Lawmakers in Maryland are currently considering the pros and cons of allowing a commercial iGaming market. Online gaming has been on the radar in the state of Maryland for the past several months. With the topic of possible iGaming legalization on the table, the Maryland Lottery and Gaming Control Agency has studied the effect online gaming could have on the state. State Senator Ron Watson recently put together a bill that would legalize online gaming, as well as poker. Should Watson’s latest bill pass in the legislature, online gaming revenue would be taxed 46.5%.
The state currently brings in revenue from Maryland’s six casinos, as well as from fantasy sports and statewide sports betting. But this is not the first time iGaming has been up for debate in Maryland. Senator Watson proposed a similar bill last year to implement an online commercial market. However, the Senate Budget and Taxation Committee did not move forward with the proposal. Retail sports betting has been legal in the state of Maryland since 2021. The state opened its online sports wagering market in 2022. So, why delay expanding the state’s gambling options to include iGaming and iLottery choices? Opponents say bringing iGaming onto the scene could pose a threat to workers in land-based casinos and put their jobs in jeopardy.
Do lawmakers’ objections have merit? Some analysts say yes
In a 2021 study conducted by Deutsche Bank that looked at iGaming’s effects in Pennsylvania, research showed a decline in revenue at brick-and-mortar casinos that coincided with the launch of the state’s online gaming market. According to the report, land-based casino revenue during March 2021 fell by 12%. Revenue in April rose by 1% but dropped by 3% during the month of May. During those months, several new land-based casinos opened in the Philadelphia area, yet there was a decrease in activity.
Based on its findings, Deutsche Bank analysts noted that “Pennsylvania should take into account that land-based casino revenue was dropping due to the fact that iGaming was eating into its market share.” Analysts based their conclusions on comparing Pennsylvania’s results to productivity in other states with legal land-based casinos. However, they recognized the effects that the Covid-19 pandemic had on the market and on the economy at large during the time of the study. Another study highlighted survey data that reflected a boost in online gaming activity.
The Pennsylvania Department of Drug and Alcohol Programs published a survey in connection with Pennsylvania State University during 2021. According to the report, nearly one in 10 residents participated in online gaming. The survey also found that 28% of Pennsylvania residents said they have engaged in some form of gambling during the past 12 months. Pennsylvania began offering players online gaming in July 2019. During its first seven months live, the state generated nearly $10m in revenue. As of January 2024, the state’s iGaming handle reached nearly $3.2bn. Meanwhile, in New Jersey, a recent study conducted by the National Economic Research Associates (NERA) produced similar findings to those in Pennsylvania.
Though iGaming in the Garden State brings in a significant amount of tax revenue, the study revealed that fewer people are employed to provide iGaming services than those working in the state’s land-based counterparts. NERA also found that the cost of programs to combat problem gambling within the state could offset the tax contributions that iGaming provides monthly. However, iGaming revenue continues to grow in the Garden State. During the month of January, the New Jersey Division of Gaming and Enforcement reported that the state’s online casino and their partners walked away with $183.3m in revenue.
New Jersey’s iGaming market has been in place since 2013
Though trends surrounding iGaming from both of Maryland’s neighbors could raise concerns for lawmakers, reports from both states reflect lucrative tax revenues and handles that far exceed what both states brought in when their markets first launched. Do these trends mean the end of brick-and-mortar establishments, or do they signify a change in the industry that follows the evolution of technology while still making room for old-school play? The answer to this question, as far as Maryland is concerned, goes beyond whether it will legalize online gambling.
Similar objections have been raised concerning the state’s reception of an iLottery and whether Maryland should expand the current lottery market to include action online. A bill to do just that is currently on the table as well. If passed, House Bill 1218 will allow the State of Maryland and its lottery to provide players with access to games “through online sales channels.” A similar bill last year to implement an online commercial market was presented to lawmakers. However, the Senate Budget and Taxation Committee did not move forward with it.
Also, like with iGaming, those opposed to bringing iLottery onto the scene say the market could pose a threat to land-based establishments. However, Scientific Games SVP of Public Policy and Government Affairs Christine Wechsler recently addressed this issue before the Maryland House Ways and Means Committee. She spoke on behalf of the company and maintained that an iLottery would not only leave retail locations unhindered but could also cause them to thrive. She said, “The Maryland Lottery is like all other businesses selling products to consumers – it must modernize to meet changing consumer demand,” Wechsler shared in her public statement. “Providing convenient and relevant experiences to consumers online and at retail will be critical to enable the Lottery’s sustainability and maximize revenue potential for the state.”
Shaping the framework
She went on to cite that none of the 12 established iLotteries around the US have reported any cannibalization involving their land-based counterparts. She further explained the company’s position by saying, “Our focus has always been on delivering solutions and services to facilitate retail growth and maximize profit returned to Maryland’s beneficiaries. Also, we are invested and fully committed to helping shape a successful iLottery framework for the state that responsibly drives continued growth across the Lottery’s established brick-and-mortar retailer network while providing incremental online revenue. Regardless of the outcome of either debate, sports betting revenue in Maryland continues to provide benefits to communities around the state. Maryland’s sportsbooks currently contribute 15% of all taxable wins to the Blueprint for Maryland’s Future Fund. The organization supports public education programs around the state. In addition to supporting non-profits, part of Maryland’s casino gaming revenues are used to support communities near the casinos, as well as to support the state’s horseracing industry and businesses owned by women and minorities
