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Legislation Passed to Regulate Online Gambling in Michigan

Posted on by John Lathram

MichiganThe legislation to regulate online gambling in Michigan still requires the Governor´s signature and could face a legal challenge before it takes effect.

Back in June, Michigan´s House of Representatives passed a version of Rep. Brandt Iden´s Lawful Internet Gaming Act. Because the bill was passed immediately prior to the summer recess, it was not expected to be considered by Michigan´s Senate until the fall; but Rep. Iden was optimistic that it would be passed before the end of the year´s legislative session.

With the clock ticking down on the final day on the legislative session last night, the bill suddenly sprung to life and flew through the committee stage to be passed by the Senate by a majority of 33-5. The final version of the legislation to regulate online gambling in Michigan was approved by the House, and now goes to the desk of Governor Rick Snyder for his signature.

Michigan´s Lawful Internet Gaming Act

The approved version of the Lawful Internet Gaming Act is very similar to what was proposed before. It creates a Division of Internet Gaming within Michigan´s Gaming Control Board that would be responsible for developing the rules under which operators can provide online gambling. It would also be responsible for approving operators and issuing online gambling licenses.

Once the rules have been developed, operators have to pay $100,000 to apply for a license and – if approved – $200,000 for the initial license and $100,000 per year thereafter. Gross gaming revenues will be taxed at a rate of 8%, plus the state´s commercial casino will also have to pay a “Municipal Service Fee” of 1.25%. Tribal casinos will still have to renegotiate their compacts with the state.

One big difference from the version of the bill passed by the House in June is that Michigan´s Lawful Internet Gaming Act now allows operators to offer sports betting (but not Daily Fantasy Sports). Only operators licensed by the Gaming Control Board would be allowed to accept sports bets (there was talk of the state lottery getting involved), who would be subject to the same fees and taxes on revenues.

Opposition to the Lawful Internet Gaming Act

Assuming Governor Snyder puts his signature to the bill, the Gaming Control Board will have fifteen months to put together the rules and issue licenses before the Act takes effect. During that time it is likely to face a legal challenge from parties opposed to Internet gambling, who claim the legislation to regulate online gambling in Michigan violates the state constitution.

According to Article 4 § 41 of the constitution, Michigan´s legislature is not allowed to authorize any expansion of gambling without state-wide approval from voters and approval from voters “in the township or city where gambling takes place”. Opponents to the Act claim that, as Internet gambling will take place in every township or city within Michigan, each will have to approve the Act separately.

However, the clause does not apply to the state´s commercial and tribal casinos, and Rep. Iden has fought to dispel this argument by claiming that, provided gaming servers are located inside each casino, the act of gambling takes place at the casino and not at the location from which a bet is placed. The outcome of this episode could depend on how the expansion of gambling is interpreted by a judge.

Other Factors that Could Affect Implementation of the Act

Ultimately, the state of Michigan might not be in control of its own destiny when it comes to online gambling. Rumors have been circulating for a while about a possible reinterpretation of the DOJ´s 2011 opinion on the Wire Act, a new attempt to introduce an anti-Internet gambling bill at federal level, and government intervention on sports betting legislation.

Any of these factors could influence the ability of Michigan´s new Division of Internet Gaming to implement the Lawful Internet Gaming Act – which might be why the Act was rushed through at the eleventh hour. The conclusion is that no-one can be certain about the future of online gambling in Michigan until such time as the first hands of cards are dealt.

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