Michigan Online Gambling Bill Approved by House

MichiganLate last night, Michigan´s House of Representatives approved Brandt Iden´s Lawful Internet Gaming Act by a margin of 68 to 40. Due to the summer recess, the Bill will not be debated by the Senate until September – giving supporters of the Bill time to overcome tribal, legal and financial concerns.

Several weeks ago, Rep. Brandt Iden published a new draft Michigan iGaming Bill. At the time I commented it would be a “tough ask” to get the Bill through the House of Representatives prior to the summer recess due to tribal, legal and financial concerns. However, after a few amendments, Iden found sufficient support to get the Bill passed – albeit by a smaller majority than he would have liked.

The Bill – if passed by the Senate in the fall – will allow the state´s three brick-and-mortar casinos to offer regulated online poker, casino games and sports betting. Daily Fantasy Sports has not been included in the Bill and remains a grey area. (In 2015, the Michigan Gaming Control Board´s Executive Director – Rick Kalm – said in an interview playing DFS for real money was “illegal under current Michigan law”).

The Bones of the Lawful Internet Gaming Act

The bones of the Lawful Internet Gaming Act are that Detroit´s three commercial casinos will be able to apply for five-year licenses at a cost of $800,000. The licenses will allow them to offer online games similar to what they are currently allowed to offer in their brick-and-mortar establishments plus sports betting. The casinos´ revenues from online gambling would be taxed at a rate of 8%.

Michigan´s twenty-three tribal casinos will also be able to conduct online gambling operations once new compacts are created or existing compacts renegotiated. Fees and taxes will be negotiated on a case-by-case basis, and tribal online casinos will be subject to the same location and age verification procedures as commercial casinos. The full text of the Lawful Internet Gaming Act can be found here.

Summarizing the Tribal, Legal and Financial Concerns

The tribes have not yet indicated their support for the Bill despite a contentious clause being removed from the Bill that would allow commercial casinos to continue providing an online service if tribal online gambling was ever prohibited federally. Their remaining concerns are mostly financial – and these will not be resolved until new compacts are created or existing compacts renegotiated.

The constitutional issues of whether Iden´s Bill represents an expansion of gambling still remain, and will undoubtedly come under greater scrutiny than they received in last night´s vote when the Bill is debated by the Senate. Similarly, the financial implications of the Act will also be examined in greater depth considering the likely cannibalization of online casino-style games offered by the state´s online lottery.

What Happens Next for Michigan´s Online Gambling Bill?

While Brandt Iden enjoys his well-deserved holiday, the Lawful Internet Gaming Act will make its way to the Senate´s chambers where it could be debated at any time from September onwards. As Senator Mike Kowall – the author of Michigan´s first Lawful Internet Gaming Bill in 2016 – still sits on the Senate Regulatory Reform Committee, the Bill should have little difficulty passing the committee stage.

Thereafter, there are reasons to be optimistic about the Bill´s progress. The lure of potential sports betting revenues could generate tribal support for the Bill, the argument that the Bill represents an “expansion of gambling services” could sway constitutionally-conscious Senators, and a reallocation of revenues could pacify Detroit-based Senators and those concerned about the State School Fund.

However, even if the Bill is passed by the Senate in the fall, it will still be at least a further twelve months before regulated online gambling in Michigan becomes a reality. Before anything can happen, a Division of Internet Gaming has to be created within the Michigan Gaming Control Board. The new Division will have responsibility for publishing the conditions under which licensees can operate, vetting license applications and issuing licenses, and assessing software platforms etc.

As we have seen in Pennsylvania – where legislation to regulate online gambling was passed last October – it takes a considerable amount of time to put all the pieces in place. In practice, online gamblers in Michigan may not be able to play on a regulated site until 2020 – assuming supporters of the Lawful Internet Gaming Act are able to overcome tribal, legal and financial concerns during the summer recess.

Jacqueline Packett
Jacqueline Packett