Michigan Governor Gretchen Whitmer has unveiled a new proposal in her Fiscal Year 2027 budget, aiming to implement a per-wager tax on online sports betting operators. The plan mirrors a similar tax that was introduced in Illinois in 2025. The proposed tax could generate millions in additional revenue for the state, but it has already sparked concern among industry stakeholders, who fear the potential negative effects on both sportsbooks and bettors.

Michigan’s Proposed Per-Wager Tax

Under the new proposal, Michigan would impose a 25-cent tax on each of the first 20 million online sports bets placed by licensed operators in a fiscal year. Once that threshold is surpassed, the tax would increase to 50 cents per wager. This is identical to the system adopted in Illinois, where a similar per-wager charge was introduced in July 2025.

Governor Whitmer’s budget projects that Michigan’s new tax could raise approximately $38.8 million in revenue for the Medicaid Benefits Trust Fund. This fund is designed to support the state’s health and wellness programs, which are facing significant financial pressures due to federal funding cuts and rising costs.

The per-wager tax is part of Whitmer’s larger strategy to close Michigan’s projected $1.8 billion budget gap. By applying this charge to online sports betting operators, the state hopes to generate consistent revenue while addressing financial challenges. However, the proposed measure has raised concerns in the gaming industry, especially considering the unintended consequences observed in Illinois following the implementation of its own per-wager tax.

Michigan’s plan to introduce a per-wager tax follows in the footsteps of Illinois, which made headlines with its own tax structure in 2025. Illinois imposed a similar charge, which required sportsbooks to pay 25 cents per wager for the first 20 million bets and 50 cents for each subsequent bet. While the tax was expected to generate significant revenue, its implementation led to a noticeable decline in the number of wagers placed with licensed sportsbooks. In fact, Illinois saw a 15% drop in wagers in the second half of 2025, which some industry groups have attributed to the added costs associated with the per-wager tax.

Sportsbooks in Illinois reacted by increasing minimum bet requirements and adding per-wager transaction fees to offset the additional costs. These measures, however, may have contributed to the drop in betting activity, as bettors were faced with higher prices and fewer incentives to place wagers with licensed operators. The drop in wagers was particularly noticeable in the months leading up to the Super Bowl, a traditionally busy time for sports betting.

Despite this decline, the Illinois per-wager tax still generated a substantial amount of revenue, raising more than $60 million in its first six months. In Michigan, Governor Whitmer’s budget hopes to replicate Illinois’ success by generating similar amounts of revenue to support public health initiatives, but the concerns raised by Illinois’ experience suggest that Michigan may face similar challenges.

Michigan’s Expanding Online Gambling Taxes

In addition to the per-wager tax, Whitmer’s proposed budget also includes a number of other measures aimed at increasing revenue from online gambling. These include changes to the tax rates for online casinos and the elimination of free bet deductions for operators.

Currently, Michigan’s online casinos are subject to a progressive tax rate ranging from 20% to 28% on adjusted gross receipts (AGR). Under the new proposal, the tax rate would increase to 36% for operators that exceed $185 million in annual AGR. This would significantly impact Michigan’s top-performing online casinos, which include major players like FanDuel, BetMGM, and DraftKings. The proposed tax changes are expected to raise an additional $135.5 million for the state, further bolstering the Medicaid Benefits Trust Fund.

However, Michigan’s online casinos, like the sportsbooks, will no longer be allowed to deduct promotional credits or free bets from their taxable revenue. These deductions have previously been a key incentive for operators to offer promotional deals to attract new customers. The elimination of this deduction is expected to generate another $21.1 million in new tax revenue for the state.

Despite the potential for significant revenue generation, Whitmer’s proposed tax hikes are likely to face strong opposition from the gambling industry. According to SBC Americas, the Sports Betting Alliance (SBA), which represents major operators like FanDuel, DraftKings, and BetMGM, has already voiced concerns over the per-wager tax. The SBA argued that such taxes would drive bettors to unregulated, illegal operators, undermining the state’s efforts to build a legal, responsible sports betting market.

In addition to the per-wager tax, industry groups are also critical of the new tax rate on online casinos. With Michigan’s current tax rate already among the lowest in the country, these new increases may make it harder for licensed operators to compete effectively in a highly competitive market.

Rep. Daniel Didech of Illinois, who has championed the repeal of the per-wager tax in his state, may offer a roadmap for Michigan’s opponents. As Illinois grapples with the effects of its own tax structure, Michigan lawmakers may need to carefully consider the balance between generating tax revenue and maintaining a thriving legal sports betting market.