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Maryland regulators approved a proposed rule change on Thursday (September 26) that would prevent operators from deducting promotional play from taxable sports wagering revenues.
The Maryland Lottery and Gaming Control Commission approved the proposed amendment presented by staff that would halt the practice of deducting promotional play that has been in effect since the state launched sports betting in November 2022.
Under the existing regulation, sportsbooks are able to deduct an unlimited amount of promotional play through the first fiscal year of their operations.
After that first year, companies are permitted to deduct promotional play up to 20 percent of a company’s annual revenue from the prior year.
The newly approved regulation simply states that “no percentage of promotion play may be deducted from proceeds.”
The same language would also apply to taxes paid by land-based casinos on video lottery terminals and table games.
“Given the state’s anticipated budget shortfalls, we reviewed our practice regarding deduction of promotional play from taxable casino gaming and sports wagering revenues,” said James Nielsen, deputy director and chief operating officer of the Maryland Lottery and Gaming Control Agency.
“Eliminating these deductions is expected to increase gaming taxes paid to the state, and is a step we can take to support the state’s effort to meet it’s budgetary goals.”
Nielsen said the agency considered submitting the proposal as emergency regulations, which would bypass a public comment period following publication in the Maryland Register and allow the rule to be implemented quicker, but ultimately elected to follow the standard rulemaking process.
Companies are still required to submit a report within 90 days of the end of the fiscal year, which in Maryland runs through the end of June, which details their use of promotional play during the prior year.
The practice of deducting promotional play attracted attention in Maryland when, according to Vixio GamblingCompliance research, operators combined to deduct more than $134m in promotional play from only $108m in gross revenue in the final six weeks of calendar year 2022 as seven operators launched mobile offerings in the state.
In calendar year 2023, operators combined to deduct more than $182m from the more than $497m in gross revenue collected, although in calendar year 2024, promotional play has trailed off significantly as many operators have seen their unlimited deductions expire.
In the last three months of reported data, covering June through August, operators have deducted less than $3m in promotional play from almost $120m in gross revenue.
As of the end of August, 11 operators offer mobile wagering in Maryland.
Other states have taken similar action in recent years to curb promotional play deductions after initially allowing them in full.
Those states include neighboring Virginia, whose legislature implemented a fix in 2022 preventing operators from deducting promotional play after their first 12 months of operation.
