Michigan Online Gaming Launch Serves Notice to Midwest States

Michigan Online Gaming Launch Serves Notice to Midwest States
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Those familiar with the history of U.S. gambling in the 20th century may recall the domino effect of riverboat casinos in the Midwest in the early 1990s. The same phenomenon has been playing out in the 21st century, this time in cyberspace, with Michigan the most recent domino.

Michigan flips the switch on full-scale online gaming Friday and will become one of the few jurisdictions in the country to offer the full suite of internet gambling — online casino action, peer-to-peer poker and sports wagering. So far, the only states that offer all of those options are on the East Coast — Pennsylvania, New Jersey and Delaware, although Delaware action is modest.

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Other Midwest states have arrived at Internet gambling, in some fashion, before Michigan but even the ones who do have it — Illinois, Indiana, Iowa — have so far limited it to sports betting only, although they are all considering legislation to add online casino games. That’s where real money can be made, both for operators and the state governments who reap tax revenue.

When the online gaming industry in Michigan, the 10th largest state in the U.S. by population, gains traction, the financial impact will certainly get the attention of other states. Just as was in the case in the early 1990s with the Midwest riverboats, state government appetite for gambling expansion is now being driven by the need for tax revenues.

Gambling in Other States

Back in the late 20th century when Iowa, Illinois, Missouri and Indiana turned to riverboats in rapid order, followed by Michigan’s land-based casinos, there was a recession. Now, it’s the financial ravages of the COVID-19 pandemic that has state government budgets in tatters.

Thirty years ago, state after state succumbed to the reality that their citizens were traveling to nearby jurisdictions to gamble and leaving their money in neighboring states. Today, that may occasionally be the case (New Yorkers traveling to New Jersey to bet sports online) but the rationale for new adopters is more fundamental. If a neighboring state can squeeze out more tax dollars from online gaming, where is the sense in not doing the same.

In the case of the Midwest, that leaves Ohio as a prominent outlier in online gambling. Ohio has casinos but has been unable to get out of the gate on online gambling or sports betting.

Michigan Market Could Be Huge

Michigan, with its substantial population and full buffet of gambling options, will sooner or later start posting attention-grabbing revenue numbers, both in terms of operator revenues but more importantly, for tax revenues.

New Jersey serves as a relevant comparison. In 2020 in New Jersey, online casino gaming and sports wagering (retail but mostly online) generated about $195.7 million in taxes. Michigan has over a million more people than New Jersey, so at full steam, Michigan’s numbers should approach or eclipse Jersey.

A note here is that the Jersey figures are buoyed for the time being by New Yorker participation on the sports betting side, that is until New York becomes a domino in that regard and greenlights online sports betting.

But getting back to Michigan — as a full-service online gambling state, there’s every reason to expect substantial revenue figures and tax money. If the past informs the future, expect other states, maybe even Ohio, to follow.

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