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Maryland Online Casino Licensing Structure Gets More Inclusive, Complicated; Bill Moves To House Floor

Written By Matthew Kredell on March 12, 2024 - Last Updated on March 15, 2024
Maryland online gambling

To make Maryland online casino licensing more inclusive and diverse, a Maryland House subcommittee also made it much more complicated.

Bill sponsor Del. Vanessa Atterbeary amended Maryland online casino legislation HB1319 Tuesday in the House Racing and Gaming Subcommittee.

The Ways and Means Committee voted favorably on the amended bill Wednesday, advancing the bill to the House floor. The vote was 15-7, with all Republicans and one Democrat in the committee voting against.

A Maryland-based source told PlayUSA that the full House may vote on the bill Saturday. Monday is the deadline for bills to cross over to other chamber.

The new version increases potential online casino licenses from 12 to 30 while adding conditions to make licensees more diverse, equitable and inclusive.

The amendment from Atterbeary also prohibits using credit cards to fund Maryland online casino accounts and adds additional language to mitigate problem gambling issues.

Number of potential Maryland online casino licenses increases

As introduced, Atterbeary’s bill included 12 untethered online casino licenses. This differed from SB603, the Senate bill that provides each of Maryland’s six casinos with two skins each.

The amendment creates three categories of licenses. The first category allows casinos to have up to three skins if they meet significant social equity requirements.

Here are the three categories:

  • Casino licenses: For the first license, Maryland’s six casinos must share 5% of iCasino revenue with a social equity applicant partner. By sharing 33% of iCasino revenue with a social equity applicant partner, casinos can obtain a second license and a bonus third license (with a 5% social equity partner).
  • Class B licenses: The four off-track betting parlors and two bingo halls eligible for Maryland sports betting licenses are earmarked online casino licenses, as is Urban One, a black-owned Maryland-based media company that used to have a minority ownership stake in MGM National Harbor.
  • Competitive bid licenses: A minimum of five licenses are put up for competitive bid. Any of the 18 licenses not used by casinos are added to what is available for competitive bid. The first round of bidding is for social equity applicants. The second round is open to all others.

The bill defines social equity applicants as a person or group of people that have lived in an economically disadvantaged area for at least five of the past 10 years and then either:

  • Attended public school in an economically disadvantaged area for at least five of the past 10 years.
  • Attended at least two years at a four-year college in a state where at least 40% of individuals are eligible for the Pell Grant.
  • Has a personal net worth that doesn’t exceed an amount determined by the commission.

Each initial casino and Class B online casino license costs $1 million over five years. Renewal remains 1% of gross gaming revenue over the previous three years.

Other changes industry may find problematic

Atterbeary’s amendment prohibits using credit cards to fund online casino accounts. Sen. Ron Watson confirmed to PlayUSA that he did not include such a prohibition in his Senate bill because the Maryland State Lottery and Gaming Control Agency advised him that it could create issues.

Maryland online sports bettors may fund their accounts with credit cards. By prohibiting credit card usage for online casino, it prevents companies that offer both iCasino and sports betting from sharing wallets for their products.

Other additions in the amendment include:

  • Requires participants to create deposit limits.
  • Prohibits licensees from accepting or receiving revenue from countries known for money laundering, listed as a terrorist state or from a jurisdiction where iGaming is illegal.
  • Promo deductions over the first five years are based on revenue.
  • Tasks the Commission with producing an annual report on the operation of internet gaming in the state and its impact on VLT facilities.
  • Tasks the Commission with producing an annual study on unauthorized forms of online gaming such as platforms that use microtransactions or online sweepstakes and their impacts on the regulated Maryland iCasino market.
  • Requires the live dealer studios be located in the counties of VLT facilities rather than in the VLT facility.

Disbursement of Maryland online casino revenue

The tax rate in the Senate online casino bill, which many in the industry found high, remains at 55% for online slots and regular table games, and 20% for live dealer games.

The amended bill creates eight areas of funding from Maryland online casino revenue, which is projected at over $300 million. Some are meant to address cannibalization concerns expressed by some casinos and casino workers.

  • To counties with Maryland casinos: $6.5 million in 2026, $8.3 million in 2027, $10 million in 2028, $11.3 million in 2029, $11.4 million in 2030.
  • For the Purse Dedication Fund for horse racing prizes: $4.9 million in 2026, $6.3 million in 2027, $7.6 million in 2028, $8.6 million in 2029, $8.7 million in 2030.
  • To the Racetrack Facility Renewal Fund:  $900,000 in 2026, $1 million in 2027, $1.2 million in 2028, $700,000 in 2029 and 2030.
  • To the Small, Minority and Women-Owned Business Account: $1.3 million in 2026, $1.6 million in 2027, $1.9 million in 2028 and $2.2 million in 2029 and 2030.
  • For background investigations and regulatory activities, the State Lottery and Gaming Control Agency receives 1% of online casino proceeds.
  • 1% of online casino proceeds to the Problem Gambling Fund.
  • Counties in the Maryland receive 1% of online casino proceeds to be used for funding education.
  • The remainder of online casino revenue goes to the Blueprint for Maryland’s Future Fund for education.

New promotional credit structure

The amended language has a complicated structure for how promotional credits are counted in taxable revenue based on how much the licensee made. Promotional credits are only allowed in the original five-year initial license period.

During the first year, operators don’t have to include any promotional credits or free play redeemed by players as taxable revenue. For the next four years, licensees may write off:

  • 35% of promotional credits if revenue during the previous year does not exceed $4 million.
  • 31.25% of promotional credits for revenue between $4 million and $8 million.
  • 27.5% of promotional credits for revenue between $8 million and $10 million.
  • 23.75% of promotional credits for revenue between $10 million and $12 million.
  • 20% of promotional credits if revenue exceeded $12 million.

Previously, all promotional credits were allowed in the first year and 20% were counted for the next four years.

What’s next for Maryland online casino legislation

Maryland online casino legislation faces an uphill battle in the Senate. The Senate bills were never going to be the vehicles for Maryland iCasino legislation this year. The House, with Atterbeary leading the committee, always was going to move a bill first.

But Watson told Bonus.com that Senate leadership doesn’t see the need for online casino revenue this year.

“The general consensus of the Senate is that a balanced budget has been developed and submitted. And, as such, no new taxes are required, nor are they ready to entertain this new revenue stream.”

Prior committee hearings revealed staunch opposition from labor unions and two of the six Maryland casinos.

Atterbeary clarified after the committee vote that Maryland legislators are just deciding whether to put the choice of legalizing online casino in front of Maryland voters in the November general election.

“The vote that was taken was not a vote to implement internet gaming. It ultimately will be decided by the people, who will have to vote for it on a referendum during the election.”

If Maryland online casino legislation does pass and get approved by voters, it could be a longer wait for the market to launch. The amendment does not seem to provide a time frame for how long casinos have to secure second and third licenses before forfeiting them to the competitive bidding pool.

Maryland had a similarly complex structure for online sports betting licenses to boost diversity, equity and inclusion.

As a result, the state took a year and four months after bill passage to launch online sports betting. Most online gambling markets take between three-to-six months to launch. And Watson, who is part of the Maryland Legislative Black Caucus, told PlayUSA he didn’t think the model created the intended boost for diversity, equity and inclusion.

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Matthew Kredell

Matthew Kredell serves as senior lead writer of legislative affairs involving online gambling at PlayUSA. He began covering efforts to legalize and regulate online gambling in 2007 after federal passage of the Unlawful Internet Gambling Enforcement Act disrupted his hobby of playing small-stakes online poker. He has since interviewed more than 300 lawmakers around the country and written extensively about online gambling legislation. He has led coverage of bills to legalize online gambling in most states. A lifelong Angeleno and USC journalism alum, Matthew started his career working as a sportswriter for a decade at the Los Angeles Daily News. He has written on a variety of topics for Playboy Magazine, Men’s Journal, Los Angeles magazine, LA Weekly and ESPN.com.

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