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Michigan is often associated with the words Leaders and Best.
Michigan State fans, please relax. I am not referring to the Wolverines in this particular situation.
Michigan has become a leading model for other states across the country in effectively running online sports betting and online casinos.
Although sports betting is becoming increasingly legalized nationwide, internet gaming remains legal in only six states. Among these states, Michigan has successfully implemented a comprehensive model that serves as a useful blueprint for others to follow.
Lots of studying and preparation
Michigan lawmakers diligently worked on legalizing online gambling and sports betting, ensuring that their efforts paid off when the legislation was finally implemented just over two years after its passage on Dec. 20, 2019.
Jan. 22, 2021 marked the long-awaited day when both online sports betting and online casinos were launched as planned.
When establishing rules and regulations, Deputy Director David Murley of the Michigan Gaming Control Board held an open discussion with operators and industry decision makers.
Murley emphasized the importance of seeking input from the industry before implementing any regulations. He mentioned that they consistently shared draft rules multiple times to gather feedback and actively modified them based on requests or discussions.
When establishing rules for internet gaming, the MGCB quickly realized that their knowledge of retail casinos may not be entirely applicable.
Murley expressed that their prior experience in overseeing land-based casinos was vastly different from regulating internet gaming. After gaining experience in the latter, they realized the stark contrast between the two. Murley emphasized the importance of engaging with the industry and actively learning about the intricacies of internet gaming regulation.
Michigan had some examples to draw from in Pennsylvania and New Jersey, as both states had already implemented both platforms. However, it is worth noting that neither state had done so simultaneously.
All hands on deck
Getting both industries up and running in the state involves numerous complex factors. A major challenge lies in achieving a consensus among casino operators and tribal operations across the state.
In the state of Michigan, there are 12 distinct Native American tribes that have been officially recognized by the federal government. These tribes collectively own and operate a total of 23 casinos on their respective lands throughout the state.
The combination of the three retail operations in Detroit could have led to numerous clashes, whether it be regarding regulations or the initial launch of the venture.
The incident did not occur in Michigan; rather, it was a chase that received unanimous support from all parties involved.
According to Murley, the tribes were in favor of the Detroit casinos, demonstrating a shared perspective. There was no conflict between the tribes; in fact, they recognized the potential benefits. The tribes receive a portion of the tax revenue generated by iGaming, which is directly beneficial to them. Murley believes that the political environment was conducive to this agreement, as even typically opposing parties or groups were in alignment.
Other states striving to legalize internet gaming face a significant hurdle in gaining consensus among casino operators, particularly within tribal communities.
Ready for launch
After years of meticulous preparation, coupled with relentless efforts during the COVID pandemic, the long-awaited launch day finally dawned on January 22, 2021.
There were a total of ten online sports betting platforms and eight online casinos operating on that particular day.
According to Murley, the MGCB assigned the operators the responsibility of being prepared for the launch day. They outlined the necessary requirements and set a deadline for the operators to meet in order to participate in the initial boom.
“We made a conscious effort to collaborate closely with the industry, communicating our requirements for licensing and emphasizing the benefits of being part of the initial launch group. We offered incentives to encourage them to submit their materials and engage in discussions to address any outstanding issues. This approach ensured that they wouldn’t be left out if they complied. It turned out to be a highly successful strategy, as it facilitated a swift and efficient process for licensing and ultimately led to the rapid launch of internet gaming in Michigan.”
In just one month after the launch, a total of 12 sports betting and 11 internet gaming apps were made accessible. As of now, there are a combined 15 operational apps for both industries, ensuring that every tribe and Detroit casino now has an online platform for sports betting and iGaming.
The current challenges
Finding a significant number of skilled workers in a budding industry is challenging. Given its nascent and innovative nature, there is a scarcity of experienced individuals.
This is particularly accurate in terms of adhering to and implementing rules and regulations.
Murley expressed that hiring people has become a universal challenge, as finding individuals who can effectively address this issue has become increasingly difficult.
Due to this, the MGCB is once again depending on operators to take on the responsibility of being the initial defense in monitoring their own actions and remaining informed about Michigan’s particular regulations and guidelines.
“We believe that the nature of online casinos is so distinct and vast compared to land-based ones that the licensee themselves should be the primary regulator. It is their responsibility to ensure that they are abiding by the law and regulations. However, if they fail to do so, we will have to handle the situation differently than we would with a land-based casino. Unlike the latter, where we have a considerable number of staff, strict rules, and a well-established routine over the past 25 years, we consider online casinos as more independent entities. We are available to assist if needed, but if they choose to disregard important matters, we cannot simply stand by, as we lack the resources to actively pursue and uncover such issues.”
Land-based casinos operate solely within the boundaries of Michigan’s code of policies, without having to consider any additional factors. This sets them apart from online casinos.
Online operators, particularly those with platforms in various states nationwide, encounter the challenge of navigating distinct regulations for each state. Consequently, ensuring compliance with all the requirements specific to a state such as Michigan may occasionally be overlooked, resulting in potential shortcomings in their product.
Murley expressed surprise at the disregard shown by certain licensees towards statutory requirements and regulations. This lack of compliance is frustrating, as it suggests that licensees either intentionally ignore or fail to comprehend the guidelines. Murley also noted that some of these requirements are straightforward and should not pose significant challenges, yet licensees still neglect them. This lack of focus on Michigan’s specific requirements can be attributed to operating from a headquarters that oversees multiple jurisdictions, making it difficult to give equal attention to each one.
What can other states learn from Michigan?
At this point, Michigan may not be flawless, but it remains an excellent model for other states to emulate and gain insights from.
The state continues to generate substantial tax revenue from online sports betting and internet gaming. Moreover, the operators are experiencing consistent growth in their revenue, particularly when comparing the months of 2021 to 2022.
New states continue to emerge, joining the list of those already offering online sports betting. Furthermore, some states are also making efforts to establish online casinos.
In 2025, Ohio is set to enter the realm of online sports betting, and operators are optimistic about the state’s potential for a successful beginning.
Operators may encounter challenges during launch if the rules are excessively complex.
Despite the green flag being given, some major operators in Ontario postponed their debut in sports betting for several weeks due to complex rules and policies.
Director of Governmental Affairs at FanDuel, Andrew Winchell, believed that a significant portion of rules across states could be identical or similar, excluding policy matters, and instead focusing on day-to-day operations and non-policy driven aspects. He emphasized the importance of collaborating with regulators beforehand to proactively address potential issues and prevent them from escalating. Winchell commended states like Virginia and Michigan for their successful efforts in this regard.
In certain states, the burden of high tax rates is a concern for operators. New York recently introduced legalized sports betting, but it comes with a hefty 51% tax on sports betting revenue. Ontario, on the other hand, imposes a 20% tax rate, while Michigan stands at a comparatively low 8.4%.
Ohio’s tax rate of 10% is comparatively lower than many other states in the country.
