Michigan reaping early rewards from iGaming

Posted:: May 04, 2021 19:50 Category: Americas , Online ,

The early revenues and tax benefits for the state are leading experts to wonder why online gaming hasn’t been more widely adopted around the US

By Mark R. Smith, U.S. Correspondent

The recent introduction of online gaming in Michigan has been a smashing success, with the state posting $95.1 million in revenue for March.

That impressive figure represented a 19.3 percent increase from February’s numbers following the state’s first full month in iGaming, which launched on Jan. 22; through March, Internet gaming total gross receipts hit $204.1 million.

That $95.1 million number placed Michigan third among the five states in the US  that offer legal iGaming, behind New Jersey with $113.7 million and Pennsylvania with $97.7 million (which also include Delaware and West Virginia).

Michigan’s legislature: where are we now?

This budding success story began when the Michigan legislature passed iGaming bills in 2018 that were vetoed by former Gov. Rick Snyder; the legislature again passed the bills in 2019, which were then signed into law by current Gov. Gretchen Whitmer.

KALM.RICHARDThe bills passed the legislature with considerable majorities each time, but the iGaming bill that was signed into law in 2019 had a higher tax rate than was included in the 2018 bill (more on that angle below).

One factor in this early success may have been the COVID-19 pandemic. “Certainly, Michigan residents have spent more time at home during the public health crisis,” said Richard Kalm, executive director of the Michigan Gaming Control Board (MGCB). “They may have chosen to place bets online because they were not comfortable going into public places while the virus remains a threat.”

There may be more to learn on that front in the coming months; in March, the Detroit casinos reported their highest monthly aggregate revenue — $113.84 million from table games, slots and retail sports betting — since the shutdown began in March 2020.

Still, providers made a big advertising push in Michigan, and some observers have said the combined launch of several providers drove them to create special marketing and promotions to capture business in a competitive market.

Currently, there are 12 operators and platform providers authorized for online gaming and sports betting or online sports betting. Three other operators and platform providers must complete regulatory requirements before the MGCB authorizes them to go live.

The early strong iGaming numbers have made numerous observers wonder why legalizing Internet betting wouldn’t be a good idea in any state, Kalm said one size might not fit all:

Each state is different,” he said. “Michigan legislators chose to pursue bills to legalise online gaming and sports betting after the PASPA (Professional and Amateur Sports Protection Act) decision in 2018. The Michigan Legislature had leadership with the political will to push for the measures.

However, the higher tax rate from the 2019 bill is already paying off in Michigan. John Pappas, a gaming industry consultant based in Washington, D.C., noted the tax revenues iGaming is generating for the state.

“Sports betting produced just under $900,000 in state and local tax revenues for the month of March,” Pappas said. “However, with far less fanfare, Michigan’s iGaming industry brought in more than $22 million in tax revenue for the same month.”

That gap in potential tax revenue for the 45 states that are not yet active in the iGaming arena, he said, “is too big to ignore” – especially as the world works out of the pandemic-stricken market.

“If you’re lawmaker that is turning to sports betting as a way to raise revenue, you are doing your state a disservice if you are not also legalizing iGaming,” said Pappas. “While sports betting is popular and gets a lot of attention, the true opportunity for states is to regulate the triumvirate of online gaming options: sports, casino and poker.

“Each product feeds off the other and it creates tremendous synergies that benefit consumers, operators and the state,” he said, “and it’s also how states can dig out of COVID-19 deficits.”

David G. Schwartz also made that point. “The positive numbers from Michigan may have other states looking at legalizing online gambling,” said Schwartz, gaming historian at the University of Nevada Las Vegas.

“[They] show that the long-established track record of New Jersey in the online gambling sphere,” he said, “can be replicated elsewhere.”

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