Online Casinos Dominate Michigan's Gambling Tax Revenue

United States, ranking just behind Pennsylvania. The state’s iGaming industry, encoming online casinos and sportsbooks, has proven especially lucrative, generating significant tax revenue. Online casinos, in particular, are the driving force behind Michigan’s impressive $1.8 billion in lifetime taxes, ing for 95.5% of the state’s online gambling tax contributions.

While online sports betting attracts attention with seasonal surges and exciting campaigns, it is clear that online casinos are the foundation of Michigan’s thriving gambling market. The state’s total gambling revenue has reached staggering heights, with both online sports betting and casinos bringing in nearly $2 billion in combined taxes since legalization.

Unparalleled Growth in iGaming Revenue

The Michigan iGaming sector has recorded $6.8 billion in lifetime revenue, contributing $1.7 billion in taxes. In contrast, sports betting has generated a more modest $81.8 million in taxes. November 2024 marked a milestone for the industry, with online casinos breaking records for the third consecutive month, achieving $226 million in revenue. The success translated to $58.3 million paid to state coffers that month alone.

Sports betting, despite November being a prime month for the vertical, lagged far behind, generating just $2.7 million in taxes. This stark difference highlights the prominent role of iGaming in Michigan’s economy.

Michigan’s tax structure heavily influences the dominance of online casinos. While sports betting platforms are taxed at an 8.4% rate and allowed to deduct promotional spending—effectively reducing their tax rate to 5%—online casinos operate under a tiered system. This tiered model charges higher tax rates as operators earn more, as detailed below:

• Below $4 million: 20%
• $4 million to $8 million: 22%
• $8 million to $10 million: 24%
• $10 million to $12 million: 26%
• Over $12 million: 28%

Top operators, including BetMGM, FanDuel, DraftKings, BetRivers, and Caesars, sured $12 million in revenue in November, collectively contributing $48.2 million in taxes.

Efforts to increase these taxes ended with the expiration of a proposal from Senators Sam Singh and Jeremy Moss. Their bill, which would have raised sports betting taxes to 8.5% and added 1% to each iGaming tier, failed to advance before the end of 2024.

Slots Propel Online Casino Success

Slots are a cornerstone of Michigan’s online casino popularity, mirroring trends in other states with legalized iGaming. Although the Michigan Gaming Control Board (MGCB) does not differentiate revenue by game type, Pennsylvania provides a useful comparison. In Pennsylvania, slots for 75.4% of total iGaming revenue, suggesting a similar dominance in Michigan.

By 2024, Michigan had exceeded $500 million in annual gambling-related tax revenue. Of this, $400.9 million originated from online gambling, while retail casinos contributed $100.5 million. These funds are primarily allocated to the School Aid Fund but also other essential programs.

Notably, iGaming revenue has contributed to:

• First Responder Presumed Coverage Fund: $4 million
• Compulsive Gambling Prevention Fund: $3 million
• Agriculture Equine Industry Development Fund: $3.7 million
• Responsible Gaming Campaigns: $3.75 million

MGCB Executive Director Henry Williams emphasized the widespread benefits of these revenues, stating:

“From ing education and first responders to tackling illegal gambling, the MGCB remains steadfast in its mission to protect consumers and enhance the public good.”

With online casinos vastly outpacing sports betting in tax contributions and overall revenue, Michigan demonstrates the powerful impact iGaming can have on state economies. As gambling continues to evolve, the prominence of online casinos solidifies their status as the backbone of Michigan’s gambling market.

Source:

”Michigan: Online casinos for more than 95 percent of lifetime online gambling tax revenue”, cdcgaming.com, January 03, 2024.