Fiscal Analysis of Michigan’s iGaming Legislation Creates Constitutionality Debate

Even as Michigan lawmakers continue to coalesce around recently introduced online gambling legislation, a recent bill analysis conducted by the state’s Senate Fiscal Agency has cast doubts over the proposal’s constitutionality.

In a bill analysis document completed on April 5, legislative analyst Drew Krogulecki provided legislators with a comprehensive examination of Senate Bill 203, focusing on its potential consequences for municipal and state government.

Using a format in which opposing arguments against the bill are presented, followed by responses addressing those concerns, Krogulecki concluded his analysis by stating that the “Lawful Internet Gaming Act” would result in negligible financial impact:

“(The) bill would have an indeterminate negative impact on the City of Detroit, result in additional expenses to the Michigan Gaming Control Board, generate additional revenue to the First Responder Presumed Coverage Fund, and have an indeterminate impact on the General Fund and School Aid Fund.”

On their own, those insignificant economic benefits would be enough to call SB-203’s viability into question, but within the 16-page document, Krogulecki also highlighted a more pressing concern.

In the first opposing argument entry, the analyst outlines a legal argument which holds that SB-203 violates Michigan’s state constitution:

“Senate Bill 203 could be considered unconstitutional from several different perspectives.

Under Article 4, Section 41 of the Michigan Constitution, any law enacted after January 1, 2004, that authorizes any form of gambling must be approved by a majority of voters in a statewide election and a majority of electors voting in the township or city where the gambling would take place.

Without requiring a statewide vote, the bill would violate this provision.”

As observed by Krogulecki, the Michigan state constitution requires any law authorizing gambling related activities to be approved by voters, rather than the legislature.

However, Krogulecki then goes on to present a response that supports SB-203’s constitutionality.

According to this position, the fact that Detroit’s three land-based casinos, along with Michigan’s assortment of tribal gaming enterprises, would be iGaming licensees makes the bill constitutional due to a special exemption:

“Article 4, Section 41 of the Michigan Constitution specifically exempts the Detroit casinos (MotorCity, MGM Grand Detroit, and Greektown) and Indian tribal gaming from that section, and it is these casinos and the Indian tribes that would be potential licenses under the proposed Act.”

As currently written, SB-203 would only allow players physically located within one of the state’s brick and mortar casinos to participate in real money online gambling.

Should the bill be declared unconstitutional, the issue of iGaming in Michigan would not be dead. Rather, the proposal would be presented to voters via statewide referendum to comply with constitutional obligations.

Krogulecki’s report also called another potential obstacle into question, as his analysis suggests that SB-203 would create conflicts with the state’s tribal gaming authorities:

“The bills would erode tribal sovereignty. Specifically, Senate Bill 203 would require Michigan Indian tribes to waive their sovereign immunity if they wished to participate in online gaming.

While this would not be illegal, it could be unacceptable to the tribes. Furthermore, subjecting tribes to Michigan Gaming Control Board licensure and regulatory structures could be challenged as a violation of the Indian Gaming Regulatory Act.”

This particular opposing argument did not receive an accompanying response, which is not a surprise considering how California’s decade-long iGaming legislation debate has been hindered by tribal opposition.

Michigan is just one of several states currently mulling iGaming bills, along with New York, Pennsylvania, Massachusetts, West Virginia, and New Hampshire.

If approved, SB-203 would make Michigan the fourth U.S. state to regulate online gambling, joining Nevada, New Jersey, and Delaware.