Maryland Lottery and Gaming Director John Martin discussed the preliminary results of online sports betting during an interview with PressBox Sports.
During the discussion, Martin cites three particular reasons for the state’s success thus far — not the least of which is sportsbook promotional spend.
Maryland launch benefits from trifecta of success
Maryland online sportsbooks got off to a promising start in November, accepting a total of $186 million in wagers from bettors. This success wasn’t some big fluke, however. Rather, Martin says a trio of factors contributed to Maryland’s impressive launch.
First, these November launch numbers convey the pent-up demand from eager Maryland sports bettors. While the first retail sportsbooks debuted back in late 2021, Marylanders had to wait far longer for online wagering to make its appearance.
This enthusiasm was then coupled with an unparalleled sports calendar, offering bettors a heaping helping of options. Thanksgiving week featured no less than four NFL dates, college football rivalry week, World Cup soccer, and both pro and college basketball.
Sportsbook promotional play carries the day
Perhaps most importantly though, Martin said, was the sheer effort sportsbooks put into promotional offers and bonus bets.
With seven major operators jockeying for market share on launch day, sportsbooks faced the challenge of how to stand out from the pack. Thus, they poured millions of dollars into irresistible promo offers and giveaways to new bettors.
In the first nine days alone, sportsbooks doled out $63.8 million in freebies, leaving the state with a mere $4,262 in taxes.
This massive investment in advertising has been the industry’s worst-kept secret, said Martin.
And he expects this trend to continue into the next several weeks — if not the next few months. Martin reflected:
“We’re not surprised — astounded might be a good word — but we pretty much figured promotional play was going to really carry the day.”
20% promo cap kicks in January 2024
These astounding sportsbook promotions aren’t sustainable, though, and that’s what makes Maryland’s unique structure so effective.
The primary reason is the state’s unique regulatory framework.
According to statute, a 20% cap on sportsbook promotional spend kicks in come the second full year of operations.
For the seven sportsbooks currently live in Maryland, this cap will go into effect on Jan. 1, 2024.
And that 20% cap will be based calculated off each sportsbook’s tax contributions from the previous year.
For instance, if an operator reports no taxable revenue in 2023, they’ll have no approved funds for 2024 promotional spend.
This will ultimately result in sportsbooks being more thoughtful about their promotional tactics. Martin said:
“Somewhere in calendar ’23, they’re going to start pumping the brakes. Now, the question is: when?”
Maryland sportsbooks play chess, not checkers
Maryland’s 20% promo cap forces sportsbooks to consider their long-term position in the state rather than focusing entirely on their short-term goal of market share.
If an operator invests more than it takes in for the entire year, it forfeits the right for promotional deductions in 2024. Thus, all promo spend would then be taxable.
Martin continued the discussion, exploring this see-saw effect from the perspective of operators:
“So, if I was one of these sportsbook operators, I’d start looking real hard at ’23, saying, ‘Well, wait a minute, at what point do we play this chess game to begin to back off on our promo spend in ’23 so we have some taxable gain in ’23 so we can apply our 20% promo cap to that number for ’24?'”
Sportsbook offers will undoubtedly slow down as the 2023 calendar year gets underway. But until then, bettors can continue taking advantage of bonus bets and enticing promos for the foreseeable future.