Maryland House Approves Online Casino Legislation

Maryland Representative Vanessa Atterbeary emphasized the importance of a “highly regulated industry” while advocating for an amended online casino bill, which successfully advanced from the House to the Senate on March 16th as HB 1319.

Two days before the crossover deadline, the House voted 92-43 on a Saturday to approve a bill proposing to let voters decide on legalizing icasino in November. The Senate now has less than a month to pass the bill before the general assembly adjourns on April 8. House leadership unveiled a $1.3 billion budget plan on March 15, relying on tax revenue from legalized internet gambling for future education and transportation expenses, per the Associated Press. Maryland has garnered significant attention in the industry, seen by many as having the best chance to pass an online casino bill this year. Maine is the only other state still deliberating legalization. Challenges in passing such bills range from a lack of understanding about online gaming to regional players feeling they won’t benefit. As Maryland’s online casino bill progressed through the House, it underwent numerous changes, with some industry stakeholders viewing them negatively and planning to lobby against them as the bill moves through the Senate.

The online casino bill introduces a three-tiered licensing system.

When HB 1319 reached its third reading on March 16th, Atterbeary included an amendment to expand the available licenses, prohibit the use of credit cards for account funding, and incorporate guidelines regarding diversity, equity, and inclusion.

The bill proposes a minimum tax rate of 55% on electronic games, with rates in the seven legal states ranging from 18% to 57%. Live-dealer games would face a 20% tax rate. Operators would incur an initial $1 million fee for a five-year license, with a renewal fee equal to 1% of the average annual profit over the previous three years. Tax revenue generated would be directed towards the Blueprint for Maryland’s Future initiative, including allocations to counties hosting brick-and-mortar casinos, horse racetracks, and small, minority, and women-owned businesses. One percent of taxes collected would be allocated to problem gambling and responsible gambling programs. The bill outlines three levels of licensing, with “social equity partners” playing a significant role in the structure. These partners are defined as individuals or groups residing in economically disadvantaged areas for at least five of the past ten years, or those who have attended public schools in such areas for at least five years. Additionally, they must have completed at least two years at a four-year Maryland college where at least 40% of students were eligible for Pell Grants, or have a personal net worth below a threshold determined by the lottery commission, which serves as the regulatory body.

Who could apply for a licence?

The state’s six existing casinos are eligible to apply for online gambling licenses, with a requirement that they be at least 5% owned (directly or indirectly) by a social equity partner, as outlined in the bill. Additionally, casinos meeting certain criteria may obtain a second or third license if they are at least 33% owned by a social equity partner. Seven “Class B” licenses are designated for the four off-track betting sites and two bingo halls already licensed for online sports betting, along with the Black-owned media company Urban One. Furthermore, a competitive bid process will determine the allocation of at least five and up to 18 stand-alone digital gambling licenses, with the initial bidding round reserved for social equity applicants.

When online sports betting was legalized in 2020, Maryland lawmakers implemented some of the strictest minority-related participation requirements in the United States, which significantly slowed down the regulatory process. It took the lottery two years to develop rules and for operators to meet these standards, making Maryland one of the slowest jurisdictions in the US to transition from legalization to live online betting. Only Arkansas and Puerto Rico experienced longer delays, compared to the average six-month timeline for regulators to launch a new market. On March 16, five additional amendments were proposed, but only one related to live dealers and unionization passed. Among the failed amendments were proposals to require in-person funding of accounts, implement two-factor identification for logging in, and impose caps on individual bets and consumer spending within a 24-hour period. Despite the amendments, opposition remains, particularly from casino-worker labor unions and Republican lawmakers, who fear job losses as a result of online gambling expansion.