How Michigans Proposed Tax Hikes Could Impact Online Gambling Taxes and Player Winnings

As the Michigan Senate deliberates on new legislation, the conversation surrounding online gambling taxes has moved to the forefront of state fiscal policy. Senator Sam Singh is spearheading this initiative, which aims to restructure how the state collects revenue from online casino gambling as well as retail and mobile sports betting. By refining these online gambling taxes, the goal is to ensure that Michigan captures a more significant share of the profits generated by commercial iGaming and sports betting operations.

Recently, state Sens. Sam Singh (D-East Lansing) and Jeremy Moss (D-Southfield) introduced Senate Bills 1193 and 1194. These bills propose incremental increases in taxes for both sports betting and iGaming on commercial operators. According to the proposals:

• SB1193 suggests raising the tax on gross sportsbook revenue for both online and brick-and-mortar operations by 0.1%, moving from 8.4% to 8.5%.
• SB1194 proposes an increase in the tax on gross gaming revenue (GGR) from commercial iGaming entities by 1%.

Michigan applies a graduated tax rate for iGaming, which is structured as follows:

• For operators earning below $4 million, the tax rate will increase from 20% to 21%.
• For revenues between $4 million and $8 million, the rate will rise from 22% to 23%.
• For revenues between $8 million and $10 million, the tax will increase from 24% to 25%.
• Revenues from $10 million to $12 million will now be taxed at 27%, while revenue exceeding $12 million will incur a rate of 29%.

These proposals will be reviewed by the Senate Government Operations Committee, comprising key members, including Singh himself.

Concerns from Commercial Operators

Notably, these bills will not affect tax obligations for tribal operators in online and retail sports betting. Thus far, tribal casinos have successfully retained a competitive edge against commercial ventures. If any modifications to the tribal rates become necessary, they would require reforms to their Class III gaming compacts.

Detroit solely hosts commercial casinos in Michigan, which expanded gaming options in December 2019, allowing the MGM Grand Detroit, MotorCity, and Hollywood Casino at Greektown to launch their online platforms.

Critics of Singh and Moss’s proposed tax increases include critical members from BetMGM, FanDuel, and ESPN Bet, who suggest these hikes could hinder their competitiveness compared to tribal partners.

Statistics of Gaming Revenue

As of October 2024, commercial iGaming revenue from BetMGM, FanDuel, and ESPN Bet amounted to $1.058 billion, compared to $913 million generated by the 12 Native American tribes engaged in online gaming. The breakdown for online sports betting demonstrates that:

• Commercial operators accrued $247.4 million.
• Tribal operations generated $134.6 million.

Hence, the total contribution from iGaming to the state’s finances has surpassed $363 million, along with over $12.5 million from sports betting revenue in recent months.

Conclusion

The proposed tax increases on commercial iGaming and sports betting operations in Michigan, spearheaded by Senators Sam Singh and Jeremy Moss, have sparked significant discussion. As the legislation moves forward, it’s essential to consider how these changes will impact the competitive landscape between commercial operators and Native American tribal casinos. The potential increase in state revenue may also play a critical role in shaping the future of gaming in Michigan.