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Maryland’s first hearing on online casino legislation this year showed just how complicated iGaming passage will be.
The Maryland House Ways and Means Committee heard more than five hours of testimony about online casinos on Monday.
While more than half was gaming industry people testified in support, the hearing continued with wave after wave of six-person panels testifying against the bill for economic or problem gambling reasons.
Committee Chairwoman Del. Vanessa Atterbeary, who authored HB1319, opened the hearing by saying that there has been no cannibalization of brick-and-mortar casinos in other states with iGaming and online gaming has an opportunity to provide safer protections for problem gamblers than a land-based facility.
“Contrary to what you may have heard, the sky will not fall if iGaming is implemented in the state of Maryland,” Atterbeary said.
But many union representatives, casino workers and representatives of problem gambling organizations spent their time arguing against the chairwoman’s initial assertions. They expressed concerns regarding cannibalization affecting casino jobs and revenues for counties with casinos, the harms of increased problem gambling and lack of participation for minority-owned businesses.
Four of six Maryland casinos supported legalizing online casinos.
Maryland iGaming proponents and opponents will testify again Wednesday when the Maryland Senate Budget and Taxation Committee hears online casino implementation bill SB603 and referendum SB565.
Casino workers say Maryland iGaming will cost jobs
Similarly to New York, labor opposition has become the biggest impediment to Maryland online casino.
Maryland AFL-CIO President Donna Edwards told the committee that lawmakers shouldn’t undo the good jobs they brought to the state when they created the casino industry in 2008.
“We believe Maryland should not take a risky bet on internet gaming,” Edwards said. “The job losses, unstable revenue and definitely the damage to public health are not worth the risk.”
Heidi Zimmerman, a bartender at Horseshoe Casino Baltimore, was one of many casino workers to speak at the hearing. She said 80% of her revenue came from tips, as with many employees at the casino, including dealers.
“The math is easy, there is no disagreement that iGaming will cause a reduction in foot traffic at the casinos. Less customers means less people to serve, which equals less tips, which means less income for casinos workers and less jobs. … I speak for all of my coworkers when I say please do not take another bite out of our customer base by legalizing iGaming in Maryland.”
Atterbeary countered that she believes the iGaming consumer is different than the typical person who goes to the casino.
“I have three kids,” Atterbeary said. “I don’t want to go to a casino, I don’t want to deal with lot a lot of people, but I could sit in my house and play a game here and there. So I do believe it is a different type of individual.”
Richard Wildt of the United Food and Commercial Workers union claimed that nearly 2,000 casino workers have lost their jobs in Pennsylvania since it started iGaming.
“It is pretty well accepted that iGaming will significantly reduce visits in traditional brick-and-mortar casinos. When, not if, the volume is reduced in gaming properties, it will adversely affect our members and the prospects of job security for those remaining.”
Casinos respond to cannibalization concerns
Representatives of Horseshoe Casino Baltimore, MGM National Harbor, Hollywood Casino Perryville and Rocky Gap Casino Resort testified in favor of the bill if amended to tether internet gaming skins to casinos. The bill currently has 12 licenses available without a guarantee of casino participation, though Atterbeary said it was always her intention for licenses to go to casinos.
Horseshoe Baltimore General Manager Randall Conroy said he expected online casino to increase employment.
“As an operator for the Horseshoe Baltimore working for Caesars Entertainment, my job is to manage this team of 700 great team members. I would not be up here if I thought there was a job loss at Horseshoe Baltimore.”
MGM Senior Vice President Rick Limardo said the company’s experience in other states is that BetMGM has helped grow their overall customer base. He noted that MGM has added more dealers at their casinos in Michigan and New Jersey since those states adopted iGaming.
“It gives you the opportunity to create new customers through those channels and cross-sell what we call this omnichannel customer experience and create a whole ecosystem to bring them into the brick and mortar property, have dinner, go to the sportsbook, go to a show, and try the actual table games in a property as well.”
Howard Glaser said every Maryland casino is a client of his company, Light & Wonder, for game content and technology on their casino floors.
“Our conclusion as a land-based company is that opening the digital channel is essential for brick-and-mortar casinos to thrive and compete in the long term, especially against other online entertainment channels. If you fast-forward five years, 10 years, a casino that does not have the ability to be online is a casino we believe will be in trouble competing in that market.”
Not all Maryland casinos want iGaming
Mark Stewart, general counsel for The Cordish Cos., and Bobbi Jones, general manager of Ocean Downs Casino and Racetrack, testified against the bill.
Stewart said Cordish, a Maryland-based corporation that owns Maryland Live!, started its iGaming operation in Pennsylvania with only one employee, who lived in New Jersey.
“Many of those pushing the state to due iGaming are looking to make money off of it. There’s nothing wrong with that, it’s capitalism. If iGaming passes, we’re a gaming company so we’ll do well financially. But despite our potential financial gain, we are asking you not to do iGaming and that should speak volumes.”
Del. Dalya Attar pushed back on Cordish’s claims. She asserted that Pennsylvania experienced growth in retail slots and table games in Pennsylvania in 2023 and noted the company is currently hiring dealers and food and beverage specialists at Philadelphia Live!.
Jones said Churchill Downs, owner of Ocean Downs, had a 15% decline in revenue and lost 45% of its workforce at its Pennsylvania property Presque Isle Downs because of iGaming.
“This will impact our team members and cause a loss of good paying jobs that are year-round with health benefits and retirement benefits. iGaming will negatively impact the state and our local community with loss of tax revenue from reduced gaming revenue, reduced payroll, reduced sales tax revenue and reduced contributions to our county and surrounding counties. iGaming will reduce the spending on goods and services along with marketing spending, which can and will impact the minority owned businesses throughout the state.
Battle over online casino studies
To reinforce their arguments, many witnesses cited conflicting iGaming studies and argued over which study was best.
iDEA Growth recently released a study conducted by Eilers and Krejcik to counter studies done by The Innovation Group and Anne Arundel Chamber of Commerce that projected cannibalization.
The Innovation Group study, commissioned by Maryland Lottery and Gaming Control Commission, projected a 10% reduction in brick-and-mortar casino revenue and a 4-to-8% reduction in labor.
Produced by Sage Policy Group, the Arundel Chamber of Commerce study concluded that if the state legalized online casino, it would result in a loss of somewhere between 1,200 and 2,700 jobs after reducing brick-and-mortar casino revenues by 26%.
iDEA Growth Founder Jeff Ifrah, a Maryland resident, and Sage Policy Group CEO Anirban Basu argued over another study conducted by National Economic Research Associates (NERA).
NERA looked at the $2.4 billion that New Jersians spent on online casino in 2022, considered where the money could have gone if iGaming didn’t exist and concluded that the state economy ended up being $180 million smaller because of online casino.
Ifrah contended that calling the NERA report a study gives it more credit than it deserves.
“It’s not based on any data in Maryland or New Jersey. They didn’t speak to anyone. They were paid a very minimal amount by someone who opposes gaming and opposes iGaming to come up with something, so they went to a bunch of Londoners and said where do you spend your money? I know where they don’t spend their money. They don’t go to the dentists. I go to a dentist in Maryland and my teeth look good, so what does that mean? We spend money differently. … It’s not a credible report, sir.”
Glaser pointed out that four states surrounding Maryland — Pennsylvania, New Jersey, West Virginia and Delaware — have made $1.1 billion in tax revenue in the past year on $3.7 billion in gross online casino revenue.
“Look, these reports are confusing,” Glaser said. “Forget a report by a different third party on either side, look at the numbers from the gaming commissions in the state. If the governor of New Jersey and the governor of Pennsylvania were here today and the legislative leaders, they would tell you that they have realized significant tax revenues from the combination of iGaming as well as the growth in land-based gaming.”
Fiscal report causes concerns
The fiscal report produced for the hearing took the side of the studies saying there will be cannibalization.
Although the fiscal report projected more than $900 million in annual total revenue from iGaming, it predicted a $64.7 million decrease in the education trust fund due to falling casino revenue.
Most concerning to county representatives, it projected an additional $9 million to be split among all 24 Maryland counties but an $11 million decrease to local impact grants for the six counties with casinos.
Del. Jason Buckel, the House Minority Leader, said his county can’t afford to lose $2 million to $3 million in revenue. He asked if Atterbeary would consider a hold-harmless clause to protect brick-and-mortar casino revenues, which she said was a reasonable conversation.
Del. Eric Ebersole questioned creating a hold-harmless clause in perpetuity when there’s no guarantee that a loss was caused by online casino.
Kevin Kinnally of the Maryland Association of Counties responded:
“Certainly the local impact grants are crucial for the communities around the casinos. So I’m not sure if we should hold harmless all the time. But if we’re going to make a big expansion like this one that could affect those dollars, then we’d like to see some protections for those communities surrounding the casinos.”
Tax rate discussion takes a back seat
The high tax rate, set at 55% for online slots and electronic table games, and 20% for live-dealer games, was expected to be a hot topic for casinos. But casinos spent most of their time on the defensive.
Conroy from Horseshoe Baltimore did say he thought 15% was a reasonable tax rate. Rocky Gap proposed 28%.
Stewart said legislators are right to aim high with the tax rate.
“The tax rate should be higher for online than it is in brick and mortar, and ultimately the state needs to do what’s best for the state. If you’re setting a tax rate to achieve a goal you had in mind, that’s what you should do and not worry about the illegal market aspect of it. Enforcement is for that.”
Uri Clinton from Boyd Gaming asked to increase skins from 12 to 23, three skins for each brick-and-mortar casinos and five licenses available for competitive bid. He said that would allow Boyd Gaming to invest in the state but also promote competition and allow for more participation from minority-owned businesses.
Chair wants funding for education blueprint
Despite the vocal opposition, there’s a good chance that HB1319 gets through the Ways and Means Committee because the chair sees online casino revenue as key to funding the Blueprint for Maryland’s Future Fund.
Atterbeary explained:
“As of right now, the blueprint is not funded for FY2028 and beyond. In addition, we have all heard from our local school systems that the cost of the blueprint is significant. I am personally committed to not walking back the promise we made to our children in this state. … It is our job in this committee, the revenue committee, to find funds and look at all available options to fund the blueprint.”
Basu warned that loss of income tax revenue, sales tax revenue and problem gambling expenses could offset the projected online casino revenue.
“Is it possible that you have a negative fiscal impact from this and therefore, less money to finance the blueprint?” Basu asked. “Yes. To sustainably finance the blueprint, you don’t want to shrink your economy.”
Brandt Iden of Fanatics asserted that fiscal projections for the revenue iGaming would generate for Maryland education could be low. Iden was the House Ways and Means chair in Michigan when the legislature passed an online casino bill. He recalled how the fiscal note projected iGaming to bring $50 million at market maturity.
Now, he boasted, Michigan is the leading iGaming state in the US and the state made $354 million in tax revenue for education in 2023.
“In Michigan, we debated cannibalization and talked about job losses in Detroit, none of which has occurred. … It’s amazing to see the kind of revenue impacts that this can have on education, just like it did in Michigan.”
