Governor Gretchen Whitmer must address certain budget shortfalls, and future federal support for the state’s Medicaid program is uncertain. She needs more revenue, which could mean a rise in taxes on online gambling and sports betting.
A new top online casino tax tier
In 2025, the online casinos in Michigan generated a record of $3.1 billion in online gaming revenue. This put Michigan in the top spot for gross iGaming revenue, beating both Pennsylvania and New Jersey. Online gambling has become central to state revenue. An example of an MI online casino is Play Gun Lake, which is the online arm of Gun Lake Casino.
The Michigan Gaming Control Board (MGCB) reported that online casino gaming generated over $597 million in taxes during 2025. Michigan currently taxes online casinos at a graduated rate of 20% to 28%.
Under the new budget proposal, operators who reach $185 million in annual adjusted gross receipts will have to pay a higher tax rate. They will be taxed at 36%, which is 8% higher than the previous maximum tax rate. The new tax is designed to target the largest operators in the state, which collectively account for a large share of the market. It is still far less than Pennsylvania’s 54% for online slot revenue.
The higher tax rate is expected to generate $135.5m in additional tax income for the state this fiscal year. Most of this will go to the Medicaid Benefits Trust Fund for health and wellness programs.
A new per-bet tax on sports wagering
According to the budget proposal, Michigan seeks to introduce a per-bet tax on sports wagering. This is identical to the system Illinois adopted last summer.
Operators would pay $0.25 per bet on their first 20 million bets each year. After 20 million bets, the tax would increase to $0.30 per bet. Again, this per-bet tax would mainly impact the largest sportsbooks in Michigan.
Investors who understand how trading works know they need to follow market developments closely, and the same applies to online sports betting. In Michigan, higher operating costs could prompt operators to adjust their pricing. Some operators in Illinois chose to pass the tax on to bettors, and this could happen in Michigan, too. This new per-bet tax could generate nearly $39 million for the Medicaid Benefits Trust Fund.
Elimination of promotional deduction write-offs
Tourism in Michigan is flourishing, and tourists often enjoy online sports wagering, where they can claim bonuses to play for free without using their own funds. The proposal would also do away with promotional deduction write-offs for sportsbooks. Operators can currently deduct promotional free play credits from their taxable revenue.
Other states are also revisiting their early sports betting frameworks and considering making such changes. Sportsbooks could start scaling back their promotional offers, and sports bettors could see less favorable odds over time. This has occurred in response to higher taxes in other states, where operators are offering fewer promotions and refining their pricing models. However, ending the tax deduction could mean over $21 million for the Medicaid Benefits Trust Fund.
Opposition and legislative hurdles
Republican leaders in the Michigan Legislature are pushing back against the proposed tax increases. They believe the package is too broad and potentially harmful to iGaming businesses. Unified GOP resistance could result in blocking or reshaping the governor’s proposal.
Tax hikes could cover health care workforce shortages
Michigan is facing health care workforce shortages, particularly in long-term care facilities and nursing homes. Facilities like these have a high turnover rate, as wages for direct caregivers are low, and other industries can offer flexible scheduling and higher salaries.
A direct care worker wage increase would help to improve recruitment and retention. Having a stable workforce is essential for maintaining the health care’s quality in the state. The proposed gambling tax hikes would provide a dedicated stream of revenue for this purpose.
While the purpose of the tax hikes is legitimate, some detractors of the proposal believe they could topple Michigan from its top position in online gambling. Lawmakers in Michigan must consider the proposal carefully, which is likely to take some time.
