With eyes on a fall launch of online gambling, Michigan’s state government nudged the numbers with a positive projection last week.
The lawmaker who powered the legislation is still thinking much bigger. The state is now projecting a $25 million injection of annual tax revenue after this fall’s launch, an increase from when expanded gambling laws were passed last year.
But Rep. Brandt Iden, who will close out his time in Michigan’s House of Representatives this year, still ultimately sees nine-figure annual potential.
“I continue to believe that we will at least have a number that’s three digits before the comma, and I think that we’re going to get there,” Iden told PlayMichigan on Monday morning, estimating a Thanksgiving launch or maybe earlier in November.
Tax revenue will aid schools, first responders
After more than a year of stops and starts, Gov. Gretchen Whitmer signed legislation to allow sports betting and internet gambling statewide.
The announcement came with a $19 million projection of state tax revenue, according to the Michigan Department of Treasury. Of that revenue, $4.8 million is earmarked for the School Aid Fund and $4 million for the First Responder Presumed Coverage Fund.
Retail sports betting launched in March, and the Great Lakes State was on track for an early 2021 launch of online sports betting, internet casinos, and online poker.
Then, of course, the pandemic changed the timeline.
Shutdown makes states desperate for online gambling
All 26 of Michigan’s casinos closed in March, with many shuttering for several months.
Detroit’s three commercial casinos were empty for nearly five months. As a result, their revenues dipped 65% from the first seven months of 2019, a loss of $555.2 million. That cost Michigan $45 million in state tax revenue, and the city of Detroit $66.1 million compared to the previous year.
It’s one of several industries impacted in 2020, and states are scrambling to find new sources of revenue.
In addition to closing casinos and creating budgetary holes, the pandemic gave a new perspective for the potential of online gambling.
In New Jersey, a pioneering state which fought to legalize sports gambling in 2018, online gambling revenue soared nearly every month of the pandemic. That culminated in a record-setting July with more than $87 million in revenue and $13 million in taxes.
Online casinos outpaced sports betting as a revenue driver was also illuminating for the state.
“At the end of the day, there just is not a lot of money in terms of state tax revenue in sports,” Iden said. “It’s great, we’re happy to have it and excited. Obviously, everyone knows I bet sports, I love it. But you’ve got to have iGaming.”
New online gambling projection nets $25 million for Michigan
In addition to setting a public hearing later this month for draft rules, the state’s Office of Administrative Hearings and Rules last week released impact statements for internet gambling.
The statements were prepared by the MGCB as part of the rulemaking process and approved by the Administrative Rules Division.
That’s an increase of more than 31% from the original $19 million that was projected in December.
Iden thinking bigger as online market matures
It’ll all take some time to iron out, said Iden, a 37-year-old former Kalamazoo College tennis player, and avid NFL bettor who says he’s undecided about his own professional future past 2020.
He cautioned there are potential pitfalls on the legislative side. In addition, not all operators will be ready at the start line.
And for the 2021 fiscal year, which starts Oct. 1, Iden said he’s OK with the state’s conservative estimate.
“The reality of this is that is a very conservative number, and I think rightfully so,” he said of the $25 million estimate.
Iden said a $30 million guess is reasonable for the first year. He noted the Big Ten football uncertainty as an example of an unknowable variable. He projects between $80 to $110 million of online gambling tax revenue for the fiscal year starting Oct. 1, 2021.
“I’m talking about full integration – perhaps 12 months, 16 months, 18 months down the road,” Iden said. “What could that look like?”
Experts split the difference between MI gambling projections
Like many things in life, the answer is probably somewhere in the middle.
During the pre-pandemic world, a group of experts met with lawmakers in January at the annual Consensus Revenue Estimating Conference in Lansing.
The projections were used as budgetary guides for the 2020-21 fiscal year, which starts in a few weeks.
There, they arrived at a number somewhere between the $25 million forecast and Iden’s ultimate nine-figure aspirations.
They settled on a bet of $50 million in revenue from sports betting and online gaming.
It won’t take long before we start to see who hits the mark.