Michigan Becomes Fastest State to Cross $1 Billion in Online Casino Tax Revenue

Revenue figures for August came earlier than usual, with lots of talking points for the online casino industry, especially. Perhaps the most important of them all is how the state surpassed $1 billion in lifetime iGaming tax revenue faster than any other jurisdiction in the US has managed. The state also saw revenue figures north of $150 million for the sixth consecutive month and the seventh month in 2023.

Other financial indicators were largely positive, except the month-on-month comparison with July 2023. BetMGM Michigan also ended August as the top online casino by revenue again, despite growing competition by FanDuel.

For a long time, Pennsylvania held the record as the fastest state to reach $1 billion in online casino tax revenue in the US. It took the Keystone State 36 months to hit the milestone. However, Michigan has now broken this record with about four months to spare.

Online casinos paid $28.6 million to Michigan state authorities and $10.5 million to local entities in August. This total was enough to bring lifetime gross tax receipts to $1.02 billion from the past 32 months.

Michigan directs revenue from online casino taxes to important programs and policies. Some notable beneficiaries of gambling tax revenue are the School Aid Fund, First Responder Presumed Coverage Fund, and the Compulsive Gaming Prevention Fund.

The iGaming tax revenue is quite significant, and not only because it was achieved in record time. Compared to online casinos, the sports betting tax revenue for the state currently stands at about $55 million. This is indicative of a wide revenue gap between both sectors of the Michigan gambling industry.

BetMGM, FanDuel and DraftKings were the biggest contributors to the tax revenue in the state, accounting for a whopping 72.7% of the lifetime receipts. For context, all three casinos have recorded $742.6 million in tax revenue between them.

One factor responsible for the growth of tax revenue is the going rate for each state. In Michigan online casinos pay 20% tax on their gross revenue less than $4 million and 28% on gross revenue above $12 million. The three Detroit casinos also pay an additional tax of 1.25% to the city authorities.

For New Jersey, one of the earliest states to legalize iGaming, the tax rate is 15% of gross revenue in addition to minor surcharges and fees. This explains why the state is yet to cross $1 billion in tax revenue.

Online casino gross receipts in August stood at $152.2 million, bringing Michigan’s total revenue for the first eight months of 2023 to $1.24 billion. This is a commendable 22.3% growth, compared to the first eight months of 2022. Also, August’s monthly revenue was a 16.8% jump from August 2022. However, July’s $153.6 million iGaming gross receipts meant that the state had to settle for a slight 0.9% decline in August.

Expectations are high for Michigan to close 2023 with its highest annual revenue ever. Projections are that the state will wrap up the year with $1.86 billion in total gross receipts if it continues to generate an average of $155 million monthly.

Nevertheless, it may be difficult to see 20%+ year-over-year growth figures from here on. That’s because the industry picked up in the last quarter of 2022, generating a record-setting $152.7 million revenue in December.

Still on iGaming related news, there seems to have been more intense competition with the Michigan big 3 in August. Of course, BetMGM led the pack with a revenue of $44 million, but it was just some $10 million clear of FanDuel Casino MI. The MotorCity-operated brand ended the month with $33.1 million and was also closely followed by DraftKings with $28.1 million.

Not only was FanDuel closing in on BetMGM, but it was the lowest revenue that BetMGM had seen since January 2022. On the flip side, August’s revenue was FanDuel’s second highest monthly revenue ever. Despite BetMGM’s position, FanDuel is the leading casino with the highest year-over-year growth and mobile app downloads in 2023.

BetRivers Online Casino Michigan also had a good outing, becoming the second tribal-owned casino to post more than $10 million in monthly revenue. Only DraftKings achieved this feat earlier, generating $14.4 million in monthly revenue as far back as February 2021.