Lawmakers take look at iGaming

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: online slot machines, blackjack, poker and other casino games. Lawmakers heard roughly eight hours of testimony about betting over two hearings this week from proponents, who touted financial boosts, and opponents, who pointed to problem gambling and addiction.

Like the lottery decades ago and sports betting in recent years, some states see 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 some have done recently with cannabis) to generate millions of dollars in annual revenue. Seven states, including several in the mid-Atlantic, have done just that.

Maryland legislators did not advance a similar bill last year, but since then, state regulators commissioned a study into the potential outcomes of legalization, providing fodder for this year’s talks. Maryland has bills under discussion in both the House and Senate and internet gambling might eventually be legalized, but one General Assembly leader rated as unlikely the legislation’s chances of passing in 2024.

What’s it worth?

Annapolis hummed with gambling chatter this week. Advocates and opponents of internet gaming spoke to delegates for more than five hours

Monday. Then, on Wednesday, the Senate Budget and Taxation Committee heard discussion on five bills with ties to gambling. Scores of witnesses signed up to testify for and against internet gaming.

Leaders of casinos, Las Vegas-based consultants and a former Michigan statehouse member — now an executive with a betting company — argued Monday before the House Ways and Means Committee for the state to regulate what’s currently an illegal market.

Representatives of a couple of Maryland casinos, the father of a compulsive gambler, a recovering addict and union casino employees — over 100 of whom bused in Wednesday, wearing bright shirts stating, “Don’t Take My Job” — came to oppose internet gaming.

Both sides cited dueling economic studies and sought to weigh not just financial impacts, but social ones, too.

Democratic Del. Vanessa Atterbeary of Howard County sponsored the House bill and chairs the Ways and Means Committee. She focused Monday on the funds that could be raised for education, saying 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. Democratic Sen. Ron Watson of Prince George’s County, who sponsored the Senate bill, pointed Wednesday to “impending fiscal challenges” and the value of creating a new revenue stream.

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, Atterbeary said, “to regulate iGaming and capture that revenue … for the Blueprint.”

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 established 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.

Watson 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. (Watson later retorted, telling other lawmakers that Basu’s analysis fell short, like a taco compared to an enchilada.)

Mark Stewart, executive vice president and general counsel of The Cordish Cos., which operates Live! Casino and Hotel in Anne Arundel, spoke against internet gaming, unlike a few 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 Monday. “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. Senate President Bill Ferguson, a powerful Democrat, said it’s unlikely, however, 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?

Some casino leaders argued that introducing internet gaming would not preclude in-person casino visits, but rather open doors to new clientele. That, they said, would grow the industry and its 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 brickand-mortar casino. Somebody behind their computer cannot get the experience that they get 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.”

In addition to funding education statewide, some of the tax money generated would go to the state’s problem gambling fund.

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

Casino leaders who testified, however, were less happy with that tax figure. Horseshoe’s Conroy suggested a 15% tax — which 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 warier 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.

Witnesses played tug-ofwar with economic figures, but the social implications might be even more complex. 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. David Carleton, a bartender at Horseshoe Baltimore, said visiting a casino provides a social good — more so than playing on an app.

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