Maryland Senator Ron Watson, who has authored online casino legislation in previous years, filed two bills in the last week of January related to iGaming. The first bill, Senate Bill 565, would allow Maryland residents to vote on iGaming in November. The second bill is Senate Bill 603, which would legalize Maryland online casinos if voters approved the first piece of legislation.
While an increase in tax revenue is something most state governments are fond of, there are concerns raised in an iGaming study that will need to be solved first.
What happens next?
SB565 and SB603 are both scheduled for a hearing in front of the Senate Budget and Taxation Committee on Feb. 28.
Details of Watson’s iGaming bill
While the casino industry is thriving in Maryland, Watson feels it could grow larger still. His method of expansion is adding online casinos to the suite of gaming offerings in the Old Line State.
SB603 was read on the Senate floor for the first time and then was released on Friday, Jan. 26, to the public. Within the bill is an outline of how a potential online casino industry would operate in Maryland.
The bill allows for five internet gaming licenses to be made available that will run for five years. Each will cost $1 million and there can be up to two operators per license. In order to qualify for one of the online casino licenses, at least 250 full-time jobs must be created within Maryland and those jobs must be maintained. Any company that wants one of those online casino licenses also must spend at least $5 million to build a studio within Maryland where the live-dealer tables will be operated.
A high tax rate at 47%
Operators will keep 53% of the revenue generated. The remaining 47% will go to the state in the form of tax contributions. During the first year of online casino gaming, operators can deduct free play and promotional plays from the total revenue to lower their tax bills. After the first year, operators are allowed to deduct no more than 20% of those free plays.
If Maryland adds iGaming, it would be the eighth state to do so. The others are Connecticut, Delaware, Michigan, New Jersey, Pennsylvania and West Virginia. Rhode Island has passed online casino legislation, but wagers are not being taken yet.
Two separate studies have been done on the potential impact iGaming could have in Maryland. In one of those studies, it said there is an estimated $900 million of taxable revenue that could be drawn from iGaming.
Concerns will have to be addressed before passing an iGaming bill
But another study said that any gains from iGaming could be offset by the sacrifices required to add an online casino market.
Just a few days before SB603 was released, a study on online casinos was filed that did not shed a positive light on iGaming.
The report in question was requested by the Anne Arundel County Chamber of Commerce and carried out by the Sage Policy Group. Sage Policy Group CEO Anirban Basu, who used to serve as the Chair of the Maryland Economic Development Commission, was the one tasked with carrying out the study.
Basu presented six points, and none were in favor of legalizing online casinos. Here are those six takeaways:
- Possible cannibalization of the thriving casino industry
- Legalizing iGaming could destroy more Maryland jobs than it creates
- Non-gaming industries would also take a financial hit
- Legalizing iGaming would reduce capital investments
- Trading casino foot traffic for online wagering hurts businesses that surround casinos
- Taxes from iGaming might be offset by the sacrifices required for online casinos to thrive
The two biggest worries from the Sage report were the loss of jobs and the impact iGaming could have on non-gaming industries.
According to the study done by Sage, the lowest estimated number of jobs that would be destroyed would be 685. That would mean a $65.6 million loss of wages overall. That loss in wages would mean the state would lose out on $1.9 million in state income taxes and $1.2 million in local income tax collections.
With that loss of jobs and income, some worry the negatives of iGaming will outweigh the benefits. The report by Sage used New Jersey as an example of that issue. Despite $2.4 billion coming from online casinos in 2022 in New Jersey, the state saw a fall of $180 million in economic activity and wages fell by a combined $900 million. To end the report, Basu warned that Maryland could follow a similar path as New Jersey.
“These negative impacts — the loss of high paying union jobs and the associated labor income and income tax revenue, fewer agglomeration effects, and reduced capital investments — would also be present in the event that iGaming is legalized in Maryland.”
Different report focuses more on positive impact iGaming could have
There was another report submitted to the Maryland Lottery and Gaming Control Agency about the possible impact of iGaming in the state. This report was carried out by The Innovation Group. It had a very different message than the report submitted by the Sage Policy Group.
Instead of advocating against iGaming, The Innovation Group actually found that online casinos could be a positive for Maryland. According to the study, lottery sales were virtually unchanged in states with iGaming. States without iGaming have a 12% net growth in lottery sales. States with iGaming, meanwhile, have seen an 11.9% increase in lottery sales.
There was also evidence shared that online casinos can help retail casinos bring in more customers. In 2017, David Satz of Caesars Entertainment spoke in front of the Pennsylvania Legislature. He noted that 80% of Caesars online casino customers in New Jersey were not in the Caesars database.
The truth likely lies somewhere in the middle of each report. Regardless, the appetite for online casinos is growing in Maryland.