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Last week, Michigan’s state government provided a positive projection, indicating a potential launch of online gambling in the fall.
The legislator behind the legislation is still aiming for larger goals. Following the upcoming launch this fall, the state is estimating an annual tax revenue boost of $25 million, surpassing the initial increase seen when the gambling laws were expanded last year.
However, Rep. Brandt Iden, who will complete his tenure in Michigan’s House of Representatives this year, remains optimistic about the possibility of generating annual revenue in the hundreds of millions.
Iden expressed confidence in achieving a three-digit number ahead of the decimal point, stating, “I firmly believe we will reach that milestone, possibly before November ends, maybe even by Thanksgiving,” in an interview with Playinmichigan on Monday morning.
Tax revenue will aid schools, first responders
Governor Gretchen Whitmer has finally put an end to the year-long series of halts and restarts by officially signing legislation that permits sports betting and internet gambling across the entire state.
According to the Michigan Department of Treasury, the announcement included a projection of $19 million in state tax revenue. Out of this revenue, $4.8 million is allocated to the School Aid Fund, while $4 million is designated for the First Responder Presumed Coverage Fund.
In March, retail sports betting commenced, paving the way for an early 2021 debut of online sports betting, internet casinos, and online poker in the Great Lakes State.
However, the pandemic inevitably altered the schedule.
Shutdown makes states desperate for online gambling
In March, all of Michigan’s 26 casinos were closed, and many remained shut for several months.
Due to a prolonged closure lasting nearly five months, Detroit’s trio of commercial casinos experienced a significant decline in revenue. The loss amounted to a staggering $555.2 million, signifying a 65% decrease when compared to the earnings during the first seven months of 2019. Consequently, this substantial decline in revenue had a considerable impact on the state of Michigan, resulting in a loss of $45 million in state tax revenue. Additionally, the city of Detroit suffered a financial setback of $66.1 million in comparison to the previous year.
In 2020, numerous industries have been affected, and states are now urgently seeking alternative revenue streams.
Not only did the pandemic lead to the closure of casinos and financial challenges, but it also provided a fresh outlook on the possibilities of online gambling.
New Jersey, a state at the forefront of the battle to legalize sports gambling in 2018, experienced a remarkable surge in online gambling revenue throughout the pandemic. This upward trend reached its peak in July, setting a new record with over $87 million in revenue and contributing $13 million in taxes.
The state found it enlightening that online casinos became a more profitable source of revenue compared to sports betting.
According to Iden, “Ultimately, sports lack significant state tax revenue. While we appreciate and are thrilled to have it, the truth is, there isn’t much money in sports. Personally, I enjoy sports betting and actively participate in it, but the key lies in having iGaming as well.”
New online gambling projection nets $25 million for Michigan
The state’s Office of Administrative Hearings and Rules recently released impact statements for internet gambling, and they have also scheduled a public hearing later this month to discuss the draft rules.
The MGCB prepared the statements as part of the rulemaking process and they were subsequently approved by the Administrative Rules Division.
The projections anticipate internet gaming to generate revenue exceeding $18 million, while internet sports betting is expected to generate annual revenue surpassing $7 million.
The projected amount in December was $19 million, and now there has been an increase of over 31% from that initial estimate.
Iden thinking bigger as online market matures
“I believe it will require some time to resolve,” expressed Iden, a 37-year-old ex-tennis player from Kalamazoo College and a passionate NFL bettor. He admits to being uncertain about his own career prospects beyond 2020.
He warned that there are possible challenges on the legislative front. Furthermore, not all operators will be prepared from the beginning.
Iden expressed his approval for the state’s conservative estimate for the upcoming fiscal year, starting on October 1st, 2021.
He said that the estimate of $25 million is a very conservative number, and he believes it is justified.
According to Iden, it is reasonable to estimate a $30 million figure for the first year. He cited the uncertainty surrounding Big Ten football as an example of an unpredictable factor. For the fiscal year commencing on October 1, 2021, he anticipates online gambling tax revenue to range between $80 and $110 million.
Iden mentioned the possibility of complete integration, envisioning a timeframe of around 12 months, 16 months, or 18 months in the future. He expressed curiosity about how such integration would appear.
Experts split the difference between MI gambling projections
The answer, much like various aspects in life, likely lies somewhere in between.
In Lansing, at the annual Consensus Revenue Estimating Conference in January, a gathering of lawmakers was held where a team of specialists convened in the pre-pandemic era.
The projections served as fiscal year 2020-21 budgetary guides, set to commence in a few weeks.
They reached a figure that fell somewhere between the projected $25 million and Iden’s lofty goal of reaching nine figures.
They agreed to a wager of generating $50 million in revenue through sports betting and online gaming.
It won’t be long before we begin to identify those who achieve success.
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