Michigan Rejects Proposal For Per-Wager Tax for Sportsbooks

It appears sportsbooks in Michigan just picked up a significant win.

The Michigan Senate has passed a new state budget this week, but it does not include the per-wager sports betting fee. The idea was originally included by Governor Whitmer and was modeled after the system Illinois adopted last summer. She also proposed adding similar fees for online casinos, but the Senate stripped them.

Whitmer’s proposal was projected to bring in an additional $21 million from Michigan’s sports betting market. However, lawmakers in the House and Senate both worried about facing the kind of industry blowback that Illinois has. That includes higher minimum bets and fees for bettors across the state, which were implemented in Illinois after it adopted a per-wager tax.

While Illinois’ gambling revenue remains strong, its handle has shrunk since the new tax was added. The higher cost of placing wagers has driven away many casual bettors, but those remaining have compensated by placing larger ones.

Even the Governor’s fellow Democrats were wary of adding the proposed tax, with several voting with Republicans to strip it from the budget.

“We have not contemplated new revenue, particularly those sin taxes the governor has put forward, but we’re open to that conversation,” Democrat State Sen. Sarah Anthony told Bridge Michigan after passing the budget. “We want to be sure that we’re being mindful of what revenue options are there and whether they’re impacting working families.”

Whitmer underestimates the prediction industry

Whitmer’s proposal to add a per-wager tax was described as “tone deaf,” but some Michigan lawmakers, and for good reason.

The emergence of sports prediction markets has changed the betting landscape in the US over the last year. Platforms are available in all 50 US states, and operators aren’t subject to state taxes or regulations. This allows them to offer a larger bet catalog and operate at a far lower cost than regulated sportsbooks.

When Illinois added its per-wager fee last summer, the prediction industry was still in its early stages. That allowed the state to accept higher costs for bettors without fear of shrinking their market. With the industry growing at breakneck speed, that is no longer the case.

If Michigan had added a similar tax, bettors would have had an alternative option to the state’s regulated market. If sportsbooks raise costs, they would have more incentive to try the new industry, and may never return to traditional sports betting. That led to a lot of criticism of Whitmer from both chambers before the proposal was ultimately stripped from the budget.