Lawmakers weigh whether ‘iGaming’ should be gambling’s next move in Maryland

The gambling boom is growing — and its next move could put poker chips in Marylanders’ pockets.

Just over a year after online sports betting became legal in the state, two bills in the General Assembly seek to give voters the option to legalize internet gaming, which is gambling via online slot machines, blackjack, poker and other casino games. Lawmakers heard testimony earlier this week from proponents, including casino and industry leaders, and opponents, including those concerned about the effects of problem gambling and addiction.

A Senate committee has another hearing on the issue scheduled for Wednesday.

Like the lottery decades ago and sports betting in recent years, some states have seen iGaming — as it is colloquially known — as a new revenue stream amid tight times for their budgets. Rather than raise taxes or cut services, the idea is that states can legalize and tax internet gambling (as they did with cannabis) to generate millions of dollars in annual revenue. Seven states, including several in the mid-Atlantic, have done so.

While the Maryland proposal has two different bills under discussion by delegates and state senators, legislators failed to advance a similar bill last year. While the 2023 attempt ended with a plan to study the potential outcomes of legalization, the findings of which have provided fodder for this year’s talks, one General Assembly leader rated the 2024 legislation’s chance of passing as unlikely.

Testimony came in waves Monday over more than five hours, as leaders of casinos advocated before the House Ways and Means Committee for the state to increase revenues and regulate what’s currently an illegal market. Las Vegas-based consultants and a former Michigan statehouse member, now an executive with the betting company Fanatics, spoke in support, too.

On the other side, the father of a compulsive gambler, a recovering addict and union employees afraid of losing their jobs argued against it. Both sides cited dueling economic studies.

What’s it worth?

Del. Vanessa Atterbeary, a Democrat from Howard County, sponsored the House bill and chairs the Ways and Means Committee. She focused on the funds that could be raised for education, saying that it’s the committee’s job to “look at all available options to fund” the Blueprint for Maryland’s Future, the plan to pour billions of dollars into Maryland schools.

A report from Las Vegas consultant The Innovation Group, commissioned by the Maryland Lottery and Gaming Control Agency, said legalization could generate more than $300 million in state revenue by 2029.

“It only makes sense for this committee and the General Assembly to regulate iGaming and capture that revenue we need and earmark it for the Blueprint,” Atterbeary said.

Others countered that internet gaming could result in casino workers losing their jobs and that the economic benefit would be slight, if at all. The Innovation Group’s report found there would be a 10% “cannibalization rate,” a term used to describe how much the new product would economically harm brick-and-mortar casinos, and the Anne Arundel County Chamber of Commerce commissioned a study by the Sage Policy Group that was skeptical of internet gaming’s economic impact.

Sen. Ron Watson, a Prince George’s County Democrat who sponsored the bill to be discussed Wednesday, has called the revenue that internet gaming could generate the “big enchilada.”

“My computation suggests it is a tiny taco — at best,” Baltimore economist Anirban Basu of Sage Policy Group quipped.

Mark Stewart, executive vice president and general counsel of The Cordish Cos., which operates Live! Casino and Hotel in Anne Arundel County, spoke out Monday against the House bill, unlike other casino leaders.

“Many of those pushing the state to do iGaming are looking to make money off of it. There’s nothing wrong with that, it’s capitalism,” he said. “If iGaming passes, we’re a gaming company, we’ll do well financially. But despite our potential financial gain, we are asking you not to do iGaming, and that should speak volumes.”

If either bill is approved, it would send the question to voters in November for final approval, as was done with sports gambling.

But Senate President Bill Ferguson, a powerful Democrat, said it’s unlikely internet gaming would pass this session.

“I’m not feeling that this is going to be the year that we see it move. I do think it’s probably a conversation in the next few years,” he said.

‘Complementary’ or cannibalizing?

Casino advocates argued that introducing internet gaming would not preclude people from visiting casinos in person, but would rather open doors to new clientele. That, they said, would grow the industry and, in turn, revenue. Rick Limardo, an executive with MGM Resorts, said internet gaming would “create meaningful tax revenue and modernize the state’s gaming industry.”

“This is complementary to what we offer at a brick-and-mortar casino. Somebody behind their computer cannot get the experience that they get [at] one of our properties,” he said.

Randall Conroy, general manager of Horseshoe Casino, added: “I would not be up here if I thought there was a job loss for Horseshoe Baltimore.”

Most of the tax money raised would go to education statewide. Some of the tax money would go to the state’s problem gambling fund, unlike the sports gambling bill previously passed, and to local jurisdictions.

The more than $300 million in annual state tax revenue predicted by The Innovation Group assumed a tax rate of 45%. Watson’s bill would tax internet gaming at 47% and Atterbeary’s bill would tax at 55%, with live table games — for example, a livestreamed blackjack game dealt by a human being — taxed at 20%.

Regarding the proposed tax rates, “I cannot tell you how happy that makes me,” said Victor Matheson, an economist at College of the Holy Cross who studies lotteries and gambling. He said in an interview that would be higher than in many other states, decrease “cannibalization” and would be more likely to generate revenue for the state.

Casino leaders who testified, however, were less happy with that tax figure. Among several amendments pitched by the casinos, Horseshoe’s Conroy suggested a 15% tax. A 15% tax rate would raise about $37 million for the state annually by 2029, per The Innovation Group.

That’s paltry compared with the state’s $63 billion budget, noted Republican Del. Jason Buckel of Allegany County, likening it to a “blip.”

‘A casino in everyone’s pocket’

While 38 states have legalized sports gambling (including 30 with an online component), states have been more wary of internet gaming.

Critics warn of a dystopic picture that internet gaming could create. Whereas gamblers now go to a casino and socialize with dealers and other bettors, internet gaming would allow people to play slots from their couch or car.

“It’s much harder to stay out of the casino when there’s literally a casino in everyone’s pocket,” said Matheson, the economist.

Atterbeary said “problem gamblers are going to find a way to gamble” regardless of whether internet gaming is legalized, and that online gambling “has an opportunity for safer protections against problem gaming” than gambling in person.

“Contrary to what you may have heard, the sky will not fall if iGaming is implemented in the state of Maryland,” Atterbeary said.

Mary Drexler, the director of the Maryland Center of Excellence on Problem Gambling, told lawmakers that because internet gaming can be so addictive, legalizing it would be a “dangerous public policy.”

Union workers also spoke in opposition. Nancy Stack, a table games dealer at Ocean Downs on the Eastern Shore, said in an interview that she’s concerned people will “stay in their pajamas” and gamble from home, resulting in her losing her job. At 59, she said she’s “a little too old to try to start training for something else.”

David Carleton, a bartender at Horseshoe Baltimore, said going to a casino provides a social good — more so than playing on an app.

“We have to stop a massive corporation from fleecing us in our bathrooms while we’re bored,” he told The Baltimore Sun.

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(Baltimore Sun reporter Sam Janesch contributed to this article.)

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