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Michigan Closer to Legal Online Poker with Senate Approval

Written by Jennifer Newell
Last updated on
Jennifer Newell

Poker players, especially those in Michigan, are on pins and needles today. They are waiting to see if their governor signs the bill that will allow online poker to be legal and regulated in Michigan.

They’ve been in this position before. In fact, a similar scenario played out last year. The Michigan legislature passed an online gambling bill to legalize online poker and casino games. Solid majorities supported the bill in both houses. And then-Governor Rick Snyder vetoed it on December 28. It was a heartbreak for online poker fans, players, and supporters.

They are again at that vulnerable place.

The latest online gambling bill, partnered with a sports betting bill, passed through the Senate this week after passing the House in late October. Now they wait for Governor Gretchen Whitmer to sign it.

The Many Versions of HB.4311

The focus for online poker players is the 2019 Lawful Internet Gaming Act or HB.4311, the online gambling bill that includes poker and casino games. It was introduced in the House by Michigan State Representative Brandt Iden.

In its original version, it included the standard language that passed the previous year. Online poker and casino game operators would pay a $200,000 internet gaming license fee that would require another $100,000 each year to renew. The tax on gross gaming revenue was 8%.

As the months passed, it became clear that Governor Whitmer was not even considering signing the bill should it pass through the legislature. Her counterproposal was wildly different and unfeasible for online gambling operators.

Iden knew it. And without the willingness of Whitmer to meet for negotiations, Iden took it upon himself to reveal an amended version with escalating tax rates dependent upon gross gaming revenue. While lowering the licensing fee to $100,000 and the annual license renewals to $50,000, he did propose these numbers for tax rates:

–4% tax rate for <$4M, 6% for $4M-$8M, 8% for $8M-$10M, 10% for $10M-$12M, 19% for <$12M (all for first three years of operations)

–6% tax rate for <$4M, 8% for $4M-$8M, 10% for $8M-$10M, 12% for $10M-$12M, 21% for <$12M (for fourth year of operations)

–8% tax rate for <$4M, 10% for $4M-$8M, 12% for $8M-$10M, 14% for $10M-$12M, 23% for <$12M (for all years beyond the fourth)

Iden took that bill, pushed it through the House Ways and Means Committee with a 10-to-1 vote, and put it in front of the House for a vote. It passed by a vote of 63-45.

The Latest Version of HB.4311

That bill might have passed through the Michigan Senate as well, but the problem of Whitmer’s opposition remained a cloud hovering over it all.

Enter Michigan State Senator Curtis Hertel Jr. He was the person who introduced companion legislation to Iden’s bill earlier in 2019, making it a bipartisan, bicameral effort.

Before Hertel was going to push the bill through the Senate, he used his connections to Whitmer (she had worked for his father in the legislature) to speak directly with her. He reported that she was willing to talk and work on a compromise bill.

“Negotiations are going very well,” he said last week. “I fully expect the bills will be on the governor’s desk and signed before Christmas.”

That compromise bill allowed Iden’s fees to stand, authorizing an initial application fee of $50,000 and license fee of $100,000, with annual renewals at $50,000. The new tax tiers, on the other hand, were significantly higher but settled upon as follows, per Online Poker Report:

-–20% tax rate for <$4M

–22% for $4M-$8M, 24% for $8M-$10M

–26% for $10M-$12M

–28% for <$12M

The drastic hike in tax rates was only meted by a deal on deductions for adjusted gross receipts:

–First through third years: deductions not to exceed 10% of gross receipts

–Fourth year:  deduction capped at 6%

–Fifth year:  deduction capped at 4%

–Sixth year:  no deduction

Hertel said that the three Michigan land-based casinos agreed to the new fees and rates, as did the 23 tribal casinos in the state.

Key Senate Passage

According to Hertel, it was a difficult process but completed earlier this week.

Whitmer’s spokesperson, Tiffany Brown, issued a statement: “The governor is pleased with the progress made on gaming over the course of this year, particularly once Sen. Hertel and Rep. Warren were able to engage and resolve key issues to get this package across the finish line.”

One day after that news emerged, the Senate Regulatory Reform Committee amended the bill per the above negotiations, and it passed. That sent it to the Senate floor, where it passed by an overwhelming margin of 35-to-3.

Those changes then sent it back to the House for approval, which happened without incident.

On Whitmer’s Desk

The bill is now in the hands of Governor Whitmer. With all parties in agreement as to the version of the bill – and the sports betting bill – that passed through both houses of the legislature, Whitmer is expected to sign the bill next week.

This will make Michigan the sixth state to legalize and regulate online poker in the US regulatory environment under the Wire Act interpretation.

A Big But

There is a potential problem with the bill with regard to the overall online poker market in the US. That is that the Michigan Senate removed a certain clause from the bill before the final version passed and headed to the governor’s desk.

That clause is the one that would have allowed Michigan to partner with other states for interstate online poker, something to which all other states have agreed thus far.

Evidently, according to OPR, lawmakers were concerned about the online slot game part of shared gambling, one that would have created large multi-state jackpots. However, it has the potential to hurt online poker by capping its potential and keeping it isolated from an eventual large online poker network.

 

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