An Update on the Latest Michigan Sports Betting Effort

If you’re in favor of sports betting legalization in Michigan, you should be rooting for Michigan Representative Brandt Iden.

This week, Iden organized the first sports betting hearing in the state this year, nearly a year after then-Governor Rick Snyder vetoed an online gambling bill that included language authorizing sports betting.

HB 4916 seeks to legalize sportsbooks at commercial and tribal casinos, allow each casino to operate one mobile/online sportsbook, create the Division of Sports Betting to regulate sports betting and establishes a tax rate of 8%.

HB 4916 is worded such that it does not take effect unless HB 4308 regulating fantasy sports and HB 4311 regulating online casino games and poker also pass.

Governor Snyder’s veto stems from a concern that online gambling would cannibalize the state’s online lottery.

So, what does Governor Whitmer think of sports betting? The good news is that supporting Michigan sports betting was part of her campaign to replace Snyder. The bad news is that she does not agree with Representative Iden on the tax rate.

The Sticking Point: Sports Betting Tax Rate

Whitmer wants a tax rate of 15% with an additional 3.25% tacked on for the city of Detroit. According to Iden, that number is “an astronomical rate which just will not work – that number has to be somewhere closer to 9% or 9.5%.” Casino operators in Michigan have argued that the rate must be 10% or less to remain profitable and competitive.

The rate that legislators had agreed on in the previous bill was 8%. Putting the number in context, here are the tax rates on legal sports betting for nearby Midwest states:

Nationwide, the lowest tax rate is in Nevada at 6.75% while the highest is an astounding 51% in Rhode Island. At 8%, Michigan would have the third-lowest rate in the country.

To demonstrate why Michigan needs to remain as competitive as possible with its tax rates, Iden showed how simple it was to drive 45 minutes to Michigan City, Indiana, where a new FanDuel Sportsbook has opened. If Michigan does not stay competitive with Indiana, it’s reasonable that revenue could be diverted to their southern neighbor.

When Can Sports Betting Get Underway in Michigan?

So, when can people expect legalized sports betting in Michigan? The earliest residents of Michigan should hope for is by the Super Bowl.

While it’s realistic to assume that a compromise will be met on the tax rate, it’s currently the one sticking point preventing a new bill from reaching the floor. According to Iden, “the tax rate has become a key issue, and I haven’t advanced other bills until I reach an agreement with the administration.”

Michigan Representative Sarah Cambensy weighed in on the topic, saying everything in the bill looked good except for the tax rate. She went on to say, “I think we can get to where New Jersey is – a little more creative – rather than at the lower end.”

New Jersey’s tax rate varies depending on where bets are placed. At the high end, the tax rate is 14.25% at a racetrack, down to 13% at an online casino, and 8.5% at the low end when physically in a casino.

The next step for Michigan will be determined after the Michigan Gaming Control Board meets again. With bi-partisan support of sports betting and the Governor on board, all that is left to be negotiated is a tax rate. With Iowa and Indiana rolling out their sports betting products in under four months, legalized sports betting in Michigan in time for the Super Bowl remains a realistic target.

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