Michigan online sports betting launched on January 22, 2021. Now that we’ve gone once around the sun since it became legal to bet on sports online in Michigan, let’s take a look at what it’s meant for the state and what the future holds.
By all measures, Michigan has been a success for an industry that’s rapidly expanding and also finding its legs. When it launched, Michigan was the third-most populous state to offer mobile sports betting (based on citizens 21 years or older).
After a year that saw more than three billion in sports betting handle, Michigan moves into year two with a full steam of momentum. An even better 2022 is likely, but there are ways to improve online sports betting for Michigan citizens.
Legal Online Sports Betting Protects Consumers
As state Representative in Michigan from 2015 to 2020, Brandt Iden worked on sports betting legislation that eventually became the bill signed by Gov. Gretchen Whitmer in December of 2019. He’s proud of the efforts to launch online sports betting in Michigan, and he sees legalization primarily as a consumer safety issue.
“The biggest reason we wanted an online sports betting bill to be passed in Michigan was to safeguard citizens,” Iden told Gaming Today in an interview. “The revenue is nice, but most importantly, with unregulated offshore betting options out there, we wanted to protect consumers in Michigan.
“This is a low-margin industry,” Iden says, “so primarily for Michigan our concerns were with regulation.”
Thanks to the careful manner in which Michigan legislators and state officials handled their rollout of sports betting, Michigan has become a template for others.
“Other states have adopted what has become known as ‘The Michigan Model’ for their sports betting,” Iden says. Both Arizona and Connecticut adopted many of the facets of sports betting law that Michigan pioneered, especially in regards to working with tribal governments.
The Michigan Model can be classified as careful legislation, consumer protection, and a fair tax rate and low license fee (just $150,000 for commercial operators). The approach allows sportsbooks to make a profit, while still guaranteeing a healthy market and tax revenue for the state and cities (Detroit taxes its three casinos involved in sports betting). Michigan also laid out the welcome mat to online casinos and online poker operators, an olive branch to those niche industries that have been popular with Michiganders. The state also allows betting on in-state collegiate athletics, something not every jurisdiction has been willing to do.
In his current position as Head of Government Affairs for SportRadar (a licensed supplier of sports betting data that operates in several states across the country), Iden sees Michigan as a success story, but there’s still room for improvement.
“There’s more that the state could do for problem gambling,” Iden explained. “I’d like to see Michigan implement a Gambling Addiction Court, similar to what we see in Nevada.
“Michigan has drug courts, so why not a court to assist people who have an addiction to gambling or encounter financial problems due to a gambling problem?”
Handle, Revenue From Michigan Online Sports Betting (2021)
Michigan’s decision to keep the tax rate on online sports betting relatively modest has led to smaller tax revenue than some states that have taken an axe to sportsbook operators. Operators in Michigan pay a 9.65% tax rate on adjusted gross sports betting receipts.
The Michigan Gaming Control Board was authorized to license 15 operators for online sports betting. As of January 2022, there are 14 active, including industry leaders BetMGM, Caesars, DraftKings, FanDuel, BetRivers, and PointsBet.
Here’s a month-by-month look at sports betting handle, hold (the amount the sportsbooks won), and tax revenue generated by the industry.
|MONTH||HANDLE||ADJUSTED GROSS RECEIPTS||TAX REVENUE|
While more than $3.6 billion in sports bets were placed in the state in 2021, only $7.2 million was paid to the State Treasury in taxes from online sports betting last year. That’s a small amount compared to taxes brought in from other activities.
In contrast to online sports betting, online casino games like poker and slots paid $201.7 million in taxes to the State of Michigan Treasury last year, and an additional $55.4 million to the City of Detroit.
Also, more than $40 million in taxes were generated from hunting licenses in Michigan.
The bulk of tax revenue from online sports betting in Michigan is earmarked for K-12 education programs and problem gambling resources. As the state’s sports betting market matures and sportsbooks temper bonuses designed to lure new customers, that revenue should swell.
But the economic benefits are more than just tax revenue. Jobs have been created, and while it’s difficult to nail down how many new jobs are in Michigan since January of 2021 from sports betting, those new payroll taxes must be added to taxes on sports betting winnings to get closer to the industry’s economic impact on the state.
Tribal Partners Rely On Revenue To Weather Pandemic
The process phase in Michigan, in which state regulators debated and implemented the rules for governing online sports betting, coincided with the unwelcome arrival of COVID-19. As a result, many tribal casinos in Michigan that partnered with sportsbooks faced a challenging economic period in 2020 and into 2021.
While the state determined the best way to launch and monitor sports betting, casinos closed for months across Michigan due to the rapid spread of COVID-19. Online sports betting (and the allowance for online registration) provided a path to revenue that didn’t require folks to leave their homes.
As sovereign nations, licensed tribes are free to allow on-reservation retail and mobile/online sports betting. But in a wrinkle, Michigan tribes are permitted to provide statewide mobile sports betting beyond tribal lands. That type of betting, typically done in conjunction with a commercial sportsbook partner, is regulated under Michigan law.