Michigan Bats out of Left Field with Internet Gambling Bill, SB 889

One clear question has been floating around the relative water cooler since the beginning of 2016: What state, if any, will pass am internet gambling bill to join Delaware, Nevada and New Jersey in building the United State’s online gaming market?

Easy choices are California, Pennsylvania or New York, where legislation has been passed around for years, but no one would have thrown Michigan into the line-up – until now.

On April 14, 2016, iGaming analysts were shocked when Senator Mike Kowall introduced SB 889, an internet gambling bill designed to legalize and regulate certain forms of online wagering activities in the state. Barely two weeks old, the measure hasn’t seen much movement yet, nor received a first hearing date on the legislative schedule, but the simple fact that it exists is exemplary.

The same day SB 889 was introduced by Sen Kowall – along with its sponsors, Sen. Curtis Hertel Jr., Sen. Rebekah Warren, Sen. Bert Johnson, and Sen. Marty Knollenberg – it was passed on to the Committee on Regulatory Reform. Unfortunately, we won’t be able to gauge the internet gambling bill’s potential for a future in Michigan until the first open discussion takes place.

Michigan’s Lawful Internet Gaming Act

The text of SB 889, as introduced, refers to the measure as the ‘Lawful Internet Gaming Act‘, and seeks to enforce licensure and regulation of suitable online gambling operators, imposing taxes, fees and consumer protection laws along the way.

The internet gambling bill’s introductory statement reads:

 The legislature finds that the Internet has become an integral part of everyday life for a significant number of residents of this state, not only in regard to their professional lives, but also in regard to personal business and communication. Internet wagering on games of chance and games of skill is a core form of entertainment for millions of individuals worldwide. In multiple jurisdictions across the world, Internet gaming is legal, regulated, and taxed, generating billions of dollars in revenue for governments.

Sen. Kowall’s legislation states it’s primary purpose as a way to “capture revenues and create jobs generated from Internet gaming.”

He justifies the content of the measure by asserting that “it is in the best interest of this state and its citizens to regulate this activity by authorizing and establishing a secure, responsible, fair, and legal system of Internet gaming that complies with the United States Department of Justice’s September 2011 opinion concerning 18 USC 1084,” (the Wire Act).

There are a lot of rough details that will need to be hammered out before the internet gambling bill can ever make its way to the governor’s desk, but the cost of operating and online poker room or casino in the state is not one of them.

SB 889 outlines a non-refundable license application fee of $100,000, followed by an exorbitant license fee of $5 million upon approval, as “an advance payment of Internet wagering taxes owed by the Internet gaming licensee…”

Taxation has been set at 10% of gross gaming revenue, which is higher than the 6.75% collected in Nevada, but still relatively low compared to taxes in other states where internet gambling is authorized.

New Jersey takes a 15% cut of GGR, while Delaware collects a staggering 53.5% of GGR from online slots (43.5% for state, 10% for the horse racing industry), and 33.9% on table games/poker (29.4% to state, 4.5% to horse racing).

Working in the internet gambling bill’s favor is the fact that Sen. Kowall, as well as all four co-sponsors, are all members of the 9-panel Committee on Regulatory Reform. Thus we can expect a hearing date to be scheduled in the very near future as they all prepare to give strong oral arguments in favor of its passage.