Maryland online casino and poker gross revenue may reach $900 million a year, according to a study state lawmakers requested before moving forward on a bill to legalize iGaming. That revenue could begin rolling in as early as 2026, according to the research Bonus obtained on Nov. 15.
However, for that to happen, the Maryland General Assembly would need to approve a bill, Gov. Wes Moore must sign it, and then voters will have to approve a referendum to amend the state constitution.
That’s the way Marylanders legalized online sports betting in November 2020. Maryland’s online sportsbooks launched in November 2022.
For this round of possible online gambling legalization, lawmakers first wanted to see a feasibility study. That’s why on July 27, the Maryland Lottery and Gaming Control Commission (MLGCC) selected the Las Vegas-based consulting firm, The Innovation Group (TIG), to conduct the research.
So, the 49-page-long publication titled iGaming in Maryland presented a 3-year-long process to state gaming regulators. Today, Seth Elkin — Managing Director of Communications for the Maryland Lottery and Gaming Control Agency (MLGCA) — provided that research to Bonus.
The research stated:
We model 2026 as the first full year of operation based on the earliest possibility of a referendum in Maryland and the subsequent regulatory development and licensure of technology providers.
About That First Step Toward Legalization
The lawmaker who introduced SB267 on Jan. 25 responded to Bonus today.
State Sen. Ron L. Watson, D-Prince George’s County, saw his “internet gaming” bill make it into the Maryland Senate Budget and Taxation Committee for a Feb. 15 hearing before lawmakers adjourned in April.
For online casino and poker to become legal in Maryland, lawmakers will have to introduce a new bill in 2024.
Watson told Bonus today:
The report is pretty clear: There would be an expected 10% loss of state taxes associated with the “current” activities in the brick and mortar casinos or $98M in 2029, versus an increase of $300M in state taxes once iGaming comes online and is mature, again, 2029.
Our state has a decision to make. The outlook for the state suggest revenues are forecast to grow 3.5% and ongoing spending is projected at 5% from 2025 – 2029. In short we have a structural deficit at the state level. This is a gap we must close and iGaming can help.
The report will be sent to the Joint Committee Chairs of both Ways & Means in the House and the Budget & Tax Committee in the Senate for review and I expect some form of a bill to emerge. The report did not include revenue from the initial license fee, but I expect them to be inline with PA and NJ at around $400K.
I plan to continue my efforts to help craft something that will allow us to tap into this new and important revenue stream.
Stay tuned …
His comments complement what he told Bonus on Sept. 26:
I prefer to wait until the Nov 15th report comes out. The results will be critical to this effort.
Watson Is Paraphrasing the Report
In 2022 and 2023, land-based casino advocates voiced “cannibalization” concerns to lawmakers in each state where online casino gambling bills were under consideration.
Those voices killed each bill but the one that passed in Rhode Island. There, Bally’s Corporation (Bally’s Corporation 11,52 +0,88%) holds a monopoly on online gambling and retail casinos. In that case, the concept of online casino gambling taking revenue from land-based casinos was moot. So, that state’s online casino site is slated to launch in 2024.
Today, TIG’s report did say online casino and poker sites would cannibalize 10% of retail casino gaming revenue.
Then, the research provided several points mitigating that statement.
The first point was removing possible comparisons to Maryland that didn’t match its retail casino environment. In West Virginia, “taverns” allow gambling. In Pennsylvania, it’s “truck stops.”
Removing those comparisons, TIG’s study said of iGaming cannibalization:
We believe that the 10.2% impact is slightly overstated, and that the actual effect is more likely between 8% and 9%.
As for what iGaming would cannibalize, the report said:
Since Maryland’s casino revenue is just over $2 billion annually, this would amount to a loss of just more than $200 million in casino revenue, against a gain of $900 million in iGaming revenue.
According to the trade group, the American Gaming Association (AGA), Maryland’s 6 million residents are served by six commercial casinos. Those land-based gaming establishments generated $2.2 billion in gross gaming revenue (GGR) in 2022.
The report also highlights that land-based casinos often gain dollars from partnerships with online operators. Or they create their own online brands.
Still, TIG’s finding of cannibalization is far removed from claims by online gambling operators like DraftKings (DraftKings 38,30 -1,16%). Operators often say iGaming doesn’t remove revenue from land-based casinos.
Maryland Online Casino Gamblers Like Pennsylvanians?
Maryland shares a border with Pennsylvania. However, Marylanders often believe they are quite distinct from their neighbor to the North.
As far as online casino and poker revenues go, the states will be quite similar, according to today’s report.
The research said:
We believe that the strongest states in per capita revenue — Michigan, Pennsylvania, and New Jersey — will be the most apt comparables for Maryland.
TIG studied these iGaming states:
- New Jersey
- West Virginia
The report excluded Rhode Island because its online casino site won’t launch until at least March 2024.
It also discounted comparisons to Nevada because its only iGaming app is for online poker.
Meanwhile, the Big Three revenue states stayed consistent in their rankings and high GGR during September 2023:
- No. 1, Pennsylvania, $187.3 million
- No. 2, Michigan, $166.4 million
- No. 3, New Jersey, $163.8 million
It’s unclear what tax rate Maryland will propose to generate that comparable $900 million in revenue. However, the research suggested rates ranging from 10% to 30%.
Here’s what TIG wrote:
Lastly, nearly everyone we spoke with favored a blended (not split) tax rate. In other words, they advocated for slots and tables to be taxed at the same rate. Those interviewees willing to suggest tax rates for the state’s consideration offered 10%-20%, 20%-25%, and 25%-30% as reasonable options, and another simply stated that iGaming taxes must be higher than the brick-and-mortar rates.
An Old Standby With a New Twist
While states do propose responsible gaming standards, the report devotes 14 pages to consumer protections and responsible gaming considerations that lawmakers may want to add to bills.
The research also said this about illegal offshore gambling sites:
In the Northeastern region, which includes Maryland, we found an annual illegal online casino revenue per capita of approximately $42, implying an illegal online casino market in Maryland of roughly $197 million in 2022.
So, the report suggests “methods to transition individuals from the illegal market to a legal market.”
As Watson said, “stay tuned” to Maryland.