Michigan stands to collect an additional $195.4 million in online gambling taxes under the governor’s executive budget recommendation released Feb. 11.
However, as of early May, the proposal was not included in budget bills advanced by the Michigan House and Senate. This development left the tax increase unresolved during budget negotiations.
What Does Gov. Whitmer Propose?
Gov. Gretchen Whitmer, a Democrat, aims to raise revenue by updating Michigan’s online casino and sports betting tax structure. The plan includes imposing higher rates on the largest online casino operators, adding a new per-wager tax on sports betting, and eliminating free-play deductions.
She wants to direct additional online gambling revenues to support Medicaid.
The taxes would hit online gambling operators DraftKings, FanDuel, BetMGM, and BetRivers harder, given their market share in Michigan.
The online gambling industry will likely continue to oppose the tax increases, as it has with similar proposed tax changes in other states. Online sportsbooks in Illinois, which last year enacted a similar per-wager tax, responded with measures such as transaction fees and increased wagering minimums.
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 29.5% 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 $435.9 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.
MI Online Casino Revenue Record
Michigan’s online casino market has continued growing in 2026. In March, online casino gross receipts reached $322.1 million, the highest monthly total to date.
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 that Michigan is facing growing pressure from federal changes and health care costs.
The budget says federal changes are estimated to result in as many as 200,000 Michiganders losing Medicaid coverage once work requirements, more frequent redeterminations, and eligibility changes are fully in place.
The governor’s budget seeks to use several funding streams to support Medicaid, including:
- $135.5 million from a new internet tax rate on the largest casinos
- $38.8 million from a per-wager sports betting tax
- $21.1 million from eliminating the free-play deduction
Most of the gambling-related revenue would go to the Medicaid Benefits Trust Fund.
Prediction Markets in Michigan
Notably, Michigan has also moved against prediction-market sports betting.
In March, Michigan Attorney General Dana Nessel sued Kalshi and alleged that its sports event contracts amount to unlawful internet sports betting in Michigan.
The complaint alleges that Kalshi is not a licensed Michigan casino or federally authorized tribal casino and is prohibited from offering internet sports betting in the state.
Critics of Whitmer’s budget will likely claim that the tax changes could drive more residents to prediction markets and unregulated betting platforms.
Sportsbooks must also pay a federal excise tax.