An educational summit for small businesses interested in entering Maryland’s sports betting industry ended on a humorous yet cautionary note.
“So over the last two and a half hours, we’ve learned that sports betting is risky, it’s costly, likely not profitable in the first year, there’s an invasive licensing process, and your neighbors will be probed about your private behavior,” said Joseph Weinert, executive vice president for Spectrum Gaming Group. “Who’s ready?”
Experts caution small businesses
BetMGM’s Johnny Grooms, the company’s director of East Coast retail sportsbook operations, earned the nickname “Doom and Groom” from members of his panel. To this end, Grooms didn’t mince words when discussing the challenges involved with entering the sports betting industry.
“There is risk involved,” Grooms said. “At MGM National Harbor, we had almost $8 million in handle in the month of February, and we lost almost $3,800.”
Other panelists, including several lawyers, explained that the background check process is extensive. Investigators perform a deep dive into businesses and their proprietors, trying to uncover any potential issues that could prohibit them from receiving a sports betting license. The panelists stressed the need to share all information asked for by the investigators, including any previous legal issues.
The Maryland Educational Summit:
Sports Wagering Small Business Participation has just kicked off with opening remarks. This informative meeting will provide info on opportunities in sports betting for small businesses, retailers, investors & stakeholders. #sportsbetting pic.twitter.com/Ij9Ow0uLRE
— Spectrum Gaming Group (@SpectrumGamingG) May 6, 2022
Given the complicated nature of applying for and receiving a sports betting license, several people on the panel suggested working with a gaming lawyer. Their expertise can be valuable, even during the background check process. Retaining legal help isn’t cheap — another potential roadblock for small businesses — although Maryland’s Sports Wagering Application Review Commission did share a way for some small businesses to receive financial assistance.
Another discussion point was mitigating risk on certain bets. For example, if a bar in Baltimore adds sports betting, what happens when the majority of customers bet on the Ravens?
“We have the ability, of course, to move the lines, change the prices based on what kind of action we’re seeing,” said Tory Key, a business development project leader with Elys. “That’s always gonna be an option, no matter what game it is. … If we’re seeing a lot of action on the Ravens’ side and we need to hedge, per se, we certainly move the lines and the pricing to adjust accordingly.”
Adjusting lines based on bets in a particular sportsbook can help mitigate risk, but there’s always going to be some liability involved when local teams find success. On the flip side, a Ravens loss could result in the Baltimore sportsbook bringing in additional revenue that day.
While the panelists didn’t intend to scare potential businesses away, it was made evident that those seeking licenses need to be committed to the potential long-term impact of sports betting on their business, rather than expecting a quick influx of revenue.
A path forward
The event wasn’t entirely doom and gloom, and several examples were provided about how Maryland small businesses could not only enter the sports betting market, but also thrive.
Key brought up Grand Central, a local bar in Washington, D.C., that offers retail sports betting through Elys. Key mentioned the bar’s success through several months of offering sports betting, and encouraged Maryland small businesses to use Grand Central as an example of how such wagering can benefit a local establishment.
Grand Central was a popular bar in nation's capital before adding retail sports wagering, which has only increased foot traffic.
— Sports Handle (@sports_handle) April 22, 2022
“We always would implore anybody who is interested in understanding what that business model looks like, you can just go right into D.C. and see it right in action,” Key said.
Paul Hannon, senior vice president of corporate development with PointsBet USA, brought up his company’s partnership with Riverboat-on-the-Potomac, a retail location in Maryland expected to soon launch a retail sports betting operation. The minority-owned business received a license from the SWARC, successfully making its way through the application process in conjunction with PointsBet.
“We look at the Riverboat as a potential starting point for something much larger in the state of Maryland,” Hannon said. “When small businesses want to think about getting into the space, achieving that scale is difficult. There has to be willing suppliers and operators on the other side to help small businesses get there. We obviously were that for the Riverboat. I actually think in time the Riverboat could be that for other small businesses.”
Maryland’s legislation encourages small businesses, especially those with diverse ownership, to get involved in the sports betting market. That emphasis is a key reason why the legal launch in the state is taking so long.
Last week’s event wasn’t designed to scare small businesses away from sports betting. Rather, the experts wanted to keep entrepreneurs based in reality, should they decide to enter the Maryland market.
“Maryland is not the first state to endeavor to create opportunities for minorities and small business owners to participate in gaming,” said Michael Pollock, Spectrum’s managing director. “It’s not the first, but it has an opportunity to be the first in a very important goal: to succeed in that quest.”