Maryland Sports Betting Debate Centers on Fees And Access

Maryland Sports Betting Debate Centers on Fees And Access
© USA Today

A Tuesday hearing in the Maryland House of Delegates reaffirmed a core of support for a legalized sports betting bill. It also showed the fault lines about limited access and high taxation proposals in the current bills that need to be rectified in order for it to pass into law.

Though a pair of bills in the House Ways and Means Committee would take disparate approaches to legalization, lawmakers largely agreed with several dozen speakers from the sports gambling, horse racing and tourism industries, among others, that any bill would require full mobile access and multiple avenues for bettors.

Unlike some of the bills’ sponsors, these stakeholders questioned current language that would impose some of the nation’s highest sports betting tax rates and put what they deem as unnecessary restrictions on purveyor access. With the legislation still taking shape, it’s become clear the biggest questions in Maryland are over which entities could take bets and how much they would be charged for doing so.

Betting Locations

HB 225 and HB 169, as well as a pair of similar measures discussed in the Senate last week, would allow the state’s six commercial casinos to take bets. Lawmakers are still debating what other entities could do so.

  • OTBs: Committee members heard competing testimony from stakeholders — and each other — over off-track betting (OTB) locations. Not surprisingly, the state’s horse racing industry championed access for the four remaining OTBs, which simulcast horse races and are predominately located in rural communities. HB 225 sponsor Eric Ebersole, whose sports betting bill wouldn’t authorize OTB sports betting, said he was concerned about the spread of gambling because his bill would already authorize statewide mobile betting.
  • Casinos: It’s all-but guaranteed the six commercial casinos would be able to open retail sportsbooks if any bill passes, but there are still questions about their far more lucrative online options. Ebersole’s bill would allow the six casinos to open two online offerings apiece, one self-branded skin and one third-party skin.
  • Tracks: Ebersole’s bill would divide online sportsbook licenses for the state’s five horse tracks between the two ownership groups that own two and three facilities, respectively. The four potential horse racing skins, combined with the casinos’ skins, would mean up to 16 total online options in Maryland, which industry stakeholders testified Tuesday may still not be enough for a fully healthy market. That total would be still less than half the possible skins allowed at top sportsbooks in New Jersey and Colorado.
  • Key Point: Essentially a shell bill, HB 169 doesn’t specifically authorize online wagering, but stakeholders as well as lawmakers are confident that any sports betting bill passed this year would include online provisions. “We have to go mobile,” Ebersole said during Tuesday’s hearing. “We’d be a dinosaur.”

Fees

Ebersole’s bill would impose some of the highest tax rates in the nation, which he acknowledged before stakeholder testimony would be unpopular in the industry. Several speakers mentioned how steep rates in neighboring Pennsylvania had not only hurt the bottom lines of top sportsbooks, but discouraged some would-be participants from entering the market.

  • Licensing Fee: At $2.5 million, Maryland’s initial licensing fee would trail only the $10 million rates imposed in Pennsylvania and at some sportsbooks in Illinois. In Maryland, that fee would cover sportsbooks’ retail as well as online offerings.
  • Annual Fee: Subsequent annual fees fluctuate more widely, but Maryland’s proposed $250,000 rate would still take a sizable chunk of sportsbooks’ revenue in what is a low-margin industry to begin with.
  • Tax Rate: Stakeholders also asked for a reduction of the proposed 20% tax rate on gross gaming revenue, which would also be among the nation’s highest rates, down toward the 10-15% rate that is more in line with the industry standard.
  • Key Quote: “I think we hit a sweet spot,” Ebersole said, when asked by Del. Jason Buckle, another co-sponsor, if he was “wed” to the current rate. “I liked it, and I put a ring on it.”

What Comes Next

The hearing was the first major step in a lengthy process before the sports betting bill (or any legislation) can come into law. Proposed Maryland sports betting legislation stalled in committee last year.

The House and Senate will have to pass identical versions of the bill, tax rates and purveyor access included. Assuming Gov. Larry Hogan remains on board with legal sports betting, it would still be subject to a voter referendum in November.

  • Bills’ Future: Much of Tuesday’s testimony centered on HB 225, the far-more detailed measure which appears to be sports betting’s best hope in Maryland. At this point it seems HB 169, which is essentially just articulates the language for the voter referendum about sports betting, will eventually be rolled into the larger bill. Still, that clause will be necessary after the attorney general’s office ruled last year any sports betting bill would be subject to voter approval.
  • Further Debate: The bills will now go to further deliberation in a House Ways and Means subcommittee. Like their Senate companions, the bills (or bill) will likely go to a vote before the full floor, probably sometime later this month.
  • Bottom Line: After similar hearings along with a stakeholder workgroup in the Senate, elected officials in both chambers now have all the information they need to structure a sports betting bill. It remains to be seen if sports betting leaders will be amenable to stakeholders’ suggestions or stick with their current stances. What is known is that critical negotiations in the coming days, most significantly around access and taxes, will help not only determine if sports betting passes the legislature, but the future viability of the market.

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