Detroit Hesitant To Save Itself With Sports Betting Revenues

Detroit is in bad shape. It’s been that way for ages, of course, but it seems well outside of the local government’s scope of expertise to fix what it screwed up. Case in point: Detroit went bankrupt in 2013, defaulting on their almost $20 billion of debt. Remember that number. Case in point two: Michigan itself is now roughly $78.5 billion in debt. But there’s a silver lining: Detroit, since going through bankruptcy, is marginally on the mend. If the city continues cutting costs as it has done over the last five years, it will only be about 10 more years until the debt-per-citizen rate – or taxpayer burden – reaches zero. (Michigan’s debt-per-citizen is currently about $8000.)

Unfortunately, MI doesn’t seem too interested in accelerating its recovery, which brings us to case in point three: Michigan and Detroit seem hesitant to save themselves with sports betting revenues. See, ever since the Professional and Amateur Sports Protection Act (PASPA) was overturned, there has been a sizable push by Michigan- and Detroit-area casino operators to get sports betting formally legalized, regulated, and taxed in the state. For some perspective on why this is important, consider case in point number four: Sports betting in Michigan is projected to become a $5 billion industry inside the next five years (and would probably bring in far more revenue than that, given the consistently undersold “estimates” of US sports betting participation in general).

Here’s what’s so baffling about MI’s reticence to roll out a sports betting platform ASAP. If the industry produces $5 billion in revenue in 5 years’ time, that equates to about $1 billion in state tax revenue on said gambling action. Per year. Funneled entirely to Detroit (which is not reasonable, but which is conceivable if predicated on a triaged system of state repair and recovery), sports betting could pull Detroit out of its historic financial mire in a matter of 10-15 years. State-wide, sports betting – if it stays at the low-end of the market estimate and does not grow (though all indications say it in fact would grow, and rapidly) – could make the state solvent in 70-80 years. Granted that’s a long time, but coupled with other cost-saving measures, an additional $1 billion-plus to spread around the state every year would certainly go a long way towards righting the ship.

Also bear in mind that this presupposes a 20% state tax on sports betting revenue (or 20% of the bookmakers’ earnings). That might be high, as nationally, other states broaching the subject seem to settle on a rate of between 8% and 13%. However, 20% is not unobtainable, as other states have instituted far higher taxation rates on the pastime. Pennsylvania, famously, has built in a 36% tax rate of bookmaker revenues, and – though this is causing many casinos pause in going forward with launching their sportsbooks – it seems to be a sustainable rate (if only just). If MI could find a middle ground between the extremes established nationwide, it could put much more than a dent in its debt problem. They might even be able to fix those old water pipes in Flint.

Needless to say, sports betting in Michigan – and particularly sports betting in Detroit – seems like a no-brainer. Taken in the context of other recently passed laws, like HB 4926 (which allows for online casino gaming to be legalized and taxed at the state level in Michigan), it seems that the powerhouse double whammy of online casino gaming and land-based/online sports betting would do wonders for Michigan’s bottom line.

As for the players in the industry (like Caesars, MGM, etc.), all of them have expressed interest in bringing sports wagering to their Michigan and Detroit properties in the near-term, provided the state gets off its butt and allows it. As for why that may not happen any time soon, it’s complicated. On one hand, there are legislators that wish for the sports betting initiative to be rolled out, but – like representative Brandt Iden (R) says – “We want to make sure we roll out the right legislation that makes sense. We want to take our time, get it right, work with the stakeholders, and make sure it really is model legislation.” This, naturally, is code for “We want to posture and bluff our way into maximum state revenue off the back of the sports betting industry.” Again, given the perilous nature of MI’s economy, this isn’t exactly surprising or even inappropriate. Bookmakers are going to be nickeled and dimed because the state needs the money. Fine.

A bigger problem is the fact that, right now, two specific families that own Detroit-area casinos also own professional sports teams. Marian Ilitch’s clan owns the Tigers of the MLB and the NHL’s Red Wings, while also owning the aptly-named MotorCity Casino (one of the biggest gambling venues in the state). Dan Gilbert, who owns the now-LeBron-less Cavaliers, also owns the Greektown Casino, which is also in Detroit. Such conflicts of interest – or, rather, potential conflicts of interest – will take legislation to work out, even if said casinos would voluntarily withdraw action on their owners’ clubs (as has been done elsewhere in the country).

Nevertheless, sports betting is certainly going to make its way to Detroit and greater Michigan. And, ultimately, the state here has an opportunity to generate itself a hefty chunk of change that would go far towards the betterment of all the impoverished communities in the state. How or when any of this happens remains to be seen, but it would be truly mind-boggling if it took longer than another year or so. By all accounts, if you live in Michigan, you should expect to be able to bet on your favorite players and teams by the start of the 2019-2020 NFL season.

I mean, the Lions still won’t be any good, but remember: You can always bet against the home team with sports betting in Michigan!

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