Michigan Gambling Laws and Taxes

History was made in the Great Lakes State when in the last quarter of 2019, Governor Gretchen Whitmer put pen to paper to sign a law to broaden gambling activities in Michigan. It had only taken a full year of lobbying and legislative maneuvering before the new gambling law would materialize. Under the legislative amendment to gambling in Michigan, online casinos, online poker, and sports betting were aptly included in the gambling mix.

While the lengthy legislative process would be a source of frustration for many prospective sportsbooks and online casino gambling investors in Michigan, the Lawful Sports Betting Act and the Lawful Internet Gaming Act provided much consolation.

Michigan Online Gambling Law

Act 152 of 2019, otherwise known as the Lawful Internet Gaming Act, was initially introduced in March 2019 and filed as House Bill 4311 by a House Representative- Brandt Iden. Still, in March of 2019, House Bill 4311 would be brought to the attention of a couple of influential House committees. The document proposed that it was best to regulate internet gambling by instituting fair, responsible, and secure legislation that legalizes granting licenses to online casino operators in Michigan.

According to Act 152 of 2019, operators of online casino gambling sites in the state must function with a single brand catering to all forms of internet gambling or two independent brands, with one brand offering interactive poker while the second brand provides other online gambling games. The Michigan Gaming Control Board (MGCB) would be instituted to supervise the licensing and regulation of poker platforms and internet casinos in the state, including Tribal casinos.

But while the Lawful Internet Gaming Act covers the type of casino games that internet casinos can offer, the law does not state the type of lottery games that casinos can offer their customers. It is a task reserved for the Bureau of Lottery. Also, the Lawful Internet Gaming Act does not place any prohibitions on the sale of online lottery games by internet casinos.

Key Elements of the Michigan Online Gambling Law

  • Internet casino operators are required to get a 5-year renewable license.
  • The law required that online casino gaming commences in Michigan only after a minimum of one tribal casino and a single commercial casino are licensed.
  • All internet casinos are expected to have maintained a minimum of 50% of their respective gaming positions in addition to the Michigan Class III gaming status at the time of the law’s enactment.
  • All online casino operators are expected to prove that they have the technology to validate geolocation, the 21+ customer age verification requirement and that their customers are listed on the responsible gaming database of the MGCB.
  • All operators must display their gaming licenses on their online sites.
  • Operators must provide monthly reports stating gambling winnings and their income from online slots, table games, and online poker. They should also provide information on the total redeemed free-casino gameplay, customer wagers, adjusted gross receipts, deductions, and payouts.

Michigan Internet Gambling Taxes

The law states that within the first three years of a 5-year license, operators of online casinos cannot determine their overall adjusted gross receipts by simply deducting their current gross receipts under the guise of ‘free play.’ They cannot deduct over 10% of their gross receipts in 1 to 3 years, over 6% in the fourth year, and over 4% in the fifth year of operation. By the sixth year, the gambling law will not allow any deduction of the gross receipt with ‘free play.’ A progressive income tax is paid by online casino operators based on their respective adjusted gross receipts (AGR) for the year in question, but usually starting at a rate of 20% as follows:

  • An AGR of $4 million or less will attract a tax of 20%.
  • An AGR of less than $8 million but more than $4 million will attract a tax of 22%.
  • With an AGR of less than $10 million but over $8 million, operators pay a 24% tax.
  • With an AGR of less than $12 million, but more than $10 million, operators pay 26%.
  • Over $12 million of AGR will attract 28% in taxes.

Online casinos are expected to pay their taxes on or before the 10th of every month. It is also worth noting that operators are expected to pay US$ 50,000 in application fees for a gaming license. However, the initial licensing fee is a sum of US$ 100,000, while the subsequent expected licensing fee paid yearly is US$ 50,000.

Michigan Sports Betting Law

House Bill 4916, introduced by Rep. Brandt Iden in September 2019, will transition into the Lawful Sports Betting Act by December 2019 after being passed into law by Governor Gretchen Whitmer.

The Lawful Sports Betting Act states that every internet casino is allowed to operate just one sportsbook brand. Online casinos must unambiguously display their sports betting brand on their site.

In addition, the law clearly defines an “athletic event” and those events that cannot be categorized as athletic events, including online fantasy contests, casino games, high school sports events, and pari-mutuel horse racing. The MGCB also regulates Sports Betting.

Key Elements of the Sports Betting Law in Michigan

  • The law does not include sports betting conducted in Indian territory.
  • The act prohibits sports betting in public settings like a club.
  • Operators of sportsbooks are required to prove their competence in validating the geolocation and the age of registered customers. Also, they have to confirm that their customers are not listed under the responsible gaming database of MGCB.
  • Sportsbooks must meet the Michigan Class III gaming status requirement plus maintaining a 50% gaming position when the law was promulgated.

Michigan Sports Betting Taxes

Similar to obtaining an online casino license, operators of sportsbooks are expected to pay US$ 50,000 in application fees with an additional US$ 100,000 as an initial license fee followed by US$ 50,000 paid subsequently on an annual basis. Also, sports betting suppliers are expected to make an initial fee payment of US$ 5,000, followed by a US$ 2,500 yearly renewable fee payment.

According to the law, sportsbook operators are expected to pay 8.4% in taxes on their adjusted gross sports betting receipts. A 1.25% fee is also imposed on operators’ adjusted gross receipts by the city of Detroit.

How does Michigan Benefit from Online Casino Gambling and Sports Betting?

Following the signing into law of the new gambling amendments in Michigan, it was widely reported that the state would earn an initial estimated annual revenue of US$ 19 million from licensing fees and taxes. The House Fiscal Agency released this report.

This agency also estimates that the annual revenue from online casino gambling and sports betting would rise to over US$ 60 million in time. According to the Office of Administrative Hearings and Rules, the state will earn an initial annual revenue of US$ 25 million consisting of US$ 7 million from sports betting and US$ 18 million from online casinos.

Tribal Casinos and Online Gambling in Michigan

It is worth noting that there are 12 Native American tribes in Michigan. Each of these federal government-recognized tribes is a casino operator with the power to grant casino licenses to commercial online casino sites, including a permit each for sportsbooks, interactive poker sites, and internet casinos.

When it comes to taxes, those internet casino gambling operators that partner with tribal casinos will be expected to pay the following:

  • 70% of their total taxes are paid to the internet gaming fund.
  • 20% paid for the services rendered by the tribal government under their jurisdiction.
  • 10% paid to Michigan strategic fund.

Finally, it is required that those sportsbooks associated with tribal casino operators should pay 90% in taxes to the internet sports betting fund while 10% is paid to the Michigan strategic fund.

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