What Kind Of Online Gambling Market Will Michigan Be?
The first wave of Michigan betting sites is expected to go live in the coming 4-6 weeks. That moment is a long time in the making, as the Wolverine State started down the road to online gambling some five years ago.
The big question is, will Michigan live up to the hype?
Overview of the Michigan Online Gambling Market
Michigan has all the hallmarks of a robust online gambling market.
The state:
- Is ranked tenth in population with around 10 million residents
- Possesses a strong land-based gambling industry
- Went with an open, competitive market
- Didn’t impose heavy financial burdens on operators
- Will launch alongside online sports betting
There are also a few economic variables at play.
Michigan is in the lower 50% of states based on income and disposable income. By way of comparison, New Jersey ranks 3rd and 2nd, and Pennsylvania ranks 22nd and 24th.
That said, there’s little doubt it will be a solid market like New Jersey or Pennsylvania.
Pennsylvania Provides the Best Comparison
I suspect the Michigan market will look a lot like Pennsylvania right out of the gate. The pandemic kickstarted Pennsylvania’s online gambling growth, and Michigan’s launch will also get a boost from and lingering coronavirus concerns.
Yes, the state has a significantly smaller population than Pennsylvania, but its online gambling market structure is less restrictive both in terms of market access and operator burdens.
Further, both states will have very similar online gambling options, including sports betting, casino, poker, and lottery. And it’s that final vertical, online lottery, that could be the real wild card.
The Michigan Online Lottery is thriving with slot-like instant win games. Pennsylvania legalized online lottery products at the same time it legalized online gambling, and online lottery games launched first. However, Pennsylvania’s online lottery products weren’t as established or as plentiful when online casino games came along.
In fact, Michigan will provide a useful comparison in the debate around the impact of operator burdens. Michigan’s licensing fees and tax rates are industry-friendly, while Pennsylvania’s are far more onerous. If Michigan vastly outperforms Pennsylvania, it will arm other states with some much-needed data on what they should charge the industry.
| Michigan | Pennsylvania | |
| Licensing Fee sports betting | $100,000 | $10 million |
| Licensing Fee online gambling | $100,000 | $10 million* |
| Tax Rate sports betting | 8.4% (commercial) 11.4% (tribal) | 36% |
| Tax Rate online slots | 20-28% based on revenue | 52% |
| Tax Rate online table games | 20-28% | 16% |
New Jersey Inhabits a League of its Own
New Jersey online gambling revenue is on another level, and it’s hard to envision a market reaching the numbers New Jersey is posting on a per capita basis. That said, I suspect New Jersey’s seven-year growth trend will plateau and recede at some point, perhaps when neighboring New York online sports betting is legalized.
Forecasting the First 12 Months of Michigan Online Gambling
The Pennsylvania online casino industry neared $10 million in its fifth month. Five months later, it was generating over $40 million. However, that leap coincides with the COVID-19 casino shutdowns, without which, Pennsylvania’s online gambling revenue would have risen at a more gradual pace, perhaps hitting $40 million in month 12.
We expect Michigan to have a faster start but a slower growth rate because of the variables mentioned above since there is unlikely to be a pandemic bump.
Assuming an early January launch, our estimates indicate the state will see strong growth over the first six months of 2021, followed by a period of more modest growth during the summer before accelerating again in the fall.
Steve Ruddock is the content director for BettingUSA and the Editor-in-Chief of Gaming Law Review.
Steve has covered the legal and legislative developments in the US gambling sector for more than a decade for online and print publications.
