Michigan’s Online Gambling Success Could Be Blueprint For Other States

Leaders and Best are two words often associated with Michigan.

Now, take it easy Michigan State fans, in this instance I’m not talking about the Wolverines.

The state of Michigan has set a great example for other states around the country when it comes to successfully operating online sports betting and online casinos.

While legalized sports betting is blossoming around the country, internet gaming remains legal in just six states. Of those states, Michigan has provided a nice blueprint for how it can be done.

Lots of studying and preparation

When Michigan lawmakers passed a bill to legalize online gambling and sports betting on Dec. 20, 2019, they really made sure to put the work in by the time things launched just over two years later.

The plan always called for online sports betting and online casinos to go live on the same day. That came on Jan. 22, 2021.

According to Michigan Gaming Control Board Deputy Director David Murley, the work was an open discussion with operators and industry decision makers when establishing rules and regulations.

“We made a point of consulting with the industry, before we enacted rules. I mean, we sent out draft rules multiple times to get feedback, and made changes several times based on requests or discussions,” Murley said.

One of the first things the MGCB recognized was that all that they knew about retail casinos didn’t necessarily apply when establishing rules for internet gaming.

“We were used to regulating land-based casinos. When that’s what you know, and you apply it to something like internet gaming regulation… I consider it to be night and day, especially now that I’ve done this for a while,” Murley said. “But, sometimes you have to talk to the industry and start to learn about, about how this really works.”

Michigan did have some examples to work with as well, with Pennsylvania and New Jersey having already launched both platforms in their states. However, neither had done so at the same exact time.

All hands on deck

There are a lot of moving pieces to get both industries up and running in the state. One of the biggest is a consensus among casino operators and the tribal operations around the state.

Michigan has 12 different federally recognized Native American tribes that operate 23 land-based casinos around the state.

Combine that with the three retail operations in Detroit, and a lot of clashes could have been had over regulations, or even launching the venture to begin with.

That didn’t happen in Michigan. It was a pursuit supported by all involved.

“Our tribes, they wanted this. So, they were on the same page with the Detroit casinos,” Murley said. “They weren’t at odds. Everyone saw that they could benefit from this. The tribes, they actually get a percentage of the tax money made from iGaming returned directly to the tribes. I think our political dynamics were such that everything lined up. The people that are often at odds, or the parties often at odds, were all kind of in agreement.”

Getting all casino operators in agreement, especially within the tribal communities, is a big challenge for other states pursuing legalized internet gaming.

Ready for launch

With years of preparation, while also working through the COVID pandemic, launch day arrived on Jan. 22, 2021.

On that day a total of 10 online sports betting platforms and eight online casinos were up and running.

Murley said the MGCB put the responsibility on the operators to be ready by launch day by laying out what was required and giving them a deadline to meet in order to be part of the initial boom.

“I think we also tried to really work with the industry by telling them, ‘Look, if this is what we need, in terms of say, licensing, this is what we need. And if you get it in by this time, you’ll be part of the first group that launches.’ Then we tried to incentivize the industry to get their stuff in and to talk to us to get these issues resolved. Knowing then that, if they did that, then they weren’t going to be left behind,” Murley said. “I think that was very successful. It allowed us to move this stuff through the rules and everything else with the licensing, and get internet gaming launched in Michigan very, very quickly.”

Within a month of launch day, 12 sports betting and 11 internet gaming apps were available. Currently, a total of 15 are operational for both industries, meaning each tribe and Detroit casino has an online platform in place for sports betting and iGaming.

The current challenges

Like any blossoming industry, it’s not easy to find a lot of qualified workers. Things are still so new and fresh.

That’s especially true when it comes to compliance and enforcement of rules and regulations.

“I’m sure everyone has the problem that we’re trying to hire people. So people we need to properly regulate this are just very difficult to find right now,” Murley said.

Because of that, the MGCB is again relying on the operators to be the first line of defense in policing themselves and staying up-to-date on Michigan’s specific rules and policies.

“I think we take the approach that this is so big and so different than land-based casinos, that the licensee itself has to be the primary regulator. I mean, they have to regulate themselves and make sure they’re complying with the law and rules. If they don’t, I think we view it as, we have to probably treat this a little differently than we would with a land-based casino, where we had a large number of staff and all kinds of rules in place, and a routine that’s been down for 25 years,” Murley said. “So, we do look at it as, ‘Hey, you guys are on your own, ask us if you need help. But, if you’re not going to, if you’re just going to ignore things, we can’t take that lying down, because we don’t have the resources to kind of chase you and find these things.’”

One of the big differences between land-based and online casinos is that the operators of the land-based casinos don’t have to think about anything other than operation up to Michigan’s code of policies.

When dealing with an online operator, especially those that have platforms in multiple states around the country, those operators are having to sort through different rules for different states. That can lead to lapses in making sure their product always meets all of the requirements for a state like Michigan.

“It has been surprising that some of the licensees just seem to ignore some of the requirements that are in statute and or rule. It’s frustrating because, to ignore it means you either deliberately ignore it, or you read it and you didn’t understand it just for whatever reason. Some of the things that shouldn’t be difficult to do, some licensees just don’t do them,” Murley said. “They don’t always seem to be kind of focused on what Michigan requires. That’s what happens when you’re running from a headquarters that’s responsible for multiple jurisdictions. You can’t focus on all of them.”

What can other states learn from Michigan?

Michigan is not a perfect machine at this point. However, it has still been a great example for other states to learn from.

Online sports betting and internet gaming continue to bring in big tax revenue for the state. Revenue for the operators has also shown consistent growth, especially when comparing months from 2021 to 2022.

While many states already have online sports betting launched, new states are still popping up. Others are attempting to get online casinos off the ground as well.

Starting in 2023, Ohio will join the online sports betting mix and operators are hoping that the state will be able to start off on the right foot.

For operators, overly complicated rules can make for a difficult launch.

Ontario launched sports betting in April, but convoluted rules and policies had some major operators delaying their debut until many weeks after being given the green flag.

“I would argue that three quarters of the rules could be similar or exactly the same state to state and not be dealing with policy, just be dealing with day-to-day operations and things that are not policy-driven,” said Andrew Winchell, Director of Governmental Affairs at FanDuel. “Working with the regulators in advance, helps shortstop those issues before they ever actually become an issue. I appreciate states like Virginia and Michigan, who did great jobs with that.”

High tax rates on operators are also an issue in some states. New York launched legalized sports betting earlier this year, but is imposing a 51% tax on sports betting revenue. Ontario has a 20% tax rate. Michigan sits at just 8.4%.

Ohio will be taxing at 10%, which is among the lower rates in the country.