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It is astonishing to think that we are already six months into the online gambling trial in Michigan. While the online casino sector has exceeded expectations, the revenue generated from online sports betting in the state has been less profitable for the government during this half-year period.
After the highly anticipated launch on Jan. 22, Michigan has shown a strong overall start, with these being the main highlights.
As we reach the six-month milestone since the introduction of regulated Michigan online sports betting and online casinos, let’s take a look at the current state of the market and what lies ahead in the next six months.
1. How much tax revenue has Michigan online gambling raised so far?
This week, the Michigan Gaming Control Board unveiled statistics that provide insights until the conclusion of June.
During the initial five months of expanded online gambling, Michiganders have placed nearly $1.5 billion in sports bets online, resulting in a revenue of $119.9 million. Michigan online casinos have emerged as the primary source, generating $483.1 million in revenue for internet gaming operators.
Online sports betting has generated $2.6 million in state revenue and $1.6 million for the city of Detroit at an 8.4% tax rate. The revenue from internet gaming, encompassing online poker and subject to a graduated tax rate ranging from 20-28%, has reached $85.2 million in state revenue, $24.0 million for Detroit, and $9.2 million for tribal governments managing online gambling platforms.
Online sports betting and internet gaming in Michigan have generated a total of $87.8 million in state tax revenue and $34.7 million in local revenues, which includes contributions to tribal governments.
These totals will be further increased once the tallies from July are included.
2. Is that online gambling tax revenue underwhelming, on par, or a home run?
During the previous summer, we held a discussion with Brandt Iden, the major force behind legislation for online gambling in Michigan, regarding the potential tax revenue of the state’s online gambling market.
There were doubts about his claims of Michigan having the potential to generate a substantial amount of new state tax revenue, suggesting that he may have been exaggerating.
When Michigan Gov. Gretchen Whitmer signed the legislation in December 2019, it was projected that annual state tax revenue would amount to $19 million. However, later on, the Office of Administrative Hearings and Rules increased that estimate to over $25 million.
In January 2020, lawmakers convened at the Consensus Revenue Estimating Conference in Lansing, where a panel of experts gathered and independently projected approximately $50 million in fresh state tax revenue.
However, Iden’s estimation of a potential $100 million appeared to be unrealistic.
If the current trend continues, it is highly likely that Michigan’s state tax revenue will exceed $100 million by the time the July revenue figures are disclosed.
Regardless of how you look at it, it is remarkable that the state could have achieved that milestone by Thursday, which marks the 6-month anniversary of the online launch.
3. Was the hot start in Michigan online casino revenue expected?
The launch of Michigan online casinos was met with the perfect storm.
However, take into account these factors:
- In 2020, the coronavirus pandemic compelled individuals to primarily stay at home. As a result, some individuals found themselves with additional discretionary funds that had not been expended during the months leading up to the online launch.
- The introduction of online sports betting coincided with an exciting addition designed to attract bettors.
- The delay in launch throughout the entirety of 2020 could have turned out advantageous for Michigan. With the perception that a fall launch was attainable, financially backed operators initiated television advertisements well in advance. Consequently, these advertisements were imprinted in people’s minds for several months.
- In contrast to New Jersey and Pennsylvania, Michigan was well-prepared with all the major players in the industry ready to launch on Jan. 22. While the other markets saw some small operators launching beforehand with others gradually joining in, Michigan had the advantage of witnessing the lucrative potential of nationwide online gambling. As a result, while those markets took slow initial steps, Michigan was able to sprint ahead in the online gambling industry.
However, almost nobody anticipated such a reaction.
4. Has the Michigan online sports betting market been a disappointment?
The success of Michigan’s internet gaming market has resulted in a less impressive outlook for online sports betting.
Michigan operators have generated approximately $1.5 billion in online sports bets since their launch, surpassing Indiana, Colorado, and Virginia. However, it is evident that these figures fall considerably short compared to the leading states of New Jersey, Illinois, Nevada, and Pennsylvania.
Despite having a smaller population compared to Illinois and Pennsylvania, Michigan surpasses New Jersey in terms of population, and significantly outnumbers Nevada. However, it is worth noting that New Jersey’s population is inflated by visitors from New York, while Nevada is renowned for its long-standing dominance in sports betting.
On the other hand, the states competing with MI in the next-tier range have comparatively smaller populations.
Football is the primary distinguishing factor between Michigan and all other states, except for Virginia, which initiated its football program a day before Michigan.
Michigan stands out from the rest as it has yet to experience a full NFL or NCAA season. Football holds supreme significance in the realm of sports betting. It becomes challenging to gauge Michigan’s position accurately without a football season that allows for significant victories, thereby aiding in customer retention during the offseason as well.
Another contributing factor to the decline in sports betting in Detroit is the struggling professional sports scene. The availability of online sports betting came after a disappointing season for the Detroit Lions. Additionally, the once esteemed Pistons, Red Wings, and Tigers are currently experiencing extended periods of poor performance. However, there is a chance that the recent progress these organizations have shown in their development might not only improve their own fortunes but also reignite the enthusiasm of sports fans, leading to increased engagement with betting apps.
Online sports betting may be considered disappointing when compared to online casinos. However, in the overall national landscape, Michigan’s sports betting scene is still considered incomplete at the moment.
5. What operators have had the most success in Michigan?
By leveraging its triumph in Michigan, FanDuel Sportsbook has strengthened its position as the leading online sportsbook in America. Similarly, DraftKings Sportsbook has also established itself as a reputable and top-notch sportsbook operator in this region.
Additionally, both of these operators consistently compete for the second position in internet gaming revenue on a monthly basis, showing a close race.
BetMGM has emerged as the most influential game-changer in Michigan by a significant margin.
BetMGM Casino is the leading player in the online casino industry in Michigan, capturing 36.3% of the market share alongside BetMGM Poker. Furthermore, it is contending with DraftKings for the second position in terms of lifetime online handle for sports betting in MI.
Recognizing a significant potential in Michigan, BetMGM strategically positioned itself to seize the opportunity. Leveraging the esteemed reputation of downtown Detroit’s busiest casino, MGM Grand Detroit, they ensured their presence at the forefront alongside their competitors, ready to hit the ground running.
In order to prepare for launch, they successfully secured significant funding. They enlisted the support of Jamie Foxx, who continuously emphasized to the people of Michigan the importance of actively participating and investing in the endeavor.
It appears that we have been attentive, and as a result, BetMGM has established itself alongside the prominent brands in the industry.
6. Are most Michigan sports bettors using tribal or commercial operators? What about in internet gaming?
From their launch until June, the three brands associated with Detroit’s commercial casinos in Michigan raked in a total of $966.5 million in sports betting. This equates to an average of $322.2 million per operator, which includes Barstool Sportsbook, BetMGM, and FanDuel.
On the other hand, the remaining 10 sports brands are associated with tribal operators. It is important to note that FireKeepers Sportsbook recently debuted and some other brands joined the market later, so these figures may not accurately represent the average situation.
However, excluding FireKeepers, the total bets made by these operators amounted to $532.7 million through June. This translates to an average of $59.2 million per operator.
Commercial brands from Detroit brought in a total of $283.1 million in internet gaming revenue, while tribal brands fell just short of $200 million.
Brands eagerly flocked to commercial casinos due to the advantageous synergy found in major metropolitan areas. Additionally, these brands typically possess the greatest financial resources. As a result, their substantial investments are yielding impressive outcomes thus far.
7. What about Upper Peninsula vs. Lower Peninsula? Are any other regions doing well or falling behind?
Established brands have formed partnerships with all five tribal operators in the Upper Peninsula for online gambling.
The collective brands of DraftKings, Golden Nugget, PointsBet, TwinSpires, and WynnBET have generated a total of $447.5 million in sports bets and accumulated $132.0 million in revenue from internet gaming.
The nine live brands generated a total of $1.05 billion in sports bets and $351.1 million in internet gaming revenue, located south of the Mackinac Bridge.
Moving forward, we will closely monitor west Michigan as we delve deeper into the Lower Peninsula region.
In that specific region, we will categorize FireKeepers, Four Winds, and Play Gun Lake together. However, these brands are currently facing some significant limitations. FireKeepers only recently launched, Four Winds is not yet fully operational, and Play Gun Lake does not offer online sports betting at this time.
Out of the total online sports betting and internet gaming revenue of approximately $603 million in Michigan, West Michigan brands have contributed only a meager 1.5% ($9 million).
8. Where are Michigan online gambling tax revenues going?
Under the Lawful Sports Betting Act and the Lawful Internet Gaming Act, tax revenue is divided into two distinct portions for online sports betting and internet gaming.
In the realm of sports betting, Detroit operators will contribute 30% of their revenue towards the city’s initiatives, including the recruitment and education of patrol officers, as well as the implementation of anti-gang measures and programs for youth development.
Afterwards, a portion of 5% (with a maximum limit of $3 million) will be directed towards the Michigan agriculture equine industry development fund. Nevertheless, certain lawmakers are advocating to eliminate the $3 million cap for the fund, thereby allowing the 5% allocation to be uncapped.
The internet sports betting fund receives the remaining amount, along with 90% of tribal tax revenue payments, while the Michigan strategic fund gets the remaining 10%.
The internet sports betting fund allocates $500,000 towards the prevention of compulsive gambling, followed by $2 million towards the presumed coverage fund for first responders. The remaining amount is designated for the state school aid fund.
The city of Detroit receives 30% of revenue from internet gaming operated within its jurisdiction.
Furthermore, an additional $3 million will be allocated towards the development fund for the equine industry in Michigan’s agriculture sector.
The remaining amount is allocated to various funds. This includes an additional $500,000 contributed to the compulsive gambling prevention fund, $2 million designated for the first responder presumed coverage fund, and the remaining balance directed towards the state school aid fund.
The local tribal government of the casino licensee receives 20% of the tax revenue, while the state’s strategic fund receives 10%. The remaining 70% goes to the internet gaming fund.
9. What are the major developments expected for the rest of 2021?
We are closely monitoring the market for Soaring Eagle product launches and Play Gun Lake sports betting.
However, from a consumer’s perspective, the focus of many individuals will be on the upcoming football season, constantly thinking about football season.
Additionally, football season is upon us.
However, the industry as a whole has already experienced similar situations in other states. In Michigan, the focus will primarily be on determining when the state will establish agreements for interstate poker games.
Ever since the introduction of online poker on Jan. 29, it has been confined to a restricted market in Michigan. This means that players from the state can only engage in competition with fellow residents.
By the end of the year, interstate play should be made accessible as the Michigan Gaming Control Board is currently assessing compacts.
Live dealer online casino games were introduced in the Detroit area on Thursday, marking the six-month anniversary of the launch of Michigan online casinos. Evolution received approval on Wednesday and wasted no time in going live. It will be interesting to observe the market response to this new development.
Evolution runs live blackjack, baccarat, and roulette games from a studio located in Southfield, serving various online casinos in Michigan.
According to their announcement, PlayTech has secured studio space in Southfield, although they are still awaiting approval.
10. What operators are poised to make a move the rest of the year?
Tilman Fertitta’s presence on Michigan television screens is becoming more frequent, indicating the readiness of his Golden Nugget brand, known for its expertise in casinos, to make significant investments.
In addition, WynnBET recently formed a collaboration with the Detroit Lions and seems eager to invest in Michigan prior to the start of the football season. The company achieved significant progress in June’s sports betting industry and is poised to establish a prominent presence not only in Michigan but also beyond.
It is anticipated that Barstool Sportsbook will experience a revival in sports betting, particularly in football. As the brand’s primary focus, football is expected to help Barstool regain its market share and halt the decline it has been experiencing for several months. Despite a promising start in January, the brand has encountered significant challenges recently.
Observers and gambling stakeholders across the country find the tribes that have embraced self-branded products like FireKeepers, Four Winds, and Soaring Eagle to be an intriguing subject for study.
In the next six months, the future of online gambling in Michigan remains uncertain. However, Playinmichigan, along with industry professionals, sports enthusiasts, and casino visitors throughout the state and nation, will closely monitor the developments.
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