Maryland lawmakers had an incredibly lengthy discussion about the finer points of online gambling Monday.
During a nine-hour House Ways and Means Committee hearing, legislators spent seven of them discussing House Bill 1319. The bill was sponsored by Del. Vanessa Atteberry and would legalize Maryland online casinos.
Over the course of the discussion, lawmakers spoke with stakeholders, advocates and critics of the bill. Most of the discussion revolved around three main topics:
- Tax rates
- Cannibalization & job loss
- Responsible gaming
Atteberry lays out details of the bill
The marathon hearing started with the bill’s sponsor giving a broad overview of her legislation. Atteberry pitched the bill as a means to help the underfunded Maryland public education system.
Moreover, a common thread throughout the hearing was about funding the “Blueprint for Maryland’s Future.” The General Assembly passed that initiative in 2021, which guaranteed an additional $3.8 billion in education funding over the next decade.
Atteberry said she had four “key priorities” for the bill.
- Creating the best legal framework to create a diverse set of applicants and awardees
- Protecting our in-state workforce and casinos who currently contribute significantly to the education trust fund
- Ensuring an improvement in assisting problem gamblers
- Creating additional revenues to get 3 and 4-year-olds into pre-school
Key points of HB 1319
- Voters must approve the legislation through a ballot initiative this November
- Maryland Lottery and Gaming Control Commission would act as the regulatory body
- Diversity plan must be submitted by the licensee 30 days after awarding a license
- It requires meaning minority participation in the iGaming businesses
- License fee would be $1 million and good for five years
- Licensees would have revenue taxed at 55%, or 20% if they offer live dealer games
- There must be privacy protections in place for user data
Atteberry also argued to pass the bill because Marylanders were already gambling online, but just through offshore sites.
“Illegal iGaming is already happening in our state to the tune of $200 million,” Atteberry said. “This should be a concern for everyone on this committee and everyone who is interested in the issue of problem gaming. It is already occurring.”
Prospective operators lobby for lower tax rates
During the first of eight panels, representatives of existing Maryland gaming operators testified in favor of the bill. However, they offered thoughts on possible amendments.
Randy Conroy, general manager of Horseshoe Baltimore, told committee members online casino licenses should be tethered to existing Maryland casino operators. Additionally, he said a 15% tax rate was more conducive to a successful market.
“The existing casinos have proven experience administering casino gaming, including strict adherence to all gaming regulations,” Conroy said. “Such as anti-money laundering, know-your-customer, responsible gaming and underage protections. Moreover Maryland casinos have the unique ability to cross-market iGaming with brick-and-mortar businesses.”
Representatives from Hollywood Casino Perryville and MGM National Harbor seconded the tethering amendment.
Conroy said tethering to casinos would bring more foot traffic to the casino through cross-promotion. Thus, there would be more job creation and more tax revenue for the state.
“Second, iGaming should have a reasonable tax rate of 15%,” Conroy added. “You should demand the best iGaming experience in the country, which will require significant technological investments by the operators.”
Del. Jason Buckel pushed back on the idea of lowering taxes. But Conroy said that if the tax rates are too high, illegal operators become “more and more attractive.” Tax rates were expected to be a cornerstone of the discussion.
Buckel said if tax rates are too low, then revenue needs might not be met. Rick Limardo, vice president of governmental affairs for MGM Resorts ended the tax discussion by saying operators and the state could easily find a middle ground.
“I think there’s a sweet spot we can find that meets the state’s policy objectives and that allows us to compete against the entrenched illegal market and generate meaningful revenues for the state,” Limardo said.
Sportsbooks want licenses too
The second panel was a mix of analysts with economic impact projections and sports betting operators.
On the operators front, Alyse Cohen, owner of Long Shots OTB & Sportsbook, and Uri Clinton, general counsel for Boyd Gaming argued that lawmakers should award more licenses. Under the current legislation, regulators can award no more than 12.
But in their eyes, that wasn’t enough.
Cohen, the owner of the only female-owned sportsbook in the state, said she worried about the future health of her business without access to an iGaming license. She argued that if her larger competitors, like BetMGM Maryland for example, could cross-market their sportsbook with an online casino, she’d lose market share, and possibly her business.
Furthermore, she urged lawmakers not to look at the online and brick-and-mortar realm as separate industries. On the other hand, Cohen believes they are “two equally important aspects of the same business.”
Cannibalization debate had arguments on both sides
One of the more unsolved issues of the day was on the topic of job creation. In other words, would online casinos kill existing brick-and-mortar jobs? Or create new ones?
Those on the side of job creation pointed to the recent study published by iDEA Growth, an economic research and advocacy group dealing mostly in the gambling industry.
In the study, gaming analysts from Eilers & Krejcik found that states would typically see a 1.7% increase in brick-and-mortar casino revenue after legalizing their online counterparts.
Those who were skeptical of those figures pointed to a NERA study, which argued that states typically overstated online casino tax revenue projections by $200 million.
Del. Wayne Hartman relied heavily on NERA’s study when asking questions to the panel. In a scathing answer to Hartman, iDEA’s Jeff Ifrah said the study was incredibly flawed because it looked at spending habits in the United Kingdom and not any data from American casinos.
“They had no data,” said Ifrah. “Zero. They didn’t speak to one casino. They didn’t speak to one person at the [gaming commissions]. [They said] ‘We are going to take that data of habits in the UK and we’re going to say this is how people in Maryland will act. This is how they will spend their money.’”
Last, but not least, responsible gaming
Responsible gaming was clearly an important issue to lawmakers. But it was a distant third behind a heated tax rate debate early on, and the consistent cannibalization theme throughout the hearing.
Alan Feldman, a distinguished fellow in responsible gaming at the International Gaming Institute at the University of Nevada Las Vegas, spoke the most on the topic.
Feldman said that online casinos could actually have much better responsible gaming measures than the brick-and-mortar industry. In short, because of the data.
Operators can more accurately track the play of everyone using their website. Thus, it was easier for them to notice when someone deviated drastically from their normal betting activity.
Some delegates pointed to the increased calls to problem gambling hotlines in other states. But Feldman said those could be attributed to three things.
- COVID made it more acceptable to talk to counselors remotely.
- National conversations about mental health make it more acceptable to find help.
- Anonymity of phone calls makes it easier to use.
There were a handful of anti-gambling advocates who argued that making gambling easier to access would inevitably lead to higher rates of problem gambling.
Legislators will vote on the bill at a later date.
