Michigan poised for head start on sports betting

Detroit — Some lawmakers want Michigan to make a quick bet on legalizing the sports gambling industry after the U.S. Supreme Court on Monday struck down a federal ban that helped give Las Vegas a monopoly.

Bills awaiting action in the Michigan House could give Michigan a head start in what could be a national race to regulate sports betting, said sponsoring Rep. Brandt Iden, R-Oshtemo Township. It would cash in on an industry already thriving on the black market, he said.

“If we beat Ohio, Illinois and Indiana, we’re going to have people coming to Michigan for that very reason,” said Iden, who shepherded a three-bill package through his House Regulatory Reform Committee in December. “They’re going to eat at our restaurants, be in our downtown. There’s definitely a benefit to move quickly.”

The U.S. Supreme Court on Monday voted 6-3 to strike down the Professional and Amateur Sports Protection Act, a 1992 federal law that had outlawed sports betting in most states.

The court ruled the federal ban violated the “anti-commandeering rule” of the 10th Amendment to the U.S. Constitution, which holds that if the Constitution does not give a power to the federal government, that power is reserved for the states.

The act “unequivocally dictates what a state legislature may and may not do,” Justice Samuel Alito wrote in the majority opinion. “It is as if federal officers were installed in state legislative chambers and were armed with the authority to stop legislators from voting on any offending proposals. A more direct affront to state sovereignty is not easy to imagine.”

The High Court acknowledged that sports gambling is controversial, calling legalization an “important policy choice.” Congress could still choose to regulate sports gambling directly, Alito wrote, but if it does not do so, “each state is free to act on its own.”

The Michigan legislation would allow sports betting as part of a larger package of bills designed to authorize internet gaming through tribal or Detroit casinos without an amendment to the state Constitution. A bettor would have to be located in Michigan even when making a wager online through one of Michigan’s 26 licensed casinos.

Complicating the situation is that two Detroit casinos are owned by families that own professional sports teams. MotorCity Casino is operated by Marian Ilitch, whose family owns the Tigers baseball and Red Wings hockey teams. Greektown Casino is owned by Dan Gilbert, who also owns the Cleveland Cavaliers.

The league allowed Marian Ilitch to own MotorCity after she said she had nothing to do with the family’s operation of the Tigers, which was headed by husband Mike Ilitch and now by their son Chris Ilitch.

Greektown Casino Hotel, owned by Gilbert’s Jack Entertainment, supports sports betting at “brick and mortar facilities” with proper regulation, Jack Entertainment CEO Matt Cullen said in a statement.

“The detailed state regulations that will be written in response to the Supreme Court’s decision will determine the safety and viability of this potential amenity,” he said.

MGM Grand Detroit and MotorCity casinos also embraced the chance to legalize sports betting..

"MotorCity Casino Hotel looks forward  to working with the Michigan State Legislature and the Michigan Gaming Control Board to ensure a sound regulatory environment that protects the integrity of sports wagering and benefits the people of the state of Michigan," MotorCity spokeswoman Jacci Woods said in a Tuesday statement..

The new online gaming revenue from Detroit’s three casinos would be taxed at 10 percent — less than an existing 19 percent wagering tax — with revenue divided between the city and state under an existing formula. Taxes on internet gaming for Native American tribes would depend on compact agreements with the state.

The Supreme Court decision means New Jersey should begin full-fledged sports betting before the upcoming National Football League season, said Chris Grove, a gambling industry expert with PlayNJ.com and PlayUSA.com.

Tribes pose obstacle

For states like Michigan that had been considering it as a hypothetical, “I think you’ll see the legislation accelerated,” Grove said.

“There wasn’t a lot of incentive to act because of the question of how the Supreme Court decision was going to come back,” he said. “Now that we’ve moved from hypothetical to actual, I think you’re going to see a lot more momentum.”

Acting fast could benefit Michigan by pulling in customers from border states, Grove said. Canada allows limited sports betting — only parlays, as opposed to single-event sports betting — that is probably not a huge draw right now, Grove said.

People are already illegally betting on sports through black market bookies, Iden said. “This is going to regulate it and add consumer protections,” he said.

State Sen. Mike Kowall, R-White Lake, sponsored similar legislation last term that advanced out of committee but did not see a floor vote. Gov. Rick Snyder’s office was “listening” but not overly enthusiastic about the bill, he said.

Snyder referenced the Supreme Court case and told him, “Lets see what happens with that first,” Kowall recalled.

Native American tribes that operate casinos in Michigan have resisted early versions of the legislation, but Iden said he has been working with multiple stakeholders to ease concerns prior to a potential House vote.

The tribes want to see “a level playing field for everyone in the market, and I fully understand that,” Iden said.

Will Green of the American Gaming Association called the Supreme Court ruling an “enormous victory” for consumers, along with states and tribal sovereign nations that could now “decide for themselves” whether to pursue sports betting by changing laws or amending state compacts.

The Michigan legislation has faced opposition from a group called The Coalition to Stop Internet Gambling, which has warned that authorizing online betting could provide easier access for children or adults with gambling addictions.

But Democrats backed the bill in committee after winning an amendment to direct $1 million in annual revenue to the state’s compulsive gambling prevention fund, said Rep. Jeremy Moss, D-Southfield.

Michigan ‘more sensible’

Monday’s Supreme Court decision was not a surprise, said Jim Wise, vice president of marketing for the FireKeepers Casino Hotel in Emmett Township, which is owned and operated by the Nottawaseppi Huron Band of Potawatomi.

The tribe will monitor legislative activity and continue internal talks over whether to add sports wagering to its mix of offerings for patrons and guests, Wise said in a statement.

“We expect there will be a lot of discussion about this topic in the coming weeks and months, but until there is something more to react to, it’s probably premature to speculate,” he said.

Legal sports betting could be a revenue windfall for states that allow it, Grove said. It could initially be a $400 million industry in New Jersey, he said, but the industry could shrink as other states come online. Nationwide, his firm projects regulated sports betting could become a $5 billion industry by 2023.

Michigan’s proposed 10 percent tax rate is higher than Nevada’s 6.75 percent rate, Green said. But “I certainly think Michigan is taking a more sensible approach than some other states” that are considering rates of 15 percent or higher.

The “big question going forward” is whether the gaming industry and professional sports leagues like the NFL and National Basketball Association can reach regulatory and commercial agreements, Grove said. Sports leagues are already asking “for a cut,” want to limit data that can be used and desire the authority to “veto” bets on certain games, he said.

New Jersey voters authorized a state constitutional amendment to allow sports betting in 2011 and the state Legislature created a regulatory framework in 2012. But the state was quickly sued by the NBA, NFL, National Hockey League, Major League Baseball and the National Collegiate Athletic Association.

If the sports leagues and gambling industry find common ground, state-by-state legalization could be a “rapid process,” Grove said. But there are still “large gaps” between the two industries now that could slow the process in Michigan and other states.

House and Senate leaders have not yet taken a firm position on the Michigan legislation, but both Iden and Kowall said they expect to be busy in coming weeks negotiating details in the wake of the Supreme Court ruling.

“It’s very exciting news,” Iden said. “I think that this was a long time coming.”

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