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Legislation to legalize sports betting, internet gambling, online poker and daily fantasy sports will pass the Michigan state legislature on Wednesday, according to state Sen. Curtis Hertel Jr.
After weeks leading negotiations between industry stakeholders and the administration, Hertel tells Legal Sports Report that an agreement has been reached that will get the signature of Gov. Gretchen Whitmer.
While a steep tax increase for iGaming was needed to garner the governor’s support, the tax rate for sports betting actually decreased from 8.75% to 8.4%. Otherwise, the bill remains largely unchanged.
Hertel’s substitutes for the bills passed by the House were adopted and voted out of the Senate Regulatory Reform Committee early Tuesday.
He expects them to be approved on the Senate floor Wednesday morning, getting concurrence in the House later in the day. The Michigan legislature plans to adjourn its session for the year by the end of the day Wednesday.
Tiffany Brown, spokesperson for Whitmer, confirmed that the governor is on board with the changes made in the Senate, saying in a statement:
“The governor is pleased with the progress made on gaming over the course of this year, particularly once Sen. Hertel and Rep. Warren were able to engage and resolve key issues to get this package across the finish line. … This is a good, bipartisan solution made possible by working together on a complex issue, and the governor looks forward to closely reviewing this package once it hits her desk.”
When Rep. Rebekah Warren made clear at the House passage that both the sports betting and iGaming bills would be vetoed by the governor as they stood, it seemed certain that sports betting would need a tax increase to get through.
After all, Whitmer previously endorsed a Michigan State Treasury report asking for a 15% tax rate on Michigan sportsbooks. However, the administration wasn’t as concerned about the sports betting tax rate as it was about online slots and how they could cannibalize iLottery.
“There was never any argument that sports gaming took away from iLottery,” Hertel said. “They are very different products.”
The initial fee for a sports betting license remains at $100,000, with an initial $50,000 application fee to be renewed annually for $50,000. Whitmer had previously endorsed a tiered initial fee structure ranging from $200,000 to $1 million.
The three commercial casinos need to pay an additional 1.25% to the city of Detroit, although legislators have said the effective city tax rate is 3.25%.
In defining adjust gross sports betting receipts, the Senate bill drops a deduction for the federal excise tax of 0.25% of handle that casinos must pay. However, it includes a deduction for free-play money given to customers as a promotion.
The majority of tax revenue from the sports betting fund will go to supporting schools, which was key to getting the governor’s support. The administration looked at the amount of the total gaming package in making sure the School Aid Fund remained healthy going forward.
“The governor’s top priority when getting this done was to protect the School Aid Fund, and Sen. Hertel and Rep. Warren helped make that happen and addressed a number of other concerns she had,” Brown said.
The bill puts aside $2 million annually from sports betting tax revenue to the First Responder Presumed Coverage Fund, which Hertel said was an important addition to the administration. The fund supports firefighters going through cancer treatment.
Part of the gaming package moving in Michigan includes daily fantasy sports. The Fantasy Contests Consumer Protection Act will regulate the conduct of fantasy sports.
The Senate substitute establishes an 8.4% tax rate for fantasy sports, same as sports betting.
With the tax set, the Senate language lowers licensing fees for daily fantasy sports operators from $50,000 to $10,000 for an initial license and from $20,000 to $5,000 for an annual renewal.
Michigan will become the third state to mandate the use of official league data for in-play wagers, following Illinois and Tennessee.
Like those states, the legislation gives operators a recourse to appeal to the Michigan Gaming Control Board if they feel the data is not being offered on commercially reasonable terms.
The Michigan legislation goes a step further in outlining factors the board may consider in determining if data is being offered on commercially reasonable terms, including that the leagues make the data available from more than one authorized source.