Michigan Online Gambling One Year Later – Online Casinos Made The Most

Michigan online sports betting is part of an interesting pattern in Michigan’s gambling industry. Together, online sports betting and online casinos exceeded tax revenue expectations. However, projections for online sports betting came in way under early projections. Online casino games not only made up most of Michigan’s online gambling tax revenue, it exceeded expectations far beyond early predictions. 

So, sports betting fell short and online casinos shattered expectations. Here’s how Michigan’s most publicized new form of online gambling under-performed and its less publicized form over-performed.  

Michigan Online Gambling’s Year One Revenue   

We didn’t need to wait for reports on the last month of 2021 to come in to know that online gambling in Michigan would generate net revenue in the ten figures. After subtracting promotions and bonus credits, online gambling companies will still rake in over $1 billion: 

 2021 Net Revenue
🎰 Internet Gaming$1 Billion
🏈 Internet Sports Betting$111 Million
📈 Total Online Gambling Net Revenue$1.1 Billion

Internet gaming includes online casinos while online sports betting is just what it sounds like. Online sports betting made up about 10% of the industry’s net revenue in 2021. Part of that reason is online casinos are states’ real moneymakers. 

But it’s also because online sportsbooks offered so many welcome bonuses. Michigan online sportsbooks lost money in January and February 2021 because of all the promotions in their early months. (They probably lost money from offering Super Bowl promotions, too.) Michigan online sportsbooks wrote off 62% of their gross revenue in promotional credits. So, a big chunk of their money went toward promotions designed to attract Michigan customers.

Michigan’s online casinos didn’t rely on welcome bonuses as much as sportsbooks did. Online casinos only wrote 10% of their gross revenue off in promotional credits. So, before and after subtracting bonus funds, online casinos in Michigan generated far more revenue than online sports betting. 

Michigan Tax Realities Vs. Early Projections  

One of the great hopes for sports betting legalization was that it would generate new state revenue. That way, Michigan could increase its tax revenue without raising taxes on Michiganders. In October 2019, when then-Representative Brandt Iden was still trying to get his iGaming and online sports betting bills passed, he estimated that sports betting could generate up to $30 million in annual tax revenue. This wasn’t a first-year projection, so it could still come true when Michigan’s online sports betting market reaches maturity. 

When Governor Whitmer signed Iden’s bills into law in December 2019, Michigan’s Department of Treasury put the potential tax revenue bump at $19 million instead. Online sports betting’s first year has fallen short of both projections:       

Online sports betting still has room to grow to meet either projection. Tax revenue from online sports betting should increase as the market grows and sportsbooks rely less on extravagant welcome bonuses in the coming years.   

In contrast to online sports betting, online casinos blew early projections out of the water. Michigan Sharp estimated that Michigan online casinos and online sportsbooks could generate $60 million in first-year tax revenue. In December 2020, local Michigan station WoodTV cited unnamed experts who pegged Michigan’s online gaming tax revenue at $90 million. 

Online casinos alone generated more than twice WoodTV’s estimate and more than three times MichiganSharp’s: 

Michigan’s online casinos grew their customer bases and generated revenue streams quickly. They far exceeded early tax revenue estimates for the State of Michigan.

Michigan Online Sports Betting High Publicity And Low Revenue 

For all its publicity, sports betting makes up about a tenth of Michigan’s online gambling tax revenue. Most of Governor Whitman’s press release announcing sports betting legalization focuses on sports betting rather than online casinos. 

But sports betting generates more publicity than online casinos outside of Michigan, too. The Wall Street Journal focused on what it called “the deluge of sports betting ads” in an October 2021 story. Online casinos don’t attract the same amount of media attention. 

Part of the reason is some of the top spenders on TV gambling advertising are sportsbook companies. FanDuel, DraftKings, and BetMGM made up 82% of advertising spend on SpotTV in Q1 of 2021. 

But sports betting is also part of a much larger ecosystem that’s popular among sports fans and, of course, sports bettors. Between major sports broadcasting networks, the reach of individual teams, and even individual players, there are many ways for sportsbooks to market to new customers. 

Online casinos may be massive money-makers. But they don’t enjoy the marketing limelight that sports betting does. 

That presents an interesting challenge for states that want to follow in Michigan’s footsteps. Sports betting is popular but not very profitable. Online casinos don’t enjoy the same level of popularity but have far more tax revenue potential than sports betting. Michigan seems to have legalized iGaming — in part — by leveraging sports betting’s popularity to simultaneously pass online casino legalization. 

This is a model that other state lawmakers are likely already learning from. Check out the interactive map of legal online gambling states on the Bonus.com homepage.

About the Author

Chris Gerlacher

Christopher is a sports betting enthusiast and online gaming expert from Colorado Springs.