Michigan Online Gambling Bill Stuck in Stalemate

Last year, in one of his final acts as the Governor of The Wolverine State, Rick Snyder wielded his veto powers to kill off a widely supported Michigan online gambling bill.

At the time, the bill’s sponsor, state representative Brandt Iden (R-61), was optimistic about Snyder’s replacement by new Governor Gretchen Whitmer, whose election last November flipped Michigan’s executive branch from Republican to Democratic control.

But after reintroducing his latest iGaming legislation – House Bill 4311 (The Lawful Internet Gaming Act) – in March, Iden has seen a surprising level of pushback from Whitmer.

Governor Cites “Cannibalization” of Online Lottery Revenue

Last year, Iden successfully guided a Michigan online gambling bill through a 68 to 40 vote in the state House of Representatives, followed by a 33 to 5 vote in the state Senate.

But despite bipartisan support, Snyder exercised his veto powers while citing concerns over online casino gambling’s potential impact on Michigan’s lucrative online lottery program.

Only two months after introducing HB-4311 – his fifth attempt at legalizing iGaming in as many sessions – Iden was optimistic that the latest version would attain similar levels of support in the Legislature. Nonetheless, he was forced to park the Michigan online gambling bill in the House Ways and Means Committee – on which Iden serves as chairman – after Whitmer pledged to veto HB-4311 in its current form in May.

Bethany Wicksall – who works with the State Budget Office (SBO) – testified on behalf of the Whitmer Administration to explain the Governor’s opposition:

“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.”

Michigan Online Gambling Bill To Cost State $35.5M

Iden’s current proposal would tax gross iGaming revenue at 8 percent, while sending 5 percent to the state’s School Aid Fund.

Whitmer is relying on estimates from chief deputy Treasurer Jeff Guilfoyle, whose agency predicts iGaming could cost the state $35.5 million based on “cannibalization” of existing iLotto customers.

At the time, Iden remained optimistic, reporting that Whitmer would provide input to improve the bill’s tax rates and revenue sharing scheme. He even predicted full passage by the Legislature in June, but two months have passed without so much as a committee vote.

Iden and Whitmer Spar Over School Funding

The Treasury advised Iden to increase his bill’s tax rate to 40 percent, which would be the highest iGaming tax in America if codified.

Predictably, Iden has balked at that suggestion, telling Online Poker Report that such an exorbitant tax rate would effectively kill Michigan’s nascent iGaming industry in the proverbial crib:

“When you propose something like a 40 percent tax rate, it just clearly shows that you have no knowledge of what’s happening in the industry.
One of the things I continue to ask is for the administration to better educate themselves on the issue.

The fact that the governor’s office is ignoring the experts and simply listening to Treasury, who is not an expert in this issue and has very little knowledge, is problematic.”

Asked about his ongoing discussions with Whitmer – who has floated the idea of eliminating online slot games from the bill as a compromise – Iden told Online Poker Report that the lines of communication between himself and the Governor have broken down:

“I’d love to have a direct conversation with her about this. She refuses to engage with me directly. I’ve been talking to her staff. I welcome the opportunity, for the record, to sit down with the governor any time and talk about this issue.”

For her part, Whitmer’s public comments haven’t budged regarding regulated iGaming’s perceived impact on the state’s steady iLotto revenue stream:

“I’ve said very clearly, over and over again, that protecting the School Aid Fund, ensuring that we get every dollar back into the education of our kids is my top priority. So I’m going to have a hard time supporting anything that doesn’t protect that goal.”