Challenges of Michigan iGambling Bill

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Friday, July 28th, 2017 | Written by Adam Brown

Michigan is aiming to become the next state where residents can legally gamble online, but there are still many hurdles to clear and negotiations to take place before regulated iGaming can become a reality. Consequently, the state recently revised its Internet gaming bill, Senate Bill 203, in the hope of appeasing the 12 American Indian tribes operating casinos in the mid-western state, and bringing legislation one step closer.

Tribal Concerns

Currently, Michigan is home to both commercial and tribal casinos, all of which are hoping to operate online gambling sites within the Wolverine State; however, developing legislation that is agreeable to both types of casinos has proven to be difficult. In an effort to bridge the gap, Senator Mike Kowall (photo), the Republican Senate Majority leader, has now written a new version of Senate Bill 203.

The latest version of Senate Bill 203 is intended to appease tribes operating casinos within the state. The new language states that tribes will be able to provide online gambling, provided that they negotiate a revenue sharing agreement with Michigan and self-regulate their sites to prevent money laundering and protect consumer interests. Under the law, the revenue share would be equivalent to the tax rate assessed to commercial casinos in Detroit, which is capped at 10 percent. Commenting on the situation so far, Mike Kowall stated:

“I’m getting a real education here. The best thing we can do is keep referring back to the federal guidelines and IGRA [Indian Gaming Regulatory Act]. That pretty much sets the rules as to how tribes operate. It’s difficult for states to intervene due to the fact they are sovereign nations.”

Despite Sen. Kowall optimism surrounding the online gambling piece of legislation’s success, in reality, however, Senate Bill 203 approval in both the Senate and House, followed by a signature from Gov. Rick Snyder is an unlikely scenario for the current legislative session.

Differing Opinions

Some tribes are satisfied with the new version of the Bill, but others are not yet onboard. There are tribal leaders who believe that there is no need to renegotiate their treaties under the Indian Gaming Regulatory Act and that tribes should simply be free to offer online gambling if it is legalized for commercial casinos. Michigan counters that even though the tribal areas are sovereign nations, servers for online gambling sites and players are located on tribal lands. For this reason, the state believes that they do have a right to request revenue sharing.

Commercial casinos have been quiet about the new version of the Bill; however, sources familiar with the industry in the state believe that the casinos are onboard. The bill will prevent commercial casinos from launching online gambling sites for 1 full year to give tribes time to negotiate with the state. This does not seem to be disagreeable to the commercial casinos, provided that tribal casinos are required to pay something to the governor to ensure fairness.

Iipay Court Case

A court case in California could ultimately help to settle the dispute between tribes resistant to Senate Bill 203. Iipay Nation of Santa Ysabel in California is currently arguing in a federal appeals court that they can accept online wagers if the Internet server used to accept bets is housed within tribal borders. The lower court ruled against the tribal nation, saying that doing so violates the Wire Act and the Unlawful Internet Gambling Enforcement Act.

If the appeals court agrees with the lower court, it would indicate that Michigan tribal casinos cannot simply institute online gambling on their own under the Indian Gaming Regulatory Act and will instead need to work with the state to offer iGaming. As Santa Ysabel attorney Kevin Quigley, explains:

“They [Michigan legislators] can declare that for purposes of state law online gaming wagers are conducted at the server, or where the wager is accepted. But the Department of Justice just might come in and do what they did in our case, which is to say, ‘We don’t care what the state law says. We’re saying it’s illegal because it [wager] is initiated off the reservation.’”