Representative Brandt Iden – Chairman of the House Regulatory Reform Committee – has published new draft proposals to regulate online gambling in Michigan, but realistically only has six weeks to convince the state´s legislature they are not an expansion of gambling before the House breaks for its summer recess.
Last Wednesday, I commented that proponents and opponents of online gambling were getting their propaganda machines into full gear ahead of (I suspected) some regulatory activity in Michigan. My suspicions were mirrored by a tweet from Gambling Compliance´s Chris Krafcik the following day, and a thread appearing on Reddit at the weekend started by PartTimePoker´s Dave Huber.
As it turned out we were right; as two days ago Rep. Brandt Iden – the Chairman of the House Regulatory Reform Committee – published new draft proposals (PDF) to replace the Bill approved by his committee back in December. Speaking with OPR´s Matthew Kredell the same day, Iden acknowledged that one of the biggest challenges he faced was overcoming concerns the Bill represents an expansion of gambling.
Under Article IV § 41 of Michigan´s constitution, no law enacted after January 1st 2004 that authorizes any form of gambling “shall be effective … … without the approval of a majority of electors voting in a statewide general election”. There is an exception to this clause for three casinos in Detroit and for tribal gaming that Iden intends to use in order to circumnavigate the constitutional concerns.
When an Expansion of Gambling is not an Expansion of Gambling
The way in which Iden hopes to circumnavigate the constitutional concerns is more than a little convoluted. It relies on the assumption that regulated online gambling occurs wherever the gaming servers are located, and that placing gambling servers inside of existing casino licensees´ premises represents an expansion of gambling services rather than an expansion of gambling.
Back in December, Iden referred to his plan as an “extension of existing gaming”, but not everybody is convinced – including Republican House Speaker Tom Leonard and Michigan Gaming Control Board deputy director Tom Murley, who testified at committee hearings both in May 2016 and in September 2017 the proposed circumnavigation of the constitution “raises significant legal and policy questions”.
Iden – in his interview with OPR´s Matthew Kredell – felt that opponents of online gambling are stoking the constitutional concerns to derail the legislation and that a legal challenge will be likely if the legislature passes his proposals. Iden should read the papers more, as opponents of online gambling have also been active in raising concerns about problem gambling and underage gambling.
Gambling Expansion Concerns not the only Obstacle to Progress
Whether or not the expansion of gambling is interpreted as an expansion of existing gambling, an expansion of gambling services, or an expansion of gambling opportunities, the constitutional issue is not the only obstacle to Iden´s proposals becoming law. There are still tribal gaming concerns to overcome and the question of whether an expansion of gambling under any name is financially viable.
If tribal casinos fail to support Iden´s proposals – and they haven’t yet – Iden will find it difficult to get the support of legislators representing districts in which tribal casinos exist. He might also find it difficult to get support from legislators representing Detroit – which will suffer a loss of revenue under the proposals, and which has just exited state financial oversight after being declared bankrupt in 2013.
The Fiscal Impact Statement (PDF) that warns of a loss of revenue Detroit, also raises concerns about a reduction of income for the State School Fund. The Statement argues gamblers will be more likely to play regulated casino games rather than the casino-style games offered by the state lottery (which generates revenue for the State School Fund) because of the better returns they will receive.
It is important to note that the calculated losses of revenue for the City of Detroit (2.65%) and the State School Fund (8.10%) quoted in the Fiscal Impact Statement were based on the proposed tax rate of 15% at the time Iden´s proposals passed the Regulatory Reform Committee. His new draft proposals advocate a tax rate of just 8% – a figure that will result in significantly greater revenue losses.
Iden Has Just Six Weeks to Get His Proposals Passed
Michigan´s legislature breaks for its summer recess on June 21st and doesn´t return until September 5th, when it is likely most of the state´s officials will be thinking about their re-election campaigns rather than passing a potentially contentious piece of legislation. This effectively gives Iden just six weeks to convince his colleagues an extension of existing gambling is not unconstitutional, to convince tribal gaming interests it will be beneficial to support his proposals, and to sort out the distribution of income.
It´s a tough ask in the time available, and it is not as if the “Lawful Internet Gaming Act” is the only piece of legislation Iden is working on. According to the Michigan Legislature website, Iden is also the sponsor of outstanding Bills relating to child abuse, student safety, consumer protection, and opioid controls. It is going to be a very busy six weeks for the House Representative, by the end of which he will thoroughly deserve his vacation – whether his new draft Michigan iGaming Bill passes or not.