Michigan has emerged as the latest state to legalize sports betting this week, with Governor Gretchen Whitmer signing off HB 4916. The move, said analyst PlayMichigan.com, could rival the largest legal sports betting markets in the country once it matures, attracting billions of dollars in bets each year and generating millions in tax revenue.
Its potential as a market is enormous, capable of generating as much as $7bn to $8bn in sports bets annually and $500m in gross operator revenue, according to PlayMichigan.com projections.
“Michigan is the second-largest state in terms of population to have legalized online sports betting and online casinos and poker, behind only Pennsylvania,” said Dustin Gouker, chief analyst. “Michigan’s business-friendly tax rate and competitive licensing fees will attract operators, too. And with a solid tribal and commercial casino infrastructure already in place, Michigan should be poised for quick success.”
Michigan will tax sports betting gross revenue at 8.4%, and Detroit casinos will pay an additional 1.25% tax to the city. That puts it among the most competitive of the current legal jurisdictions. By comparison, Pennsylvania levies a 36% rate, by far the highest in the nation. New Jersey charges a 9.75% tax on revenue from retail sportsbooks and 13% on online sports betting revenue, and neighboring Indiana levies a 9.5% rate on its sportsbooks.
Even with the lower tax rate, sports betting could generate as much as $40m annually for the state, according to the analyst.
“Some in Michigan obviously wanted a higher tax rate, but the current rate should draw significant interest from sportsbook operators,” Gouker said. “That will help the market mature more quickly than markets such as Pennsylvania, where the ramp-up has been much slower despite having the largest population among all states with legal sports betting.”
Much of the future of Michigan sports betting depends on how much the state’s 23 tribes embrace online betting, which is a significant variable in how successful the industry might be in the state.
Bill Miller, President and CEO of the American Gaming Association, responded to today’s news, saying: “With Governor Whitmer’s signature, 20 states plus DC have now legalized sports betting in the United States, capping off a tremendous year of growth.
“These new markets offer more Americans a safe, legal way to wager on sports while positively impacting communities, like in Michigan, where revenue from sports betting will generate needed resources for public education, first responders, and, importantly, responsible gaming.”