The 11th-largest state in America, admitted to the United States in 1837, spread across two peninsulas in the Great Lakes region of the United States. Bounded by four of the five Great Lakes, Michigan borders Ontario, Canada, to the north and the north-east, Ohio to the south-east, Indiana to the south, Illinois to the south-west, and Wisconsin to the west. At the same time, it shares Lake Superior’s waters with Minnesota on the far north-western edge.
As an important industry and trade center ever since, The Wolverine State is mostly known as the capital of the American automotive industry. Michigan’s diverse economy, though, including advanced manufacturing, agribusiness, cybersecurity, food production, information technology, mining, as well as aerospace and defense technology.
The annual economic output contributes to a state gross product bit above $528 billion, which equals to 2.6% of the overall GDP in the United States (data for 2018).
Since the introduction of The Gaming Control & Revenue Act in 1996, Michigan and land-based casinos intertwine in a coordinated fashion, compounding the gambling scene which also consists of pari-mutuel betting on horse racing (legalized in 1933), and the state lottery and bingo charitable gambling (established in 1972).
Two latest additions enacted in December 2019 — legalizing retail and online sports betting as well as interactive gambling — complement the picture and make Michigan one of only a few states in America with a full spectrum of regulated gaming.
Legal Framework
Coming on the heels of the SCOTUS’ repeal of the PASPA in 2018, two fundamental laws create a legal foothold to online gambling, allowing existing brick-and-mortar halls to offer myriad games and sports wagering opportunities to Michigan residents.
Most interesting to the iGaming industry is, of course, HB4311, known as the Lawful Internet Gaming Act (LIGA).
It establishes a viable structure for three commercial casinos and 23 tribal casinos to offer interactive gaming using two different skins: one for online poker, and the other for online slots and table games.
The LIGA sets a tiered tax system for operators; it starts at 20% of gross wins up to $4 million, increasing to 28% over $12 million. Three land-based casinos based in Detroit are additionally liable to city tax at the rate of 3.25% of gross wins.
Online gamblers and sports bettors will be taxed 8.4% on adjusted receipts.
The LIGA also introduces the Division of Internet Gaming (DIG) at the Michigan Gaming Control Board as the principal regulatory body for online gambling. The DIG is empowered “to fully and effectively execute this act to administer, regulate, and enforce the system of internet gaming,” which includes licensing and jurisdictional agreements.
The age limits vary; in Detroit casinos, it’s 21 years of age, while Native American Tribes are allowed to establish their minimum gambling age, although it cannot be less than 18 years.
The initial projections of interactive gambling revenues range over $19 million, with close to $5 million already allocated to the School Aid Fund.
Other online gambling tax beneficiaries include public safety programs, first responders’ support, combating compulsive gambling ($500,000 per year), and helping local communities in the city in which the operator resides.
Licensing
The most significant peculiarity of the LIGA is that license for online gambling can be issued only to a land-based casino that already operates in the state.
However…
…to qualify for the iGaming permit, the aspiring operator has to go through the comprehensive vetting process to establish that it has an adequate “ability and the means to develop, construct, operate, and maintain the proposed internet gaming platform.”
Also, the applicant has to submit all relevant information about business operations, financial statements (tax returns, bankruptcy history, and accounts), officials’ personal information, adequate capitalization including the financial ability to run an online gambling hub, and the report on a total number of gaming positions.
Then, it has to submit the criminal record and civil litigation history — especially whether the applicant is a defendant in any litigation that involves the integrity of existing casino practices — and the full history of material noncompliance with any regulatory requirements in Michigan.
If the internet gaming operator-candidate proves eligibility and suitability to meet these requirements, it has to pay a one-time license fee of $200,000 plus $100,000 for each year.
To put things into perspective, all applicants for sports betting permits — governed by HB4916, the Sports Betting Act, the other 2019 addition — have to pay $50,000 application fee, $100,000 for the license, and $50,000 per year.
The online gambling license is valid for five years, with a renewal potential of an additional five.
Players’ Protection
Since the interactive gambling regulations in Michigan will kick off in 2020, we’re yet to see the full extent of responsible gaming operations. On the other hand, considering the language of the LIGA and history of gambling in the Great Lakes State, one could assume that we’re looking toward the well-governed online market.
First off, the LIGA stipulates that all operators have to ensure timely and written reports on software certifications and all technical standards of computer systems, programs, and platforms that seem to be in line with the other reputable online jurisdictions.
Furthermore…
…the letter of the law insists on developing, adopting, maintaining, and enforcing responsible gambling operations, technical and financial standards for wagering, as well as confidential personal information. It also hints at a self-exclusion database, which is exempt from disclosure under the Freedom of Information Act.
Finally, the LIGA ultimately empowers the Michigan Gaming Control Board to institute any responsible gambling frameworks and fair-gambling practices in the future.
Any deviation from the existing or new stipulations shall result in the operator’s permit revocation.
Also, the state already has significant problem gambling infrastructure in place, consisting of Michigan Association on Problem Gambling, Michigan Problem Gambling Helpline (operating under the umbrella of the state Department of Health and Human Services), and Disassociated Persons List.
The latter is the synonym for the lifetime self-exclusion program and an obvious fetus of the same initiative in the online gambling market. Also vital, the LIGA stipulates all license holders to enable automatic software sync with this database.
It wouldn’t be surprising to see fully developed players’ protection framework emerging some time in 2020, particularly regarding resolutions of players’ grievances and overall government of patrons-operators relations.
Final Notes
Speaking in economic terms, Michigan has had ten incredible years since the tremulous financial crisis in 2008/09. The state has fully recovered and offers excellent fiscal stability.
Thus…
…it seems that online gambling legalization is yet another prong in building an even more sustainable economy, particularly in lights of potential gaming revenues, sports betting frenzy in America, and the upcoming March Madness.
Of course, the final word is yet to come, although there are plenty of reasons to be optimistic.
One of the most critical factors will be, as always, the players.
To that end…
…play responsibly, prudently, stay well within the limits of your budget, don’t forget that gambling should be fun — and nothing more than that — and have good luck!
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