A legal online casino market in Maryland could generate nearly $1 billion in gross revenue annually. So says a report prepared for the Maryland Lottery and Gaming Control Agency. That could lead to $225 million or more in tax revenue for the state every year.
The gaming report was conducted by The Innovation Group to assess the impact of online casinos in Maryland. Using data from states that have legalized online casinos, the report forecasts the revenue potential of a legal iGaming market in Maryland starting in 2026 at more than half a billion dollars.
The report projects the Maryland market hitting stability by 2029, settling in the $900 million range.
Report: Online revenue would offset loss at land-based casinos
Lawmakers have been waiting to see the results of the study before forging ahead on legislation to legalize Maryland online casinos. There is currently a bill filed in the Maryland Senate that would legalize iGaming. Lawmakers are expected to take it up in the 2024 legislative session, which begins in January.
A sticking point for some Maryland legislators is the perceived negative impact iGaming would have on land-based casinos. The report found that while the fear is real, the actual outcome of legalizing online casinos was a windfall for states.
“In all, we observed 2% same-store casino revenue growth in non-iGaming states, versus an 8.2% decline in iGaming states, suggesting a cannibalization rate of approximately 10% of casino gaming revenue.”
However, The Innovation Group (TIG) found that the loss to land-based casinos, and subsequent lower tax revenue to the state, would be more than made up by the projected revenue from iGaming.
“Since Maryland’s casino revenue is just over $2 billion annually, [legalization of online casinos] would amount to a loss of just more than $200 million in [brick-and-mortar] casino revenue, against a gain of $900 million in iGaming revenue.”
That means the state would actually have $700 million more annually (once the market matures) to tax from gaming activity if Maryland were to legalize online casinos.
Report recommends online licenses tethered to MD casinos
Six states have legal iGaming markets, with Michigan recording the highest gross revenue from it in 2022, at $1.6 billion. It taxes online casinos at 25%.
TIG conducted hours of interviews with key people in the six states. That information was coalesced into a series of recommendations in the report. Those included how licensure could best be implemented in Maryland.
“While there were competing viewpoints within Maryland about who should be eligible for iGaming licenses, those we spoke with from other states were generally in consensus that licenses should be tethered to casinos.”
The report asserts that casino operators are experts in the gaming business. That makes them perfect partners for online casino operations. In addition, the leadership at brick-and-mortar casinos have been vetted and are trusted in the industry.
Furthermore, casinos that partner with online operators are more likely to support iGaming legislation if they can mitigate some of the losses of their revenue through that arrangement.
In its findings, TIG also addressed a possible tax rate on iGaming. It found that in most states with online casinos, a tax rate on revenue was in a range of 10% to 30%. TIG went on to advise that “iGaming taxes must be higher than the brick-and-mortar rates.”