Published in Economic Development

Michigan tribes make early moves as online gaming, sports betting takes shape

BY Sunday, January 19, 2020 05:54pm

 Michigan officials are still months away from finalizing rules on internet gaming and sports betting, but some Michigan-based Native American tribes are taking early steps to participate in the newly legalized industry. 

Since Gov. Gretchen Whitmer signed the bipartisan bill package on Dec. 20, at least three tribes have selected vendors to help them participate in sports betting and iGaming once regulations allow it. These include the Little Traverse Bay Bands of Odawa Indians and the Nottawaseppi Huron Band of Potawatomi, which operate casinos in Petoskey and Battle Creek, respectively.

Some lawmakers hope on-site sports betting will be operational by the NCAA basketball tournament in March. 

Other tribes are taking a more cautious approach to see how the state’s rule-making process advances. Some unanswered questions involve tribal sovereignty and gaming activity oversight that falls under federal law, such as on-premises sports betting at tribal casinos.

“We’re excited about offering these new amenities to our guests, but we need to see how regulations are updated before we proceed,” said James Nye, spokesperson for the Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians, which operates the expanding Gun Lake Casino in Wayland, south of Grand Rapids. 

Overall, however, gaming experts and tribal officials see iGaming and sports betting as an opportunity for tribes in Michigan to expand revenue and services.

The new laws — which had broad bipartisan support in the state Legislature after being vetoed by former Gov. Rick Snyder in late 2018 — allow commercial casinos in Detroit and tribally owned casinos to apply for licenses for sports wagering or internet gaming. The laws also permit legal and taxed wagering for fantasy sports and Advanced Deposit Wagering on horse racing. The bills were spearheaded by state Rep. Brandt Iden, R-Portage.

Political support or neutrality for the bills from tribes with state gaming compacts has reportedly been key for ensuring additional state revenue. 

Estimates by the Senate Fiscal Agency showed sports betting and iGaming could raise between $15 million and $40 million annually for the School Aid Fund. Casinos with sportsbooks will pay an 8.4 percent tax after winnings are paid out, while iGaming taxes could range from 20 percent to 28 percent. State tax revenue will be distributed to the city where a casino is located (30 percent) for public safety and to the Michigan Internet Betting Fund (65 percent), which distributes money to first responders and the School Aid Fund. The remaining 5 percent will support the horse-racing industry.

On-site sports betting at casinos is expected to be the first activity to take place. Finalizing and adopting new regulations for online sports wagering and casino games — such as poker and blackjack — could take up to a year, experts say.

“Although this is a new form of wagering, it’s going to be offered by the traditional providers,” said Robert Russell, gaming analyst for Regulatory Management Counselors P.C. in East Lansing. He added that several other states, including New Jersey and Pennsylvania, are ahead of Michigan in creating a robust iGaming and sports betting industry.

“We’re not creating the wheel here. We’re actually taking pretty robust systems and applying them to our state,” he said.

State versus federal law

The Michigan Gaming Control Board (MGCB) has started preparing for the formal rule-making process, but it’s unclear when the new forms of gaming will begin.

“We must establish several sets of administrative rules, which pass through many levels of review,” said MGCB spokesperson Mary Kay Bean. “The MGCB will make sure the interests of Michigan’s citizens come first as we prepare for more legal gaming options.”

Bean added that in-person sports betting at the Detroit commercial casinos will “likely be permitted first” since the Michigan Gaming Control Act allows the board to authorize gambling games.

“It will require the agency to license companies that assist the casinos with sports betting,” she said. “The MGCB will not be involved with on-premises sports betting for tribal casinos, which are governed by federal law.”

Scott Hughes, a government policy attorney with Dykema Gossett PLLC who specializes in tribal gaming, said the “complicated intersection” between federal, state and tribal law will be “one of the biggest challenges” for tribes to wade through in the process. The firm has been part of a “number of preliminary considerations” by tribes and commercial entities about the new laws.

“Tribes will need to understand and receive advice on which regulatory structures apply to a particular transaction,” he said. “That may depend in part on whether a patron is on or off Indian lands when a wager is placed.”

Additionally, vendors contracted by tribes to provide a gaming platform also will fall under tribal jurisdiction, Hughes said.

Opportunity ahead

While operator licenses will only be issued to commercial and tribal casinos, Hughes said “any number of Internet platform providers” could seek business here, including websites like Draft Kings and Fanduel.

“This presents an opportunity for the entire casino industry to offer a new product that seems to have a high level of demand, as reflected in other states,” Hughes said. “And the state has a good revenue-generating opportunity here.”

Also, the state’s largest casinos won’t necessarily thrive over smaller ones. Branding can be key for a small brick-and-mortar casino’s success in online gaming, he said.

“Partnerships with well-known platform providers and other licensing arrangements are becoming commonplace in the online sports betting and wagering markets,” he said. “Some relatively small retail casinos have been very successful online due, at least in part, to successful partnerships and branding.”

Hughes also said concerns about iGaming and sports betting siphoning revenue from the Michigan Lottery “to some degree were overstated,” and other states haven’t seen that type of “cannibalization.”

“The fact of the matter is that sports betting has already been occurring in Michigan,” he said. “This is going to bring that gaming activity into a regulated market.” 

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