Updated Maryland iGaming Bill Raises Tax Rate, License Fee

December 21, 2023
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Democratic state Senator Ron Watson has submitted his “final” version of a rewritten proposal to put internet gaming in front of Maryland voters next year, according to draft legislation obtained by Vixio GamblingCompliance.
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Democratic state Senator Ron Watson has submitted his “final” version of a rewritten proposal to put internet gaming in front of Maryland voters next year, according to draft legislation obtained Wednesday (December 20) by Vixio GamblingCompliance.

Watson is asking fellow Democrat Vanessa Atterbeary, chair of the powerful House Ways and Means Committee, to review the bill and be the co-sponsor of the legislation in the Maryland House of Delegates.

Watson’s rewritten proposal, submitted less than a month before the the new legislative session begins on January 10, would increase the tax rate from 15 percent of gross online gaming revenue to 46 percent, with the upfront license fee also rising to $1m from $500,000.

The updated version of the bill would allow up to two skins for each of Maryland's six casinos. The term of any iGaming license would be four years, down from five, with the license fee renewal equal to 1 percent of a licensee’s average annual proceeds from the preceding three-year period.

Previously, Watson had proposed that the Maryland Lottery and Gaming Control Agency (MLGCA) set the initial license and renewal fee.

In an interview with Vixio last month, Watson said the state will benefit financially from a regulated online gaming market, but not enough to close an anticipated budget deficit.

The Maryland Department of Legislative Services expects the budget shortfall to grow from about $413m in fiscal year 2024 to about $2.2bn in fiscal year 2028.

An iGaming report prepared for the MLGCA was submitted to the budget committees in both the House and Senate on November 15.

The report, authored by The Innovation Group, found an iGaming market should feature licenses tethered to existing brick-and-mortar casino locations, with each license-holder allowed to monetize its market access through two “skins” each for a total of 12 operators in Maryland.

According to revenue estimates in The Innovation Group’s report, should iGaming be at 60 percent of its development in 2026, gross gaming revenues would be $533.4m with per capita spend of $112.26 by 4.75m residents aged 21 and over.

Revenues should increase to $904.9m at full maturity in 2029, with an average spend per capita among those aged over 21 of $187.86, it said.

By 2032, with a population of legal gamblers at 4.88m and spending $188.62 per capita, gross revenue from iGaming was estimated to reach $921.1m.

A bill authored by Watson earlier this year proposing a 2024 voter referendum on iGaming failed to pass the Maryland Senate before the March 20 deadline, but he expects his updated measure to be considered once lawmakers return to Annapolis.

The measure, which has yet to be assigned a bill number, would set aside 1 percent of monthly taxes, licensee and renewal fees for the state’s problem gambling fund, with the remainder earmarked for the Education Trust Fund, which was established in 2008 when the state legalized casino gambling.

Watson’s proposal also prohibits operators from targeting advertising to individuals who are prohibited from gambling and from engaging in any false or deceptive advertising.

Other changes would see state regulators provide iGaming data and metrics in Maryland on or before September 1 each year to Morgan State University and Bowie State University. The proposal does not outline how the two universities will use the data.

Watson’s proposal authorizes online table games, poker tournaments, live dealer games and any other game typically found in a casino and approved by state gaming regulators.

The proposal also requires all live gaming studios to “have a physical location” in Maryland, although they need not be located within a casino.

If the Maryland General Assembly passes the measure and Democratic Governor Wes Moore signs the bill, then a referendum will be placed on the November 2024 general election ballot.

The question that Watson’s measure proposes would be similar to: “Do you favor the expansion of commercial gaming in the State of Maryland to authorize Internet gaming for the primary purpose of raising revenue for education?”

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