A recent report examining the legalization of online casinos in Maryland was revealing.
In addition to a potential $225 million annual tax revenue windfall, the report found that online casinos would not have a significant negative impact on other gaming activity.
According to The Innovation Group, which prepared the report for the Maryland Lottery and Gaming Control Agency, iGaming could have positive results on the state, as it has in a handful of other states that have legal markets.
Historical data show online casinos do not reduce lottery revenue
The report by The Innovation Group (TIG) should help Maryland lawmakers decide whether to approve Maryland online casinos as a referendum to be voted on by residents. The next session of the Maryland General Assembly convenes in January.
According to the report, net growth of lottery sales in states with iGaming was nearly identical to the net growth in states without iGaming. The figures were 11.9% and 12%, respectively.
Additionally, the absence of online lottery products in Maryland would bring the state more in line with those that see an increase in revenue after legalizing online casino apps and websites, according to the report.
“Since iLottery states have grown lottery revenue faster than non-iLottery states, by removing the former from the analysis [as is the case in Maryland], we actually see stronger retail lottery growth in states with iGaming than we do in states without iGaming and without iLottery.”
Put plainly: States with legal online casino apps do not see a reduction in state lottery revenue. Those without online lottery ticket sales, like Maryland, actually see an increase in retail lottery revenue. That means retail lottery locations would not be negatively impacted.
Hybrid regulatory approach may be preferable
Only six states have legal online casino gaming markets.
- New Jersey
- West Virginia
Connecticut only recently launched. Rhode Island has passed iGaming but hasn’t yet launched its market.
Interestingly, the report finds that states that regulate iGaming through their lottery control commissions have the least success. Those states with dedicated online casino gaming or a hybrid approach have had more robust markets, TIG said.
“We note that Maryland has a joint lottery and gaming commission that has experience in both lottery and
Operators who have licenses for online and retail gaming attract new customers
There’s evidence that the vast majority of consumers who register for online casinos are new customers, as is revealed from a prominent gaming operator.
In 2017, David Satz of Caesars Entertainment testified in front of the Pennsylvania Legislature regarding online casinos. He noted that in New Jersey (where Caesars Online Sportsbook is operating), “80% of their online consumers were new-to-brand, i.e., not already in the Caesars database …”
That means Maryland casinos whose gaming operators also provide mobile betting apps will see largely new customers register online. That type of growth should be a welcome development for those casinos, and also result in new tax revenue.
That’s exactly what the report suggests: Online licenses should be tethered to retail casinos in brick-and-mortar venues.
Online casinos will not negatively impact horse racing
Operators of horse tracks are nervous about online casinos and the impact they might have on Maryland horse racing. The state is a horse racing mecca. It hosts The Preakness Stakes, one of the legs of the sport’s Triple Crown.
According to research, betting on horses at tracks is not negatively impacted by the existence of online casino gaming. That’s because the primary demographic audience for online casinos is not the same as the primary demo for horse track betting.
Pimlico Race Course would likely see no drop-off in attendance nor wagering if the state legalized online casinos. The folks who want to plop down their cash on the trifecta just aren’t the same folks who log on to online casino apps and websites to play slots, the report said.
“[W]e would categorize the horse betting fans as not having strong overlap with casino clientele, which will skew younger and more female (even in the online realm) than typically older male racing enthusiasts. With OTBs [off-track betting] offering a very specific product and with limited overlap in database, we believe that the impact of iGaming on OTBs will be near zero, similar to lottery.”