Michigan lawmakers have declined to advance Gov. Gretchen Whitmer’s proposal to increase taxes on online sports betting operators, despite the Senate remaining under Democratic control. The Michigan Senate approved an $88.1 billion state budget last week without including the governor’s broader package of proposed tax increases, which was projected to generate roughly $800 million in additional revenue.
Gov. Whitmer’s original revenue proposal included several sports betting measures aimed at increasing state tax collections by nearly $200 million per year.
One of the proposed changes would have introduced a wager-based fee structure similar to the model adopted in Illinois. Under the plan, operators would have been charged 25 cents per bet on the first 20 million wagers processed annually, with the rate increasing to 50 cents per wager beyond that threshold. State projections estimated the measure alone could have generated roughly $39 million each year.
Illinois sportsbooks responded to similar legislation by introducing transaction fees on users, designed to offset the added costs. Data released by the Illinois Gaming Board has also shown a decline in total betting activity since the fee system took effect.
Whitmer’s proposal additionally sought to eliminate promotional deduction write-offs currently available to sportsbooks in Michigan, a move that was expected to raise another $21 million in annual tax revenue.
The governor’s plan also targeted online casino operators with a higher tax burden on top-performing platforms. Under the proposal, iGaming revenue above $185 million annually would have been taxed at 36%, while revenue below that threshold would have remained subject to the current 28% rate. State officials projected the revised structure could have delivered as much as $136 million in additional yearly revenue.
Had the proposal moved forward, Michigan bettors likely would have felt the impact through higher costs and reduced sportsbook incentives.
The per-bet fee structure modeled after Illinois would have encouraged operators to introduce additional charges to offset the increased tax burden. After Illinois implemented a similar system, several sportsbooks responded by passing costs onto users through added betting fees.
The proposal to eliminate promotional deduction write-offs could also have reduced the number of bonus offers available to Michigan users. Sportsbooks typically rely on promotional spending to compete for users, so limiting those deductions would have made aggressive marketing campaigns more expensive for operators. That means less value for players.
There is also concern that higher costs and fewer promotions could reduce overall betting activity. Illinois has already seen a year-over-year decline in wager volume following the rollout of its revised tax framework, according to Illinois Gaming Board data.
Increased costs in regulated markets like this can push some bettors toward offshore sportsbooks, which often have fewer restrictions, potentially enticing players to join them. But that would put them at risk, since there are fewer consumer protections on these unregulated platforms.
To that end, this news is a major positive for Michigan bettors.
