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Kowall Cautiously Optimistic about Online Gambling in Michigan

Posted on by John Lathram

MichiganSenator Mike Kowall has said in a radio interview that he is cautiously optimistic about the prospects for his bill to regulate online gambling in Michigan.

At the beginning of the month, Senator Mike Kowall introduced his Lawful Internet Gaming Act (S203) into the Senate. Co-sponsored by six of his colleagues on the Senate Regulatory Reform Committee, the bill flew through the committee stage by a majority of 7-1, and now waits – as a similar bill did last year – for a full hearing of the Senate.

During the committee hearing, Kowall acknowledged concerns from tribal gaming entities that his bill would impact their rights to regional gambling exclusivity. He later told the Detroit News he was willing to discuss the tribes´ concerns and, presumably as a result of those discussions, has now told listeners to WZZM 13 radio he is “cautiously optimistic” about the passage of his bill.

All about the Money

Kowall believes – based on data provided by representatives of Amaya – that online gambling in Michigan could generate $32 million for the state once the market has matured. His projections ignore a Senate Fiscal Impact Report that contradicts the data, and historic evidence that no state with a casino industry and a lottery has ever enjoyed a tax windfall from the regulation of online gambling.

If the objections of tribal interests are not resolved satisfactorily, the financial “benefits” to the state could actually become negative. Currently, six tribal gaming entities contribute almost $44 million each year to the state in return for their exclusive gambling rights. If these payments were to stop, the regulation of online gambling in Michigan would result in a net loss to the state.

Constitutional Issue Ignored

The issue about whether the regulation of online gambling in Michigan constitutes an expansion of gambling still remains unanswered. Under the state constitution, any expansion of gambling requires voter approval via a statewide ballot – an issue that was raised by Deputy Director of Michigan´s Gaming Control Board David Murley last May, but which has since been largely ignored.

Proponents of online gambling argue that online gambling is already taking place in Michigan through offshore and unregulated sites and therefore regulation would mean an expansion under a strict interpretation of the phrase. However, the constitutional requirement has previously been used by the casino industry to prevent the state´s racetracks from having racino-style gambling on their premises.

Moral Opposition to Online Gambling

In addition to the financial and legal obstacles Senator Kowall will have to overcome if his cautious optimism is to be justified, a new campaign is opposing the regulation of online gambling on moral grounds. “Citizens for Traditional Values” has launched a PPA-style action plan inviting citizens to contact their state senators to express their opposition to an expansion of gambling.

The organization argues the state should not be allowed to gamble its way to prosperity, and highlights the social harm to families and financial harm to businesses that an expansion of gambling would cause. The organization also raises concerns – based on the Senate Fiscal Impact Report – the tax revenues generated by regulated online gambling would not cover the costs of enforcement.

What Next for the Lawful Internet Gaming Act?

Probably nothing. Without justifying where his cautious optimism derives from, it is difficult to see what Senator Kowall has to be optimistic about. The tribes are unlikely to agree to any arrangement that sees them paying 10% of their Internet gaming revenues plus the funds due under their existing compact, while Detroit´s casinos will oppose any agreement that gives the tribes a commercial advantage.

It is a tricky situation to resolve, and all the time there are doubts about the financial viability of regulated online gambling in Michigan, Senator Kowall´s bill is unlikely to find favor with the rest of the Senate. It also speaks volumes that no companion bill has been introduced into the House of Representatives. Maybe the Representatives already understand the obstacles they are up against.

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