Michigan Update: Online Gambling Looking Likely Now for January

• Although hopeful for December, Michigan legislators laid out a plan to begin in January
• JCAR & MGCB work together waiving 15-day review period to allow online progress
• Online gaming necessary to repair damage done to Detroit casinos through COVID-19 

Although Michigan bettors hoped for a Christmas gift to begin their online wagering option, it appears they will have to wait a few weeks longer to begin the process.

Last Tuesday, the Joint Committee on Administrative Rules, a bipartisan group of lawmakers from both the Michigan Senate and House of Representatives, waived the customary 15 session-day waiting period to approve final online gaming rules. That was a key component in the ongoing developments as the decision expedites the process to commence online gambling and begin generating much-needed tax revenue for the state and City of Detroit.

The Michigan Gaming Control Board had hoped to launch online gaming before the end of 2020 during the lucrative Christmas/New Years’ time, but it appears that will not happen for about six weeks according to MGCB director Richard Kalm.

The Decision

The bipartisan Joint Committee on Administrative Rules (JCAR) agreed at a morning session on Tuesday to waive the 15-day review requirement for online gaming and sports betting rules submitted by the Michigan Gaming Control Board (MGCB).

Therefore, this will mean that the rules set forth by the MGCB can go into effect without a 15-day waiting period. That will enable online gambling to be possible a year after Michigan Gov. Gretchen Whitmer legalized internet gambling and sports wagering.

All operators and platform providers, including DraftKings Sportsbook and FanDuel, still must earn final licensing approval, which can now happen after last Tuesday’s JCAR meeting, Kalm said. But before they are licensed, they must submit approval letters from independent test labs to show each meets the state’s technical requirements. Still, the move to waive the 15-day waiting period will speed the process.

Independent of the JCAR’s waiver, officials would have had to re-submit the rules in January with a new set of lawmakers following November’s presidential election, potentially delaying the launch of online gambling further until after the Super Bowl in February. But now, Kalm said he expects some online operators to go live potentially in early January.

Kalm said in an interview,

The whole thing is going to be really dependent on the paperwork they’re submitting. We’re going to give them provisional licenses as soon as we get all the paperwork and then finish our background investigations, and also the platforms that are required to submit their software and testing labs to make sure they comply with all of our requirements. So that’s gonna take a little bit of time to get that done.

In further discussing the need for the time scheduling change Kahn explained,

They’re all gonna have to go through with their fine-tooth comb and make sure they’re in compliance. Otherwise, we cannot license them. With the waive of the rules, I thought we were four weeks out, but we just sent out earlier this week — the same day as the JCAR (meeting) — an inquiry to the platform providers’ operators to give us how ready they are to go and what they’re going to have done. So, we might be having to push that back, because we’re now looking at probably six weeks.

Finally, Kahn mentioned that online wagering in Michigan cannot begin until at least one of Michigan’s three casinos including the MGM Grand, MotorCity, and Greektown plus one of the 23 tribal casinos earn their operator licenses.

Michigan’s Sports Wagering Effect on Tax & Revenue

The Detroit casinos will share the same 8.4% tax rate on their online sportsbook win with the state as they do with land-based wagering. However, there are differences in how they will be allocated.

For land-based sportsbook operations, Michigan collects 3.78% of the sports betting tax revenue, and the city of Detroit retains the remaining 4.62%. But for online sportsbook income, Detroit will keep a noticeable 30% of the tax revenue. 5% will go to the Michigan Agriculture Equine Industry Development Fund (up to $3 million per year from each operator), and the remaining 65% to the state.

For internet sports betting conducted in partnership with one of Michigan’s federally recognized tribes, 100% of the tax receipts will go to the state.

Involving gross gaming revenue (GGR) from internet casinos, it will be taxed on a scale ranging from 20-28%, the final rate dependent on adjusted gross receipts. Online gaming from Detroit casinos will be split between the state and city, while tribal online tax revenue will fully go to the state capital. DFS operators will share 8.4% of their monthly income with the state.

Online gambling will mainly be focused to repair the damage done to Detroit’s three casinos that were damaged significantly during two shutdowns due to COVID-19. Detroit’s three commercial casinos are closed once again on Michigan Gov Whitmer’s orders through at least December 9.

MGM Grand Detroit, Motorcity, and Greektown reported $0 in GGR during the second quarter, as they were forced to be dark throughout those three months. Casino’s win totaled $163.6 million in Q3, reflecting a 53.4% loss through one year.

As those casinos are closed again, Q4 is forecast to be another difficult quarter. All agree the beginning of online gaming and mobile sports wagering will allow the three Detroit casinos to bring in much-needed revenue during the months ahead.