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Michigan Lawful Internet Gaming Act: Can Online Gambling Operators Be Held Accountable?

Sep 19 | 2022  by

Michigan is one of the few states that has legalized online gambling for citizens over the age of 21. This includes online sports betting and casino games like poker, slots, and other casino games. While this new legislation is very exciting to residents, the legal and regulatory ramifications of this are still being worked out.

Online Gambling and Sports Betting’s

Online gambling in Michigan was introduced in the Lawful Internet Gaming Act of 2019, which was coupled with the Lawful Sports Betting Act passed in the same year.

The Michigan Lawful Sports Betting Act of 2019 provides that “internet gaming operators” and “internet gaming platform providers” are regulated and licensed through this new regulatory scheme where they’re required to comply with several rules and regulations under the act and the Internet Gaming Rules promulgated from the act. But many are wondering how are they held accountable when there are issues, who gets to decide, and how can online patrons be made whole when these issues do arise.

Under Internet Gaming Rule 432.641, participants in online gambling are given a specific procedure in which they can bring complaints to “internet gaming platform providers” and “internet gaming operators,” which is a separate process from a regular “patron complaint” form process submitted to the Michigan Gaming Control Board (“MGCB”). This is traditionally done with complaints against brick-and-mortar casinos. This new process is called the iGaming/Online Sports Wagering Dispute process using an “Authorized Participant Complaint Form,” which differs from the normal process in a couple of keyways.

Michigan Gaming Control Board (MGCB)

First, while a normal patron complaint with a casino must be submitted within 21 days of the incident, the new online gambling complaint process against operators does not have such a limitation. This means that online gaming disputes may arise long after the incident date, depending on many other factors and the applicable statute of limitations. The policy behind this may have to do with the nature of the format, since online gaming may allow operators to keep digital logs of incidents much longer than a regular casino.

Second, the Internet Gaming Rules provide that online participants must first bring any complaints to the online gaming operators or internet gaming platform providers before filing a patron dispute form with the MGCB, and the operator/provider must provide a written response within 10 days to the complaint.

After bringing the issue to the attention of the operator or provider, and if no resolution is reached, the participant may then file a complaint with the MGCB. But what powers do the MGCB even have to give a participant, especially if they are seeking monetary reimbursement?

The MGCB seems to be given vague powers in relation to authorized participant complaints made to the MGCB. Under the Internet Gaming Rules, it says that the board “may conduct any investigation the board considers necessary and may direct an internet gaming operator or internet gaming platform provider to take any corrective action the board considers appropriate.” R 432.641(7). Additionally, under the Lawful Internet Gaming Act, the MGCB has the “powers and duties specified in this act and all other powers necessary to enable it to fully and effectively execute this act to administer, regulate, and enforce the system of internet gaming established under this act.” MCL 432.305.

But what does that mean in practical terms? Does the MGCB have the power to order operators and providers to pay online gaming participants when it has wronged them, in the same way that a court can provide monetary relief? Can the Board order a gaming operator to reverse the outcome of an online gambling game result? Some regulatory bodies are given quasi-judicial powers with actual courts set up to administer such relief, like the Michigan Tax Tribunal for example. However, when it comes to the MGCB, the extent of relief possible is much less clear.

Kraft vs. Detroit Entertainment (2004)

Courts have stated that the Michigan Gaming Control and Revenue Act (MGCRA) gives the MGCB “expansive and exclusive authority” to:

“. . . regulate all aspects of casino gambling in Michigan. The MGCB has the duty to, among other things, review casino license applications, promulgate rules and regulations to implement and enforce the act, provide for the levy and collection of penalties and fines for violation of the act or administrative rules, and receive complaints from the public and conduct investigations into the conduct of gambling operations to assure compliance with the act and to protect the integrity of casino gaming.”

Kraft v. Detroit Entertainment, 261 Mich. App. 534, 549-51 (Mich. Ct. App. 2004).

In this case, the court ruled the common law fraud and unjust enrichment claims were precluded by MCL 432.203 and dismissed them, essentially confirming MGCB has exclusive jurisdiction over these licensing issues. There is indeed an expansive list of powers that the MGCB has, listed in MCL 432.204 and MCL 432.204a. However, nowhere in these lists does it specifically say the MGCB has the power to issue orders against operators and providers to pay online gaming participants or reimburse them when the operator or provider deprives the participant of monetary compensation. Additionally, it is unclear whether MCL 432.204 applies to internet operators and providers the same as it does to normal casinos, and in the Lawful Internet Gaming Act, in MCL 432.305, it seems to carve out the MGCB’s own powers as it relates to internet operators and providers.

If the MGCB retians “expansive and exclusive authority” over “all aspects of casino gambling in Michigan,” but the MGCB does not have the authority to recompensate participants that lose money at the fault of the online operator or provider, what relief do participants really have, and how do consumers know they will be protected? As with many new regulatory areas, proper relief against operators and providers of internet gambling and sports betting is a question that will need to be worked out in Michigan courts over the next few years.

If you have a legal issue with an internet casino operator or provider, please reach out to Robert Pollock at Fausone Bohn, LLP. Call him directly at (248) 912-3213.