Maryland Bills Set Stage For Online Gaming Push

January 30, 2024
Maryland Democratic state Senator Ron Watson has filed two internet gaming bills that could potentially raise millions of dollars in new tax revenue if concerns over cannibalization of gaming revenues and job losses can be addressed.

Maryland Democratic state Senator Ron Watson has filed two internet gaming bills that could potentially raise millions of dollars in new tax revenue if concerns over the cannibalisation of gaming revenues and job losses can be addressed.

On Thursday (January 25), Watson filed Senate Bill 565, which calls for a public referendum to allow online gaming and includes proposed ballot language. One day later, he filed Senate Bill 603, which details how an iGaming market would operate if voters approved the referendum in November.

Both bills have been assigned to the Maryland Senate Budget and Taxation Committee. The committee has scheduled a February 28 hearing on both measures.

Watson’s implementation bill calls for up to six iGaming licenses to be issued to each of the state’s current land-based casino operators, which would be able to partner with two “skins” each.

The bill also allows for an additional five licenses to be issued if certain criteria are met, the senator told Vixio GamblingCompliance in an email on Monday.

According to the bill, those conditions include requiring a non-casino licensee to have been headquartered within Maryland for the past ten years and have already been found suitable to have a minority interest in a casino. The licensee also would have to operate iGaming under an affiliated brand for at least its first year of operations.

Standalone licensees also must have at least 250 full-time equivalent workers in Maryland as of December 31, 2023, and commit to maintaining that level. They also must commit to spending at least $5m to build and operate a live gaming studio where they will run live-dealer games for their online operations, or invest the same amount in a studio for television and film productions.

The potential total of 17 online casino sites is far less than the 60 mobile licenses state gaming regulators were allowed to issue prior to launch in January 2022, in accordance with legislation for sports wagering that was enacted in 2021.

Internet gaming licenses will be good for five years at a cost of $1m, with gross gaming revenue subject to an effective tax rate of 47 percent. During the first year, Watson’s bill would allow operators to deduct free play and promotional bonuses redeemed by players. After that, operators could deduct 20 percent of bonuses and promotions from taxable revenue.

Watson’s bill also sets aside 1 percent of tax revenue for the state’s Problem Gambling Fund, while requiring several controls on account holders.

The bill also proposes to have the Maryland Center of Excellence on Problem Gambling conduct an annual report on the impact of iGaming on problem gambling rates in the state.

The state’s legislative session runs through April 8, and the crossover deadline for bills to move into the opposite chamber is March 18. Watson introduced iGaming legislation in 2023 via Senate Bill 267, but the bill did not progress beyond the Senate Budget and Taxation Committee.

With a difficult path towards iGaming legalization in New York, some analysts now consider Maryland the frontrunner in the legislative race to legalize iGaming this year.

If Maryland does pass iGaming, it would be the ninth state to do so.

Currently, iGaming, which consists of casino games or poker, is offered in Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, and West Virginia. Rhode Island legalized online gambling last year, permitting Bally’s Corp. to launch iGaming as early as March, while Nevada only allows online poker.

However, Watson’s effort to legalize iGaming faces some opposition over concerns about job losses and less investment in the state’s six brick-and-mortar casinos.

An impact study commissioned last week by the Maryland Lottery and Gaming Control Agency and conducted by the Innovation Group found iGaming could generate $904.9m in revenue by 2029, but at the same time, land-based casinos would likely see a loss of about $200m.

A subsequent report commissioned by the Anne Arundel County Chamber of Commerce raised concerns about iGaming's impact on the state. 

That seven-page report, authored by the Sage Policy Group, estimated land-based casinos would employ 685 fewer people equaling a $33.6m loss in labor income. The secondary effects would lead to 530 job losses in industries such as legal services and healthcare for a total of $32m in lost labor income.

Anirban Basu, chairman and CEO of Sage Policy Group, noted that the Innovation Group report found that same-store land-based casino revenues from in-person gaming declined 8 percent between 2019 and 2022 in states that legalized iGaming, while increasing 2 percent in states that did not.

“This almost certainly understates the long-term decline in brick-and-mortar gaming revenue that would occur in Maryland,” said Basu, a former chair of the Maryland Economic Development Commission.

“The presence of iGaming would not only lower the trajectory of near-term revenues but also render it less likely that existing enterprises would expand their respective footprints.”

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