulations.
Sportsbooks and Daily Fantasy
Sportsbook wagering in Michigan is similarly in the process of coming to fruition as it was addressed in the same bill as online gaming. What is clear is that there will not be legalized sports betting for the start of football season and possibly not for the entire football season. With regard to sports betting, HB 4967 states that the Division may permit a license holder to accept wagers on sporting events over the internet. The regulations must still be developed by the Division after passage of the legislation so there is still much to be settled. It is not clear that all casinos in the state support mobile sports wagering.
Daily fantasy sports is also covered by the online gaming legislation. DFS would be explicitly legalized by H 4926 and subject to regulation. Although the Michigan Attorney General does not believe that DFS is legal, operators have not stopped accepting entries from Michigan residents. There are roughly 37,000 DFS players in Michigan and the main operators earn just under $7 million of revenue in the state. Michigan residents have continued to play DFS in spite of any uncertainty.
Issues Moving Forward
One ultimate issue that must be resolved before final passage of the bill is whether an amendment to the state’s constitution is necessary to allow online gaming. There is currently a provision in an existing constitutional amendment that requires gaming expansions to be subject to a referendum. A majority of voters statewide is required to give approval to additional gambling. The argument for the constitutionality of this bill is that it is not an expansion of gambling in the state. Instead, it is merely moving existing gambling from the black market or offshore entities to regulated casinos. A legal challenge to the constitutionality of the bill may threaten to delay online gambling even further.