At the end of January, Michigan became the 15th state to legalize online sports betting. What does this mean for them? How much money is the move expected to generate? Which states will be next to follow suit? Let's break it all down.
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In a move that's been a long time coming, Michigan officially legalized online sports betting at the end of January. They are now the 15th state in the US to greenlight the acceptance of online wagers, and the implications of their move are huge.
Indeed, the entire state of Michigan stands to benefit more than anything else. With legalized sports betting comes a new stream of local revenue, which has proven to be quite lucrative in other places.
But every time another state legalizes online gambling, it also impacts the other states that have yet to do the same. Some are waiting to join the party. Others continue to put up a fight against it. Rest assured, though, they may all eventually warm up to legalized online betting. And what's happened in Michigan may help opponents of the idea change their tune.
Impact of Legalized Sports Betting in Michigan
Many people tend to wonder why the legalization of online betting is even necessary at the state level. They view approved forms of physical gambling as greater gestures.
Alas, the world is changing. As Weston Blasi noted for Market Watch, in-person gambling only represents a small fraction of the betting pie. This holds true even in states that are drowning in casino options.
For example, take New Jersey, the home to Atlantic City, otherwise known as the Las Vegas of the East Coast. Over 90 percent of their accepted bets come through online. Even in Nevada, where there's actual Las Vegas, more than 57 percent of the sports wagers placed are being submitted online.
Casinos have needed to pivot in the digital age. That's why you see so many create their own sportsbook apps and websites, or who partner with companies who have the ability to do that for them. Ignoring online betting is akin to torching a boatload of revenue.
Michigan's Legalized Betting Revenue Projections
Just how much revenue does Michigan stand to gain from the legalization of sports betting? In two words: a boatload.
Michigan is the second-largest state in terms of raw population to legalize online sports betting, according to gambling analyst Dustin Gouker (via Market Watch). He believes that more than $8 billion of sports bets could come through the state on an annual basis.
That number means casinos and sportsbooks would turn around a $500 million profit. And that, by extension, would mean Michigan is eligible to receive around $40 million in new tax revenue.
While that doesn't seem like a ton of money at the state level, nothing could be further from the truth.
For starters, sports betting is a growth industry. It has increased with popularity essentially on an annual basis. As it becomes more of a staple, that number should only go up.
More importantly, no state is in position to reject $40 million of extra revenue. The coronavirus pandemic has wreaked havoc on state earnings. Their 2020 revenue streams cratered, and the 2021 projections aren't that great. Online sports betting provides a recession-proof source of income for states since gamblers don't tend to slow down during tough times. And as it pertains to the pandemic, bettors don't need to physically be somewhere to place their bets, so it's been able to grow at a higher rate than usual over the past year.
More States to Legalize Online Sports Betting?
Michigan will not be the last state to give the OK to online sports betting.
Five states are considered likely to legalize online gambling by the end of 2021: Louisiana, Maryland, North Carolina, South Dakota, and Washington. Other states like Arizona, Connecticut, Florida, Georgia, Kentucky, and Wyoming are deemed legitimate possibilities to follow suit. All of them, among some other states, either have legislature pending or are expecting tribal action.
By the start of 2022, in fact, more than half of the United States may have actually legalized sports betting. And at that point, it would be harder and harder for any holdout states to continue sitting on the sidelines. They'd have to start worrying about disincentivizing people from moving there if sports betting is legalized to that magnitude everywhere else.
Another tipping point for the United States is New York. They are among the trend-setter states. What they do carries weight throughout the rest of the country. And though they've been contemplating legalized sports betting—both online and in-person—for some time, the belief is that the financial losses suffered at the state level due to COVID-19 will accelerate the process.
Arguments against this legalization tend to rest on the decentralization of the industry. Not all sportsbooks have ties to the United States, and it is impossible to police revenue streams for what would be considered out-of-market bookies.
But that stance has never rung more hollow. People are placing bets online whether their state allows it or not. Legalizing the ability to submit online wagers will entice people to use state-approved casinos and sportsbooks because it's more convenient and not against the law. States only stand to gain revenue by giving the green light.
Michigan is the latest state to realize this. You better believe the vast majority of those that remain will come to the same realization by the end of 2022 at the absolute latest.
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