Why Michigan’s $115 million in January on-line sports activities betting wasn’t an enormous tax windfall

Michiganders have been bombarded with online sports betting advertisements, and those efforts paid off for the operators. In January, $ 115.2 million was deployed in just 10 days.

But that wasn’t a boon to the state’s bottom line.

The Michigan Gaming Control Board reported Wednesday that operators paid $ 4.4 million in taxes for January, on gross revenues totaling $ 42.7 million. Free bets and promotions affect the operators’ taxable profits.

“The grand total is the total ($ 115.2 million),” Chris Altruda, a national sports betting analyst at MiBets.com, told MLive. “I was a little surprised at the amount of advertising revenue that resulted. In some ways I shouldn’t be surprised, but at the same time it was a little noticeable that gross sales were $ 13 million and net sales were minus $ 5 million.

“But all in all, (Michigan) did everything as well as you could expect for the first 10 days, considering what was going on. You had a busy sports calendar with the NFL playoffs, you had college basketball in full swing and no exemptions for college teams either, which will help in the future. “

Online casino games are taxed at 20 to 28 percent based on annual adjusted gross receipts, while sports betting is taxed at 8.4 percent. Only $ 111,696 of the $ 4.4 million tax came from online sports betting in January.

The operators’ gross revenues for January were $ 42.7 million, with online casinos responsible for $ 29.4 million, according to MGCB.

While online sports betting providers generated a total of $ 13.3 million in gross income from sports betting, adjusted sales were minus $ 5.2 million. The operators can deduct the advertising expenditure from the gaming revenue as well as the revenue from a free betting campaign. A total of six of Michigan’s eleven licensed operators ended January in the red.

All nine online casino operators have now generated tax revenue for the state in January.

RELATED: In just 10 days, Michigan sports bettors bet $ 115 million online in January

Many operators were also offering attractive Super Bowl promotions for the February 7th game, which means that advertising revenue is likely to inflate again this month. However, Altruda expects fewer promotions to be offered once consumers re-enter the online gambling market.

“For a first month it’s understandable, especially given the importance of getting started quickly, with Michigan being something unique as everyone starts in the same place and says, ‘Go’,” Altruda said. “I think it will be a gradual decline where there is more taxable income for the state to raise money from.”

One operator, Barstool, which works with Greektown Casino, generated around 90 percent of the tax revenue for online sports betting. Overall, it ranked third in the state at $ 27.5 million, but its adjusted sports betting income topped the list at $ 99,856.87.

FanDuel and DraftKings, each of the leaders in sports betting in at least two other states, were # 1 and # 2, respectively, in Michigan’s opening month for $ 32.6 million and $ 28.2 million, respectively However, operators who offered some of the most generous promotions each reported losses of more than $ 1.8 million in adjusted sports betting income.

RELATED: Online Games, Sports Betting Launch in Michigan

Altruda said last month that he expects Michigan to hit a $ 500 million monthly sports betting handle at some point, including retail sports betting.

With the Super Bowl earlier this month and the NCAA tournament in March and April, he said the number was still a possibility. However, Detroit’s three commercial casinos – Greektown, MotorCity (partner of FanDuel), and MGM Grand (BetMGM) – reported $ 35.6 million in retail sales from sports betting in January – a figure that Altruda says is projected to be $ 500 million -Dollars must go up.

“I would say maybe a little stronger than a puncher’s chance,” said Altruda. “I also think DraftKings (a partnership with Bay Mills Resort & Casino on the Upper Peninsula) is one of the things I’m curious about about Michigan. Don’t get me wrong, it’s a national name and has a stamp of approval everywhere. Simultaneously. I am curious to know how to make this one grow when you are not in the daily routine of Detroit like the other three casinos are. As DraftKings is growing in Michigan, something will be seen and possibly a key factor in hitting that 500 million mark when you talk about February and March. I’m not sure how it will react to the baseball market. At the same time when football is rolling around I think then if it doesn’t happen in February and March then start looking ahead and thinking more about the NFL season as the more likely target for that number. “