For the most part, the expansion of sports betting within the U.S. since the repeal of the Professional and Amateur Sports Protection Act (PASPA) in 2018 has largely been an eastern affair with states such as New Jersey, Pennsylvania, West Virginia, New York and, most recently, New Hampshire, leading the charge.

But the past few months have seen a number of Midwestern states enact enabling legislation to jump on the sports betting bandwagon. Although slightly late to the game, the nascent opportunity is such that some of these jurisdictions may soon become leaders in the sports wagering segment of the U.S. gaming marketplace.

Case in point: Michigan, the latest Midwestern state to offer sports wagering to its citizens. According to a recent report from PlayMichigan.com, the Wolverine State could rival the largest legal sports betting markets in the country once it matures, attracting billions of dollars in bets each year and generating millions in tax revenue. Indeed, PlayMichigan.com estimates that the state is capable of generating as much as $7 billion to $8 billion in sports bets annually and $500 million in gross operator revenue.

There are a number of underlying reasons for this strong sports betting forecast. “Michigan is the second-largest state in terms of population to have legalized online sports betting and online casinos and poker, behind only Pennsylvania,” said Dustin Gouker, chief analyst for PlayMichigan.com. “Michigan’s business-friendly tax rate and competitive licensing fees will attract operators, too. And with a solid tribal and commercial casino infrastructure already in place, Michigan should be poised for quick success.”

Michigan will tax sports betting gross revenue at 8.4 percent, and Detroit casinos will pay an additional 1.25 percent tax to the city. That makes Michigan among the most competitive compared to other legal jurisdictions, according to the PlayMichigan.com report. By comparison, Pennsylvania levies a 36 percent rate, by far the highest in the nation. New Jersey charges a 9.75 percent tax on revenue from retail sportsbooks and 13 percent on online sports betting revenue, and neighboring Indiana levies a 9.5 percent rate on its sportsbooks.

But even with the lower tax rate, sports betting could generate as much as $40 million annually for the state. “Some in Michigan obviously wanted a higher tax rate, but the current rate should draw significant interest from sportsbook operators,” Gouker said. “That will help the market mature more quickly than markets such as Pennsylvania, where the ramp-up has been much slower despite having the largest population among all states with legal sports betting.”

Showing Promise

Indiana is another Midwestern state that could score quite big when it comes to sports wagering. Prior to the opening of sports betting operations last September, Eilers & Krejcik Gaming, a research and gaming consulting firm, analyzed the potential for legal and regulated sports betting in the state. Taking into consideration factors such as the limit on sports wagering licenses (limited to the 13 state casinos), the flat tax rate (9.25 percent) and the fact that gaming properties could offer both retail and mobile betting, Eilers & Krejcik estimated operators would take in a combined $56.2 million in revenue during the first year of operation. By year five, its estimated sports wagering will generate $265.1 million in revenue for Indiana.

So far, it appears that Indiana is well on the way to meeting that first year revenue goal, with that state generating close to $150 million in sports wagering for the month of November. With out-of-state bettors continuing to pour into Indiana, the state’s retail and online sportsbooks generated a combined $147.3 million in bets in November, up 61 percent from $91.7 million in October, according to PlayIndiana.com. Revenue for the month of November came in at $9.3 million, after generating $11.5 million in October.

One reason for this strong initial response is the expansion of major online sports betting providers into the Indiana marketplace. BetRivers Sportsbook, under the French Lick Resort license, was joined by heavyweight DraftKings, under the Ameristar Casino license, in early October as the first to launch their virtual windows. FanDuel, the largest online sports betting brand in the U.S., which is operating under the Blue Chip Casino license, launched later in the month. These three operators combined to generate 65 percent of the state’s handle in November—a total of $96.2 million in digital bets—which was up from 52 percent in October, according to Play Indiana.com. And that percentage should continue to grow as more online sportsbooks come online in the coming months, analysts from PlayIndiana added.

On the Horizon

Another potential major player in the Midwest sports betting market is Illinois, were sports books could open up some time this year. Illinois Gov. J.B. Pritzker signed off on a gambling expansion bill late last year that allows sports wagering in casinos, racetracks and sports facilities such as Wrigley Field and Soldier Field.

Due to its population, sports wagering could be quite lucrative in Illinois, according to a study by the Illinois Economic Policy Institute (ILEPI) and the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign, which states sports betting could create 2,500 jobs, increase tax revenue by $100 million annually, grow the Illinois economy by over $500 million and reduce illicit black market gambling. Basing its projections on a 20 percent effective tax rate, the study estimated the total annual market for sports betting could eventually be $12 billion, with a handle figure of $9.4 billion, gambling revenue of $565.3 million, all of which would generate a state gaming tax revenue of 84.8 million.

Obstacles Ahead

Of course, there are a number of business factors that could curtail these sports wagering predictions a bit, not the least of which is other nearby states creating their own sports betting industries.

Tribal gaming operators could also have a say on how successful sports wagering is in some jurisdictions. For example, much of the future of Michigan sports betting depends on how much the state’s 23 tribes embrace online betting, which is a significant variable, according to PlayMichigan.com.

The same can be said for online gambling and poker, which could generate millions each year in gross revenue if it’s adopted by operators statewide, PlayMichigan.com analysts added.

Regardless, online gambling should eventually boost the online sports betting industry once it launches. In New Jersey, a symbiotic relationship has formed, spurring growth in both online casinos and online sportsbooks. And that relationship will likely develop in Michigan, too.

“The Michigan bill has clearly set up the industry to succeed and eventually become one of the largest markets in the country, as long as everyone buys in,” Gouker said. “By securing an operator-friendly infrastructure, the state should eventually realize its revenue goals to the benefit of Michigan as a whole.”