Q&A with Michigan Gaming Control Board's Richard Kalm

Q&A with Michigan Gaming Control Board's Richard Kalm

In December 2019, Michigan Gov. Gretchen Whitmer signed legislation to legalize online gambling in Michigan. The move positioned Michigan to become a serious player in online casinos and mobile sports betting.

While both are legal, the state’s next step is to get online casino gambling and mobile sports betting operational. The Michigan Gaming Control Board is working to set the rules for both, which includes partner and licensing agreements.

Gambling.com caught up with Richard Kalm, executive director of the Michigan Gaming Control Board, for an update on the status of online gaming and mobile sports betting in Michigan and the potential impact on the state.

Gambling.com (GDC): What is the latest status with getting online gaming and sports betting active in Michigan?

Richard Kalm: We’ve been working diligently on the rule package and the rule set, and we think we have a pretty good package of rules. We’ve sent it out to the 12 federally recognized tribes and the three commercial casinos and we’ve taken their input in it and made some modifications. From the rules perspective, we’ve already done the regulatory impact statement, talking about possible revenue it may generate and also what it may cost the state and what the revenue costs are.

We’ve scheduled a public hearing for Sept. 23. Both sets, on the Lawful Internet Gaming Act and the Lawful Internet Sports Betting, so those rules are getting really close to being done. But rules are one thing, and then we also have the licensing process. Over the last several months, we’ve taken applications from operators and also vendors and suppliers, so that process has started and now we have to do background investigations and look at business and business property issues. We’re trying to do that simultaneously with the rules, and we haven’t done that before, because so many times the rules will dictate, in a lot of cases, what kind of information we need, but we kind of know now what the rules will be so our questions on our licensing application are geared towards that.

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Simultaneous to the rule process, we also have the licensing process ongoing. We’re trying to get it so that when the rules are effective and we get the OK, we can bring on as many as possible who have been through the licensing process. The statutes require that when the first commercial is ready to go, we can’t light up the commercial property until we have at least one tribal property to light up. My guess is that what we’re working towards is being able to light up all of them at the same time because that’s why we’re trying to get the licenses.

So, two issues. Rules are one thing that we’re kind of tied to the state’s mandate and how they do rules. Then, the licensing process where we’re really kind of subject to the information coming from the vendors and suppliers and operators to make sure we have what we need and they understand what to send us. It’s all going on simultaneously.

My staff that was idling while we were waiting for casinos to open, we’re bringing them all back now because we’re all hands-on deck trying to get this done.

GDC: As things stand, what is a realistic launch date for online gaming and sports betting?

RK: I’ve tried to be as realistic as possible. Originally we were planning for the first quarter of ‘21, just by if the rules process took as much time as it has in the past, and we have to go through the steps: the regulatory impact, public hearing, then the legislature weighs in and the joint committee on administrative rules from both houses weigh in on the rules.

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We maximized that and projected out to February. But now, realistically, we won’t hit October; I don’t think we will. We might have the rules done by the end of October, but we won’t have the licensing done. But I think a November launch is possible or early December.

Everyone wants it yesterday, and for obvious reasons because everyone has been hurt by COVID. But if we got this thing off by November, I would be extremely ecstatic because we beat three months what we originally thought it would be.

GDC: Has the coronavirus pandemic played a part in attempting to accelerate the process of getting online gaming active in the state?

RK: It did in a lot of ways. One of the biggest issues it helped with is it really forced a working relationship with us and the people we regulate. In other words, when we sent out the rules, I think there was some fear that we’re, you know, the Michigan Gaming Control Board, we have one of the stiffest acts in the nation for oversight, but these two new laws allow us a lot of flexibility. They don’t follow under the gaming control regulatory act because they’re their own separate act, so it gave us a little bit more latitude — not so much on the rules but on licensing. There’s been some relaxing of some of the biggest hang-ups we have under the gaming act.

But not only that, there has also been a great spirit of cooperation. In other words, the tribes, who have never been regulated before, weighed in on our rules and have been very cooperative. We learned a lot from them and they learned a lot from us, so that’s how we got to a decent rule set so quickly. And the commercial operators are the same way. They’re trying to get into this thing and compete, and they have to compete with 12 tribes and 23 sites in the whole state of Michigan.

When I say cooperative, I mean there’s been a lot of give and take on the rules, so that’s expedited the rule process. We send things out for them to comment on and we have 15 different entities commenting on them, and we reach back out. It’s been a really great dialogue. As negative as COVID was for the revenue side, it has been a positive to ensure that the operators and gaming work really close together to try to make sure the end goal of getting this launched as soon as possible because (the casinos) are all dying with the revenue. All of them are. Decreased capacity, they were closed for several months, and they’re really trying to get back to square one. They see online gaming and online sports betting as quicker relief.

GDC: Do you see Michigan experiencing similar profit growth that other states have seen from online gaming, such as New Jersey?

RK: Yes, and the reason I say that is New Jersey got a lot of profit, not only from the online portion, but it drove traffic back into the casinos, and the traffic that went back into the casinos — under the compensation programs and food and beverage — as soon as this COVID thing is over with, you’ll see an increase in the amenities side in all casinos, I believe, because once you have the app and you’re placing bets and you’re able to get your points, with free meals and things like that, that’ll drive a lot of that traffic back into the casino. That’s the goal with all of this, right? So that’s the amenity side. Then you’ll have the ease of people being able to set up an account and be able to gamble from their PC or their mobile phone. Everybody’s trying to capture a new market, which is people of the millennial age that are very well-versed in phones and computers and do everything off an app, so I think we’re going to capture new customers and see major increases in revenue.

New Jersey has a similar population as we do, but they also have the city of New York next to them, so they may have a little bit more revenue than we do initially. But everyone is looking to Michigan because no one’s ever involved tribes in this anywhere in the nation who have a huge footprint here. We have 10 million people here, have a huge population center, and our bordering states of Indiana and Illinois are online, so we’re going to capture that back, also. So I think that you’re going to see similar revenue numbers as you saw in New Jersey; I hope, for the state’s sake.

GDC: What do you think the long-term impact of online gaming could be in Michigan?

RK: I’m not 100 percent sure, and we’re watching New Jersey and Pennsylvania who are real new at it, so we’re not real sure about the long-term impact. But I think there will be a new market share, just based on how we’ve seen other online things go. There will be outreach and marketing and businesses are going to grow up out of it, so I think it’s certainly going to be good for Michigan. You’re seeing other states accelerate their online legislation since the pandemic, also, because they all saw it as the quickest way to get back is to expand gambling opportunities. So it’ll change the industry a little bit. Everything was physically-oriented, retail-oriented and amenity-oriented, and now there’s going to be competition in the online format to not only drive traffic back to the physical plant via casino, but to capture a new market share out there with a younger crowd that is very phone and internet dependent.

I think the prospects are really good. It will benefit first responders, the school-aid fund, the city of Detroit which will get a little bump in commercial taxes from online. Where it takes us, I’m not 100 percent sure because I’m a physical plant regulator, but I hope it’s going to be a very positive impact for the state of Michigan.