Analysis: 10 Big Questions About Michigan Online Gambling At The 6-Month Mark
It’s hard to believe we’re already six months into the Michigan online gambling experiment. Although the Michigan online casino market has ripped through expectations, the half-year return on MI online sports betting has been less lucrative for state coffers.
Those are the top-line takeaways from a strong overall start in Michigan after the long-awaited launch on Jan. 22.
With Thursday marking that six-month measuring stick since the launch of regulated Michigan online sports betting and online casinos, here is what we’re seeing so far in the market. And here’s what we could be seeing over the next six months.
1. How much tax revenue has Michigan online gambling raised so far?
The Michigan Gaming Control Board released numbers this week that take us through the end of June.
In the first five-plus months of expanded online gambling, Michiganders have wagered juuusst under $1.5 billion online on sports. Those wagers have netted $119.9 million of revenue. Internet gaming operators have netted $483.1 million in revenue, led primarily through Michigan online casinos.
At an 8.4% tax rate, online sports betting has raised $2.6 million in state revenue and $1.6 million for the city of Detroit. Internet gaming revenue, which also includes online poker and has a graduated tax rate from 20-28%, has raised $85.2 million in state revenue, $24.0 million for Detroit and $9.2 million for tribal governments that operate online gambling platforms.
Combined, online sports betting and internet gaming have raised $87.8 million in Michigan state tax revenue and $34.7 million in local revenues, including tribal governments.
These numbers do not include the tallies from July, which will only push these totals further.
2. Is that online gambling tax revenue underwhelming, on par, or a home run?
Last summer, we talked to Brandt Iden, who was the primary legislative driver of online gambling in Michigan, about the tax potential for the Michigan online gambling market.
When he told us that Michigan had nine-figure potential for new state tax revenue, there was reason to believe he was over-selling.
After all, when Michigan Gov. Gretchen Whitmer signed the legislation in December 2019, $19 million in annual state tax revenue was projected. The Office of Administrative Hearings and Rules later juiced that number to more than $25 million.
A group of experts met with lawmakers in January 2020 at the Consensus Revenue Estimating Conference in Lansing and formulated their own guess of about $50 million in new state tax revenue.
Still, Iden estimates of a possible $100 million seemed unrealistic.
Well, if the summer numbers hold to the pattern so far, Michigan should pass $100 million in state tax revenue by the time July revenue numbers are released.
In reality, the state could have hit that mark by Thursday, the 6-month anniversary of online launch. That’s impressive, any way you slice it.
3. Was the hot start in Michigan online casino revenue expected?
A bit of a perfect storm brewed here for the launch of Michigan online casinos.
But consider these factors:
- The coronavirus pandemic essentially forced everyone to stay home for large parts 2020. The situation even gave some folks more discretionary money that wasn’t spent in the months leading up to the online launch.
- A simultaneous kickoff with online sports betting brought along another shiny toy to attract bettors.
- The delay in launch for all of 2020 may have worked in Michigan’s favor. Companies and insiders thought a fall launch was possible, so well-funded operators started TV ads early, meaning there was months of advertising banked in folks’ minds.
- Unlike New Jersey and Pennsylvania, Michigan had all of the industry’s the major players ready to launch on Jan. 22. The other markets had some small operators launch first before others trickled in. Operators also had a chance to see this environment was a nationwide money-maker. Those markets crawled early, so Michigan online gambling could sprint.
Still, virtually no one expected this response.
4. Has the Michigan online sports betting market been a disappointment?
One of the byproducts of the success of Michigan’s internet gaming market is a comparatively underwhelming picture for online sports betting.
Michigan operators have taken nearly $1.5 billion in online sports bets since launch, leading a tier that includes Indiana, Colorado and Virginia. But those totals so far clearly behind top states New Jersey, Illinois, Nevada and Pennsylvania.
Although Michigan has fewer people than IL and PA, it actually has more people than NJ — and way more than NV. That said, New Jersey’s numbers are juiced by New York visitors, and Nevada is a long established sports betting powerhouse.
Meanwhile, the states MI is fighting with in that next-tier range are all smaller by population.
The main difference for Michigan in comparisons with all these states (save Virginia, which launched the day before Michigan) is football.
Unlike the others, Michigan has not gone through a complete NFL or NCAA season, and football is king for sports betting. It’s hard to have an accurate read on where MI stands without a football season to run up the score, and then help retain customers in the offseason, too.
Another factor is the flailing pro sports scene in Detroit. Online sports betting opened after another garbage Detroit Lions season was already finished. The usually proud Pistons, Red Wings and Tigers are all undergoing a prolonged slumps.
Perhaps the glimmers of hope those three organizations are showing in their recent development can lift not only their fortunes but bring a state of proud sports fans back to the arenas, television sets and, ultimately, a betting app.
So is online sports betting disappointing here in comparison to online casinos? Sure. But in the national landscape, the Michigan sports betting remains incomplete for now.
5. What operators have had the most success in Michigan?
FanDuel Sportsbook has used its success in Michigan to solidify its claim as America’s most popular online sportsbook. DraftKings Sportsbook has also been solid here, certainly proving its bonafides as a top-tier sportsbook operator.
Plus, both of those operators are neck-and-neck each month for the second spot in internet gaming revenue.
But the biggest game-changing performer in Michigan has been BetMGM, and it’s not particularly close.
BetMGM Casino dominates the Michigan online casino space, combining with BetMGM Poker to compile 36.3% of the internet gaming market share. Plus, the sportsbook is in the mix with DraftKings for the No. 2 spot in lifetime online handle in MI.
BetMGM saw a big opportunity in Michigan and prepared for it. They had the name recognition of the state’s busiest casino, MGM Grand Detroit, in downtown Detroit. They were going to be right at the starting line with their rivals.
So they raised major funds to prepare for launch, signing Jamie Foxx, who told Michiganders (and told them. And told them. And told them …) that they needed to get skin in the game.
We’ve been listening, apparently, and BetMGM is now firmly alongside the industry’s big brands.
6. Are most Michigan sports bettors using tribal or commercial operators? What about in internet gaming?
For sports betting, Michigan’s three brands tied to Detroit’s commercial casinos took $966.5 million in bets from launch through June. That’s an average of $322.2 million per operator for Barstool Sportsbook, BetMGM and FanDuel.
Meanwhile, the other 10 active sports brands are tied to tribal operators. For perspective, FireKeepers Sportsbook just launched and others were late arrivals too, so these averages are skewed.
But, through June, those operators combined for $532.7 million in bets. That’s an average of $59.2 million per operator when you remove FireKeepers from the mix.
Those commercial brands out of Detroit have compiled $283.1 million in internet gaming revenue, while tribal brands took in just a touch under $200 million.
Brands raced to the commercial casinos in part because of the synergy a major metro area can provide. Those brands also generally have the deepest pockets. That spending is getting big results so far.
7. What about Upper Peninsula vs. Lower Peninsula? Are any other regions doing well or falling behind?
All five of the tribal operators in the Upper Peninsula partnered with established brands for online gambling.
Those brands (DraftKings, Golden Nugget, PointsBet, TwinSpires and WynnBET) have combined to take $447.5 million in sports bets and amassed $132.0 million in internet gaming revenue.
South from the Mackinac Bridge, the nine live brands combined for $1.05 billion in sports bets and $351.1 million in internet gaming revenue.
Drilling down further on the Lower Peninsula, a region we’ll be keeping an eye on going forward is west Michigan.
We’ll group FireKeepers, Four Winds and Play Gun Lake together in that region. It’s a huge incomplete for these brands. Again, FireKeepers just launched last week, Four Winds was not on the starting line, and Play Gun Lake does not have online sports betting yet.
Still, of the nearly $603 million in combined online sports betting and internet gaming revenue so far in Michigan, just 1.5% ($9 million) has come from West Michigan brands.
8. Where are Michigan online gambling tax revenues going?
The allocation of tax revenue falls out of two separate pies for online sports betting and internet gaming, per the Lawful Sports Betting Act and the Lawful Internet Gaming Act.
For sports betting, 30% of revenue from Detroit operators will go to the city for things such as the hiring and training of patrol officers, along with anti-gang and youth development programs.
Then, 5% (capped at $3 million) will go to the Michigan agriculture equine industry development fund. However, some legislators are pushing to remove the $3 million cap for that fund and allow the 5% allocation to go uncapped.
The remaining amount goes into the internet sports betting fund, which also collects 90% of tribal tax revenue payments. The remaining 10% goes to the Michigan strategic fund.
The internet sports betting fund directs $500,000 to the compulsive gambling prevention fund, then $2 million to the first responder presumed coverage fund. The rest goes to the state school aid fund.
For internet gaming, 30% of revenue from Detroit operators also goes to the city.
Then, another $3 million will go to the Michigan agriculture equine industry development fund.
The rest goes to the internet gaming fund, which adds another $500,000 to the compulsive gambling prevention fund, $2 million to the to the first responder presumed coverage fund, and the rest to the state school aid fund.
For tribal operators, 20% of tax revenue goes to the local tribal government of the casino licensee; 10% to the state’s strategic fund; and then 70% to the internet gaming fund.
9. What are the major developments expected for the rest of 2021?
The launches of Soaring Eagle products, along with Play Gun Lake sports betting, are market we’re keeping a close eye on.
But from a consumer standpoint, the minds of many will be on football season, football season, football season.
Oh, and football season.
The industry at large, though, has been through the football paces in other states before. In Michigan, there will be more focus on when the state will enter into compacts for interstate poker play.
Since the Jan. 29 launch of online poker here, platforms have operated in a fenced-in market. In other words, players in Michigan can only compete against others inside the state.
The Michigan Gaming Control Board is reviewing compacts and has indicated interstate play should be available by the end of the year.
On the online casino front, live dealer online casino games launched Thursday in the Detroit area. Evolution was approved Wednesday and launched Thursday on the six-month anniversary of Michigan online casinos being live. We’ll keep an eye on how that impacts the market.
Evolution operates live blackjack, baccarat and roulette out of a Southfield studio with several Michigan online casinos.
PlayTech also has Southfield studio space, they announced, but have not yet been approved.
10. What operators are poised to make a move the rest of the year?
Tilman Fertitta is increasingly popping up on television screens in Michigan. That’s a signal that his Golden Nugget brand, which specializes in casino, is ready to spend.
WynnBET also just signed a partnership with the Detroit Lions and appears willing to spend in Michigan before football season, too. The brand made big headway in June sports betting and could be ready to make a name for itself in Michigan and beyond.
We also expect Barstool Sportsbook to have a bit of a bounce-back in sports betting. Football should be the brand’s bread and butter, so expect Barstool’s market share to stop its months-long slide. After a great start in January, the dip has been a rough one for the brand.
The tribes that have gone with self-branded products (FireKeepers, Four Winds and Soaring Eagle) are also a fascinating case study to watch for observers and gambling stakeholders across the country.
We don’t know exactly what the Michigan online gambling landscape will look like in six months. But we at Playinmichigan — in addition to industry folks, sports fans and casino-goers across the state and country — will be watching.
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