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Michigan online gambling legislation faces uphill slog

TAGs: Michigan, mike kowall, sb 203

michigan-kowall-online-gambling-legislationMichigan legislators are lining up for another run at authorizing online gambling within state borders in 2017, but their path is anything but clear.

Wednesday saw state Sen. Mike Kowall and five of his colleagues introduce SB 203, a followup to the online gambling bill Kowall (pictured) introduced last April that ultimately died on the vine. SB 203 seeks to authorize internet games that “must include, but need not be limited to, poker,” while prohibiting sports betting.

Kowall’s latest effort is largely similar to last year’s effort. Only the state’s commercial casino operators and federally recognized tribes already conducting gaming operations in the state are eligible to apply for online gambling licenses.

Online gambling revenue will be taxed at 10% but this year’s version has scrapped the upfront $5m deposit to be credited against future tax obligations. The bill allows for the possibility of interstate compacts with other gambling-friendly jurisdictions, provided “the gaming under the agreement is conducted only in the United States.”

License applications must be accompanied by a $100k check, while successful applicants will pay a fee of $200k when the license is issued and another $100k each year that follows.

Internet gaming platform providers who partner with the state’s casino operators will pay $100k upfront for their license and $50k per year after that. Internet gaming vendors – defined as providing “goods, software, or services that directly affect the wagering, play, and results of internet games” – will pay license fees of just $5k for year one and $2,500 each year after that.

The Michigan Senate Regulatory Reform Committee has reportedly scheduled a hearing next week to consider the online gambling proposals, and with all six of SB 203’s sponsors sitting on that committee, the hearing should be a drama-free affair.

Before anyone get too excited, the same committee held a hearing last May that failed to produce much in the way of momentum. Despite Kowall expressing confidence in October that his bill would pass by year’s end… well, here we are.

A TANGLED WEB
In January, gambling scribe Dave Palermo detailed the steep climb Michigan legislators face in crafting a system that merges both commercial and tribal gaming operations while not falling afoul of the Indian Gaming Regulatory Act (IGRA) and other federal laws.

As with Kowall’s 2016 effort, SB 203 requires tribes to waive their sovereign immunity, including subjecting themselves to state law and paying the stipulated fees and taxes. IGRA prohibits states from charging tribes any fees or taxes beyond the cost of regulating gaming activity, unless the state is willing to make a ‘meaningful concession’ to the tribes.

There’s also last December’s federal court ruling that prevented California’s Iipay Nation of Santa Ysabel from launching an online gambling site, based on the argument that taking off-reservation wagers would violate the federal Unlawful Internet Gambling Enforcement Act (UIGEA). Many observers are of the opinion that IGRA applies only to gambling that takes place on tribal lands.

The state’s tribes are said to be split on the merits of getting into online gambling, while the state’s commercial casino operators have to date taken neutral positions on the issue. On the plus side, Michigan already has an online lottery, so opposition from the general public will likely be minimal. But that might not matter unless the legal questions can be resolved to everyone’s satisfaction.

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