Of All Things, The FBI Might Slow Down Michigan’s Online Gambling Launch

Though it has been legal nationwide since 2018, a hurdle from the federal level could trip up Michigan’s implementation of online sports betting.

During Tuesday’s regular meeting of the Michigan Gaming Control Board (MGCB), Executive Director Richard Kalm detailed how the FBI could stand in the way of a 2020 launch of online gambling in the Great Lakes State.

He said the MGCB is still awaiting FBI approval of a portion of the online gaming statute dealing with fingerprinting licensing applicants.

The regulator still expressed confidence in a 2020 launch of mobile sports betting, online casinos and online poker in an otherwise positive report to the board.

Kalm: FBI currently not accepting MGCB fingerprints

Kalm said the MGCB has been getting fingerprints checked nationally for years until the FBI recently said the board’s statute did not support it.

Michigan passed the Lawful Internet Gaming Act last year, and Kalm said it amended the language as the FBI directed. So far, the FBI has not approved the new language.

Kalm said without approval, the MGCB can still access state records but not federal records during background checks.

“That may impact our timeline,” Kalm said. “We’ve got efforts ongoing with the FBI. There’s a group, they’re in Missouri I think, that does all that approval. We’re waiting for FBI attorneys to give us that language and give us the final go.”

Kalm said the MGCB is working with the Michigan State Police, who won’t send prints to the FBI for now.

“We’re working on that in several different ways,” Kalm said. “Really it’s a matter of getting us to the top of their pile because COVID has slowed their processes down immensely.”

Kalm still expects online gambling launch this year

Michigan sports betting launched in March at retail sportsbooks. Recent hopes are for an October launch of online gambling, but Kalm was less aggressive in his comments on Tuesday.

“Hopefully we can get these things off the ground before the first of the year,” Kalm said.

The launch of online gambling will help a state revenue source that has been battered during the COVID-19 pandemic.

Detroit’s three casinos were closed on March 16 and did not reopen until last week. Through July, aggregate revenue for the Detroit casinos was down 65% from 2019.

That loss of revenue could impact staff levels for enforcement of online gambling during the next fiscal year, Kalm said.

Operators, suppliers, vendors turning in applications

The application process is ongoing for online gambling in Michigan.

The MGCB started accepting applications from suppliers on May 15 and from operators and vendors on June 30.

Kalm said as of Monday that 11 operators, 15 suppliers and eight vendors had turned in applications. Fifteen operators in the state, 12 Native American tribes and Detroit’s three casinos are eligible to apply for licenses.

MGCB staff members are working from home to process the applications.

“We don’t think the rule process is going to be the hold up,” Kalm said. “It’s going to be whether or not we can get licensing suppliers and operators, getting that particular part. It’s going to be a little bit more cumbersome because obviously we can’t travel.”

A spokesperson for the MGCB has said the body won’t disclose the identity of the applicants until they are approved.

The MGCB issued draft rules to stakeholders in April. After feedback, a later version of draft rules were published by the state legislature as part of the rulemaking process.

Steps in rules process can be skipped, hurried

The state’s rulemaking timetable pegs 133 days of steps after the public hearing for a rule to be implemented, meaning a 2020 launch would be unlikely.

However, some legislative steps can be bypassed or expedited for a 2020 launch.

Kalm credited board staff and Deputy Director David Murley with efficient work during the state’s stay-at-home orders. Kalm said full cooperation and expediency has been the name of the game so far during the process.

“I don’t think there’s been much, and I don’t want to say there’s been a whole lot of positive things that came out of COVID. But one of them was the realization that online gaming coming online sooner rather than later was a good thing.

“For tribes who are suffering but also the commercial casinos who suffered in the city of Detroit, and obviously the taxes that have not been paid because of COVID. Therefore, there’s been sort of a new renewed spirit of cooperation.

“Regulators, we’re not always loved everywhere we go. And I’m not saying we’re loved now, but people have been much more able to understand where we’re coming from and also give us logical input as it pertains to their particular situation with the rules.

“And so this process is really moving along with really very few glitches, and that has allowed us to expedite and get this thing going quicker.”