The casino floor at the Horseshoe Casino Baltimore. Altogether, Maryland casinos or affiliated companies have sent more than two dozen lobbyists to Annapolis as the General Assembly considers measures to legalize gambling on sporting events. (Lloyd Fox / Baltimore Sun Photo)
Jeff BarkerContact ReporterThe Baltimore Sun
Maryland General Assembly leaders are considering a fast-track proposal under which lawmakers would legalize betting on football, basketball and other sportswithout first seeking voter approval in the 2020 election.
A voter-approved referendum has long been considered a precursor for Maryland to join surrounding states such as Delaware, Pennsylvania, West Virginia and New Jersey, which have all launched sports wagering since the U.S. Supreme Court struck down a congressional ban in May. The District of Columbia is in the process of establishing sports betting after the D.C. Council approved it in December.
But Maryland legislative leaders and casino and racetrack lobbyists are now studying a plan in which the state would place the regulation of sports betting under the lottery and gaming agency.
Changes or additions to lottery games are exempt from a 2007 requirement that any new commercial gaming must be approved by a majority of voters in a general election. That’s among the reasons some sports betting proponents believe a ballot referendum might not be needed.
“This issue was just recently raised as an option,” said Alexandra Hughes, chief of staff to House Speaker Michael E. Busch. Hughes and others said officials must still determine whether such an approach is legal.
Gordon Medenica, the state’s Lottery and Gaming director, said it “was certainly our understanding that this would require a referendum, and we sort of lost that window last year. This is going to be between the attorney general's office and the legislature. I'm sure the lawyers are going to make their arguments."
A spokeswoman for Maryland Attorney General Brian Frosh said the office has not been asked for a formal opinion on the matter. She declined to say whether it has received any informal requests from lawmakers.
If the plan passes legal muster, the state's “big three” — Gov. Larry Hogan, Senate President Thomas V. Mike Miller and Busch — have indicated their willingness to explore it.
“At this point, the governor anticipates working with the legislature to determine the best approach to sports betting in Maryland during this session, and is open to considering any ideas put forth,” Hogan spokeswoman Amelia Chasse said.
Miller said he would consider allowing sports betting to move forward “if the principals can agree this year to bypass the constitution.”
Busch in particular has been vocal about the potential benefits of sports betting, which he said include making Maryland casinos more competitive with those in surrounding states. “Hopefully we can expand sports betting and dedicate that money to the education fund. That’s taking place in all the other states around us,” he said.
The owners of Maryland's largest casinos — MGM National Harbor in Prince George's County, Live Casino & Hotel in Anne Arundel County and Horseshoe Casino Baltimore — are all pushing the Assembly for the right to offer sports betting. Legalization would allow the casinos to offer Las Vegas-style sports book rooms, where clerks accept bets and odds are displayed on oversized, blinking boards.
Altogether, Maryland casinos or affiliated companies have sent more than two dozen lobbyists to Annapolis during the current legislative session, according to Ethics Commission registration records.
Maryland now permits slot machines and table games at the three biggest casinos, plus Ocean Downs in Worcester County, Hollywood Casino Perryville and Rocky Gap Casino Resort in Western Maryland. The state's casino industry continued to grow last year as revenue swelled 8.2 percent to nearly $1.75 billion, according to regulators, with a significant portion going to the state.
To Maryland casinos, the approach of another Super Bowl on Feb. 3 is a frustrating reminder that they aren't sharing in the multibillion-dollar sports betting industry. Even before the Supreme Court ruling, the American Gaming Association, a casino industry group, estimated that Americans were spending more than $4 billion a year on Super Bowl bets with offshore operators, bookies and others. Most of the bets were illegal, although few resulted in criminal charges.
“All this betting is already going on,” Medenica said. “The football season and March Madness — I think sports betting is highly seasonal around these events."
Legalization, Medenica said, would be akin “to converting all the old numbers runners 40 years ago into lotteries. It’s converting all this illegal activity into legal activity.”
The difficulty comes in deciding who gets to offer sports betting in their buildings — or online — and how much they must pay the state in taxes and licensing fees for the privilege.
A year ago, legislation to put a sports betting question on the November 2018 ballot failed after the House of Delegatesand the Senate could not agree on whether to explicitly allow sports betting at racetracks. The House wanted to include the tracks in the bill, while the Senate wanted to defer a decision on particular locations and simply ask voters whether they would approve sports betting.
Lawmakers face a similar decision this year — among many others.
Joe Weinberg of Baltimore-based Cordish Cos., which owns Live Casino & Hotel, said sports wagers by themselves don’t produce large profit margins but would benefit casinos by attracting new customers who would then play other casino games. The added business also would help the state, as casino revenues are shared with the state.
Slot machine revenues are taxed differently at each casino — ranging from 40 percent to 61 percent. All casinos pay 20 percent on table game revenue.
The state’s share has largely gone to support education as well as the horse racing industry, and a portion goes to grants for communities around the casinos. A constitutional amendment approved by voters in November requires that the education money be added to the amount of funding for local school systems required by law.
“The only way for the State to capture this additional tax revenue … is to restrict sports betting solely to the six existing gaming facilities, all of which are easily accessible to the major population bases,” Weinberg said in an email.
But others are arguing for a racetrack piece. A recent Maryland Stadium Authority report suggested betting on sports — not just horse races — as an option to help attract customers to faded Pimlico Race Course.
There was no comment from representatives of The Stronach Group, which owns Pimlico and Laurel Park, or from Horseshoe or MGM National Harbor on Weinberg's proposal to leave racetracks out of the mix.
Horseshoe general manager Erin Chamberlin said that legalized sports betting in Maryland “is necessary to ensure that the state’s casinos are able to remain competitive with those located in surrounding jurisdictions where responsible sports wagering is already offered.”
MGM National Harbor said in a statement that legalization would create new state revenue and “curb the illegal sports wagering market.”
Weinberg said “to be competitive,” the state should not impose a sports betting tax rate of more than 10 percent. That is the rate set by neighboring Washington and West Virginia.
Also before the Assembly is the question of who gets to establish sports betting websites. Analysts say many casinos would want their own sites.
In one possible path, said gaming and sports law expert Daniel Wallach, state casinos would partner with existing sites such as DraftKings or FanDuel to offer online sports betting.
“In a truly open marketplace, companies like DraftKings and FanDuel could also conceivably operate independently” after being licensed by a state agency, said Wallach, co-founder of the Sports Wagering and Integrity Program at the University of New Hampshire School of Law.
DraftKings and FanFuel are currently permitted in Maryland only to operate fantasy sports contests in which participants wager on the individual performances of professional players. In other states, such as New Jersey, the sites are also allowed to take bets on the outcomes of games.
The national sports betting marketplace has been booming since the Supreme Court sided with New Jersey's argument that a sports betting ban usurps states’ rights.
Betting opponents have argued that legalization could lead to increased problem gambling or sports-league scandals in which players try to manipulate outcomes.
But Wallach said sports betting can be “a game changer” for casinos. Even though sports betting profit margins are modest, the activity attracts loads of players. “There's a reason why casinos in Pennsylvania are paying $10 million for a sports betting license,” he said. “For a racetrack or casino looking to attract a new demographic of customer, it has a social experience and camaraderie that many other casino games can't match.”
Some casinos and offshore sites offer wagers not only on games but on related activity, such as the length of the national anthem at the Super Bowl or the first team to score a touchdown.
Maryland casinos could offer some variation of those bets as well if the Assembly permits it.
Busch said sports betting will “bring more people to the casino where the wife plays the slot machine, the husband bets on Oakland versus San Diego. They’re both going there.”
Medenica said it’s conceivable that the state's 4,500 lottery retailers could eventually offer bets on games along with the traditional Powerball, instant tickets and other offerings.
With other states’ operations up and running, he said, “we're already seeing some impacts from sports betting in other jurisdictions maybe anecdotally pulling some of our casino customers out of state.”