Michigan stands to collect an additional $192.8 million in online gambling taxes under the governor’s executive budget recommendation released Feb. 11.
Gov. Gretchen Whitmer, a Democrat, aims to raise revenue by updating Michigan’s online casino tax structure. The plan includes imposing higher rates on top operators and modifying free-play deductions.
She wants to direct additional online gambling revenues to support Medicaid.
Online gambling operators like DraftKings, FanDuel, and BetMGM would be hit harder, given their large market share in Michigan.
The online gambling industry will likely oppose the tax increases, as it has with similar proposed tax changes in other states. Online sportsbooks in Illinois, which last year enacted similar tax hikes, responded by raising the minimum bet.
Alex Kane, CEO and founder of the betting platform Sporttrade, envisions an apocalyptic scenario for some Michigan gambling sites.
“Can’t help but feel for legal and regulated sportsbooks, many of which invested billions into regulatory, audits, market access, product, licensing, and marketing, most of whom are not yet turning a profit, and all who are now facing economic annihilation,” Kane wrote on X.
2025 Michigan Online Gambling Taxes
Whitmer’s proposal would notably increase the state’s share of revenue from online gambling platforms operating in Michigan.
In 2025, Michigan commercial and tribal operators reported $3.8 billion in total gross receipts from online casino gambling and online sports betting. That was up 30% over 2024.
After subtracting promotional play offers, operators reported a combined $3.3 billion in adjusted online casino gambling and sports betting receipts. Approximately $2.9 billion came from online casinos, with $436 million from online sports betting.
Based on the adjusted revenue, online casino taxes and fees were $597.5 million in 2025. Online sports betting taxes and fees were $27.1 million in 2025.
Whitmer’s proposal would end sports promo play deductions that currently benefit online gambling companies. These offers can cause harm to vulnerable users.
MI Gambling to Offset Federal Cuts
To explain the reasoning for the proposed tax increase, the FY 2027 budget proposal stated:
“In the wake of devastating federal cuts to health care that have already raised premiums and could close hospitals and clinics, crowd emergency rooms, cut jobs, and kick hundreds of thousands of Michiganders off their health care, the budget recommendation takes decisive action to protect access to coverage and ensure the future sustainability of Medicaid.”
Notably, certified federal prediction markets offer online sports betting in Michigan without paying state taxes or fees. However, these apps have only minimally affected the regulated industry’s handle.
Critics of Whitmer’s budget will likely claim that the tax changes will drive more residents to prediction markets and unregulated betting platforms.
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