Hoping to avoid a repeat of last year’s shock veto, legislators in Michigan working to legalize online gambling are accepting input from the state’s new Governor. Despite broad bipartisan support which sent a Michigan iGaming bill sailing through both legislative chambers last year, former Governor Rick Snyder used one of his final acts in office to exercise his veto powers.
But in comments made to Online Poker Report, state representative Brandt Iden (R-61) revealed that he and his colleagues are working closely with newly elected Governor Gretchen Whitmer. Iden has previously sponsored iGaming legislation in each of the last five sessions.
Despite the shift from Republican governance in the executive branch under Snyder to a Democrat in Whitmer, the latter has previously expressed her own opposition to the latest Michigan iGaming bill as currently constructed.
Plans to Amend Michigan iGaming Bill
According to Iden, his office plans to amend his House Bill 4311 – also known as the Lawful Internet Gaming Act – to directly address Whitmer’s primary concerns:
“The positive out of this is that the governor’s office is engaging on the issue. The previous governor gave no indication that he wouldn’t sign the bill. I think some of these issues could have potentially been addressed last time around if the governor engaged. The governor has a team of folks working on it, and I think we can come to a landing spot.”
Iden has gone on record to predict that the Michigan iGaming bill will be passed by both chambers and sent to Whitmer’s desk by June.
Governor Cites Potential for Lotto Revenue Cannibalization
Just as Snyder did in explaining last year’s veto, Whitmer has cited concerns over “cannibalization” of existing revenue streams generated both by Michigan’s online lottery sales and land-based casinos.
In a statement issued by Bethany Wicksall – an executive speaking on behalf of the State Budget Office (SBO) – the Whitmer administration believes legalized online casino and poker games will compete directly with the Michigan Lottery’s successful iLotto program:
“Our main concern, obviously, is the potential reduction in state revenue. As the bill is written – given the tax rate, the distribution of the additional new online gaming revenue to the state, as well as the potential impact to the state lottery – even under an optimistic scenario, Treasury estimates that there would be a potential reduction in overall state revenue.”
Wicksall pointed to HB-4311’s current tax rate of eight percent on gross gaming revenue – with only five percent diverted to the state’s School Aid Fund (SAF) – as untenable given the Lottery’s SAF contribution of 26 cents on the dollar.
In testimony delivered to lawmakers, chief deputy Treasurer Jeff Guilfoyle referenced the potential loss of $35.5 million if local gamblers substituted iGaming for iLotto:
“It is iLottery that we think would be in most direct competition with iGaming. That substitution between iLottery and iGaming, even at a very small level, has a fairly significant impact on state revenue. Because the tax rate is so much lower, the state actually comes out behind.”
Iden Plans to Remedy Tax Rate Divide
In his interview with Online Poker Report, Iden offered a crisp rebuke to the cannibalization premise:
“That’s a flawed argument in my opinion. The lottery openly admits that they use their online presence to drive people to brick-and-mortar operations. The same thing is happening with online gaming in New Jersey. If we can drive more people into the casinos with iGaming, that will increase revenue and be more money for the state as well.”
With that said, Iden made it clear that he intends to make Michigan the fifth state – joining Nevada, New Jersey, Delaware, and Pennsylvania – to legalize and regulate online casino and/or poker:
“I think there is a high likelihood we’ll have to address the tax rate. I’ll have meetings with stakeholders and the treasury to try to come to an understanding of some sort of increased tax rate for this. Also, I think the bill can be rewritten to direct more iGaming funds directly to the School Aid Fund.”
Michigan’s current legislative session concludes on June 27, giving Iden and his allies a little more than one month to solve the tax rate dilemma and send HB-4311 to Whitmer for final approval.