Did Detroit Just Kill Retail Casinos?

| March 18, 2021 9:11 am PDT

Despite a multitude of problems, the city of Detroit, Michigan just saw the first full month of online gambling generate nearly as much tax revenue for the former metropolis as its three brick-and-mortar casinos produced in a month pre-pandemic.

That’s right: Online gambling, which was not legal in the state prior to January 2021, helped boost the revenue of the three Detroit casinos – which are only now beginning to recover from months of government-enforced closure — to just about pre-pandemic levels.

Detroit Gambling Revenues in 2020

The Michigan Gaming Control Board reports that last year, Detroit’s general fund took in about $14.4 million in wagering tax revenues in February, the last “normal” month prior to the pandemic. The contributors of that $14 million were Detroit’s three retail casinos—Greektown Casino Hotel, MotorCity Casino Hotel, and the MGM Grand Detroit.

That was all back in February 2020. Let’s call that “the good old days.”

Those good old days ended the following month when the pandemic hit. Michigan Governor Gretchen Whitmer made sure her state was among the first to turn the lights off with her ordered closure of all non-tribal casinos in the state from March 16 until early August.

Those closures were rescinded in August only to be re-imposed from mid-November through December thanks to a surge in COVID-19 cases.

There are, incidentally, 24 casinos operated by various Native American tribes in Michigan. While these casinos pay wagering taxes to the state, they are not subject to state gaming authority, and only a handful closed in 2020 due to the pandemic.

The Launch of Online Gambling in Michigan

Michigan approved online gambling and sports betting in the state in December of 2019, and it spent most of 2020 developing the rules, regulations, and licensing procedures under which the new virtual gambling could be conducted.

And at noon on January 22, 2021, legal online gambling and sports betting became a reality in Michigan.

In past years, wagering tax revenue has contributed as much as $180 million a year to the City of Detroit’s general fund. Naturally, with its three retail casinos shuttered for much of 2020, the wagering tax collected was much, much less (zero for at least four months).

For the record, Michigan taxes the wagering at all casinos in the state at the rate of 8.4%. In the case of Detroit’s three casinos, that tax is split, with the state getting 3.78%  and the City of Detroit banking 4.62% to Detroit.

The new virtual gambling opportunities bring with them new taxes, of course. In Michigan, they are the Internet Gaming State Tax and the Internet Sports Betting State Tax. Both are levied at 8.4% of gross receipts. Taxes collected from online wagering covered by Detroit’s three casinos are split between the state and the city.

The Michigan Gaming Control Board separates the various forms of wagering into three discrete taxes: A general Wagering Tax, the Internet Gaming Tax, and the Internet Sports Betting Tax. All three are at the same 8.1% rate, but Detroit’s share of each is based on the revenue produced by its three brick-and-mortar casinos, regardless of whether the wagering was retail or online.

Tracey Lynn Pearson, a representative for Detroit’s Office of the Chief Financial Officer, was quick to point out that the sudden improvement in tax revenues might be temporary.

In a recent statement to the Detroit Free Press, Pearson noted: “While the internet gaming revenue performance looks promising thus far, it remains to be seen how much of this spike may be temporary due to the novelty of internet gaming and the associated promotion by the casinos.”

Pearson’s prognostication notwithstanding, online gambling will almost certainly survive and prosper over for the foreseeable future. A more pertinent question might be: Will retail casinos, like old soldiers, just fade away?

By the way, you must be 21 years of age to gamble online in Michigan, and while it isn’t necessary to be a resident of the state to play the virtual slot machines or bet on a football game, you must be physically located in Michigan when you place your bets.

J.W. Paine

J.W. Paine is one of the most experienced writers at GamblingSites.com. He's written for television and the printed media, and is a published novelist (as Tom Elliott).

Paine loves writing about Las Vegas nearly as much he loves living here. An experienced gambler, he's especially familiar with thoroughbred horseracing, poker, blackjack, and slots.

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