The Michigan House of Representatives passed several gaming bills championed by Rep. Brandt Iden this week, including legislation that would legalize retail and online sports betting, as well as online casino and poker.

Despite close votes (62-46 for online casino and poker and 63-45 for sports betting), sports betting and online gambling clearing the House has always been a given.

But the path only gets bumpier going forward.

Senate Uncertainty and a Skeptical Governor

The Senate has been unusually quiet on the issues, and Gov. Gretchen Whitmer has been highly critical of the measures, citing concerns that the new forms of online gambling will cannibalize the state’s online lottery, and by extension, the amount of money that goes towards education funding.

Those fears have led to the administration calling for everything from higher tax rates to excluding online slots from the legislation.

The legislation attempted to address the cannibalization concerns by providing some guarantees against cannibalization. The new legislation contains a provision that says, beginning in December 2020, funds from online gambling will be used to make up the difference if the Lottery’s contributions to the School Aid Fund fall below $70 million.

Governor Wants a Foot, Legislature Gives an Inch

In addition to the School Aid Fund language, Iden and the legislature increased the tax rates in the legislation. But it doesn’t seem to have appeased the governor.

Tiffany Brown, a spokesperson for the Whitmer Administration, told the Detroit Free Press, “We continue to have revenue concerns regarding the bills’ negative impacts on the School Aid Fund. The administration has taken every meeting we’ve been invited to regarding this legislation and will continue to work closely with the bill sponsor, tribal leadership and stakeholders to attempt to address our concerns.”

Sports Betting Tax

The latest sports betting legislation calls for a base tax rate of 8.75% on sports betting in MI. That’s a slight increase from the 8% tax in previous versions of the bill, but well below the administration’s asking price of 15%. As is the case with retail commercial casinos in the Detroit area, there is an added 3.25% municipality tax on Detroit area sports betting operators.

The two sides are also miles away when it comes to the initial licensing fee. That said, one-time payments are typically less prickly than ongoing tax rates.

Online Casino and Online Poker Tax

The two sides are much further apart when it comes to online casino and poker. But with the House adopting a tiered structure in the latest version of its bill, at least they’re now on the same page.

The administration previously advocated for a tiered tax rate starting at 8% and going as high as 40%. The legislation passed by the House starts at 4% and goes as high as 26%.

Here’s how it breaks down:

  • revenue under $4 million = 4%
  • revenue from $4 million to $8 million = 6%
  • revenue from $8 million to $10 million = 8%
  • revenue from $10 million to $12 million = 10%
  • revenue over $12 million = 19%

Rates would then increase by 2% in years 4 and 5. And as is the case with sports betting, the state’s commercial casinos in Detroit would be on the hook for an additional 3.25% municipality tax.

And once again, there is a sizable difference in licensing fees between the two sides. The administration is looking for $1 million upfront and $500,000, while the legislation asks for just one-tenth that amount.

Outlook

Both measures have an uncertain future.

That said, sports betting seems to be in a far better position than online gambling. The two sides aren’t far apart on the tax rate, and the governor’s initial ask of 15% isn’t a non-starter.

And as Rep. Iden told Betting USA last month, the administration has fewer reservations about sports betting. “I have heard comments from the administration that they believe sports betting doesn’t necessarily impact their lottery and online lottery player profile, to the same extent that online casino gaming does,” Iden said.

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