The early days in Michigan online gambling are sending a clear message to other states: Sports betting is great, but don’t forget about online casinos.
Industry observers have long known that internet gaming is the path to increased tax revenue. But the first 38 days of operation for MI online casinos have driven that point home faster than a Motor City muscle car.
But how did Michigan get off to such a fast start with online casinos? And what is the overall draw for this industry in other states?
Here’s a closer look at February’s bonkers online gaming revenue.
Online gaming taxes a big win for Michigan
The majority of that total comes from Michigan’s 11 online casinos, as only one online poker brand has launched.
If we were to just compare revenue between sports betting and online gaming, there would clearly be more substance with casinos than sportsbooks. In its first month of online betting, Michigan’s 12 sportsbooks reported just $9.3 million.
However, the tax comparison with sports betting, which employs many promotional bonuses as a long-term play for customer acquisition, is staggering.
While Michigan online sports betting contributed just more than $250,000 in state taxes through February, online casinos have spurred $18.3 million in state tax revenue.
That’s 72 times more money for state needs, as Michigan looks to recover from a painful 2020.
Granted, sportsbooks in MI aren’t taxed as high as online casinos or poker sites are. For sports, it’s 8.4%. For online gambling, it’s a graduated rate of between 20% and 28%.
Online casinos + poker + sports betting
Michigan’s online casinos didn’t launch by themselves. Far from it. In fact, the state went all-out on launch day with casinos and sportsbooks. A week later, online poker rooms arrived.
Why does this matter? Simply put, by launching online sports betting and internet gaming at the same time, the markets are somewhat working in tandem.
That ad and others are going after sports customers. The app, however, does not hide that it also offers casino games. Users can easily flip from sports bets, to blackjack, to slots, and back to sports. That menu, in essence, is cross-selling.
It sure wouldn’t hurt other states to mimic Michigan’s plan.
The simultaneous launch helped propel both markets from the get-go, but even a late addition of a new online market can spur cross-selling and growth. The best example of this is New Jersey.
Case study: New Jersey’s growth
New Jersey launched online casinos and online poker in late November 2013.
That December, the first full month, New Jersey operators made $7.4 million of revenue, or 9.2% of the first full Michigan online casino revenue total in February 2021. There were fewer sites (and a smaller state). But those revenues grew slowly for nearly five years to $25.9 million in July 2018.
But after online sports betting launched on Aug. 1, 2018, online casinos in the state took off.
Revenue reached $39.1 million by March 2019 and then $49.1 million by November of that year.
Prior to the onset of the coronavirus pandemic, online casinos made $55.1 million in January 2020. A year later, online casinos set a new bar of $103.8 million in January 2021.
That’s more than 400% growth in less than 2.5 years.
The point is that cross-selling can be hugely beneficial for online gambling operators and the state. Including casino gambling alongside sports is a no-brainer.
Competitive market aids Michigan online gambling boom
For context, there are about 1 million fewer residents in New Jersey than in Michigan, though more out-of-staters are known to enter the Garden State to gamble online. So, other states would be wise to try and mimic Michigan’s formula.
Several factors have contributed to the success here, including a competitive market set by a favorable tax rate and the amount of available licenses. The embedded gambling culture in Michigan absolutely helps, too.
But a simultaneous launch of online sports betting and internet gaming has been a crucial ingredient to Michigan’s boom.