If anything came out of Tuesday’s Regulatory Reform Committee meeting in the Michigan Senate it was this: legal sports betting faces the same two hurdles it did when the full House passed a measure to legalize in late October. At issue is the tax rate for both iGaming and sports betting, and whether or not Governor Gretchen Whitmer will agree to add sports betting to the 1993 tribal-state compacts.
Whitmer is seeking a higher tax rate on gross sports wagering revenue than the 8.75 percent currently identified in the bill. The argument from her office is that sports betting and iGaming could leach customers away from the state’s lottery, from which tax revenue is funneled to school aid and local and state governments. Over the last few months, Whitmer has pushed for a 15 percent tax on sports betting gross revenue, but House Bill 4916 sponsor Brandt Iden has resisted going any higher out of concerns for imposing too great a burden on potential licensed operators.
On Tuesday, Iden, who has been championing iGaming for the last four years and saw his gaming package vetoed at the last minute by former governor Rick Snyder, presented his bills and fielded questions about the tax rate, tribal compacts and funding for problem gaming. He said tax-rate negotiations with the governor’s office are ongoing, but the Michigan Senate is set to adjourn for the year on Dec. 19 and including today, has only nine more legislative days remaining.
Tax-rate negotiations ongoing
Iden said he is still in talks with the Whitmer’s office about the tax rate, but is concerned that legalizing with what stakeholders consider to be a high rate will adversely impact a legal industry in Michigan.
“If we don’t do this in a methodical, measured way, and tax this in a reasonable way, we will continue to miss out on revenue,” Iden testified. “If we don’t do something to make us competitive in this marketplace, we are going to lose out. I implore this committee to take a deep dive into these bills.”
With regard to the tribal-state compacts, Iden included a section in the sports betting bill that calls for Whitmer to sign off on including sports betting as Class III gaming, which would allow the tribes that are part of the 1993 pact to offer sports betting.
Iden was clear that the tribes stand with him, but again, the final decision will rest with Whitmer. In fact, the text of the bill doesn’t quite guarantee that she will sign off on adding sports betting to the 1993 compacts — it reads: “This state, acting through the governor, at the request of any Indian tribe, shall negotiate and may conclude and execute any amendments to an Indian tribe’s compact necessary to effectuate internet sports betting by the Indian tribe under this act and to ensure internet sports betting conducted by the Indian tribe is in compliance with this act.”
However, the bill goes on to read that if the governor fails to open talks or negotiate in good faith, the tribes could take legal action. In essence, it appears Iden has done everything he can do to get the tribes on board.
“At the same time this goes through, the governor would have to sign a letter amending the compacts,” Iden testified. “The ’93 tribes say, ‘You have to allow us to have sports betting.’ The governor can do that by signing a letter.”
Seven tribes want to add sports betting to pacts
Seven tribes signed compacts with the state in 1993, and those compacts don’t list sports betting among the allowed “Class III Gaming,” likely because it wasn’t legal at the state or local level at that time. Later compacts with many of Michigan’s other tribes do name sports betting. The 1993 compacts also include a section spelling out how the tribes can add sports betting (or other games), and it truly is as simple as the stroke of the pen that Iden referred to.
(1) The Tribe shall request additional games by letter from the tribal Chairperson on behalf of the Tribe to the Governor on behalf of the State. The request shall identify the additional proposed gaming activities with specificity and any proposed amendments to the Tribe’s regulatory ordinance.
(2) The State acting through the Governor shall take action on the Tribe’s request within ninety (90) days after receipt. The Governor’s action shall be based on:
(a) Whether the proposed gaming activities are permitted in the State of Michigan for any purpose by any person, organization or entity; and
(b) Whether the provisions of this Compact are adequate to fulfill the policies and purposes set forth in the IGRA with respect to such additional games.
The only other issue that generated any conversation at Tuesday’s hearing was problem gambling. Iden’s bill calls for an additional $1 mm to be funneled to compulsive gambling programs.
Iden’s bill remains in the Regulatory Reform Committee, which was scheduled to meet Thursday, but the meeting was cancelled, according to the Michigan legislative website. In order for the bill to move forward, the committee would have to give it approval and send it to the full Senate floor.
