The mantra for a “good” legal sports betting bill goes like this: low taxes, low fees, state-wide mobile with remote registration, and wagering allowed on all sports.
Maryland lawmakers heard over and over again on Tuesday that they bill they’re currently considering has taxes and fees that are too high, but that stakeholders embrace the mobile component and the bill’s allowance for betting on professional and collegiate sports.
The state’s House Ways and Means Committee held a jam-packed hearing on two bills — HB 169 which would send the choice to legalize to the voters, and HB 225, which lays out a framework for what legalization would look like. While the bills don’t appear to be officially linked, lawmakers certainly looked to be considering the bills as a pair, meaning that while they might approve a framework, that won’t be put in place until citizens give them the go ahead. A referendum would go on the November ballot.
MD lawmakers open to sports betting discussion
Big day for Maryland sports betting. https://t.co/aSgb58wzHy
— Phil Backert (@PhilBackert) February 4, 2020
There were more than 40 requests from people to testify on the bills, though some people testified twice, once on each bill.
HB 225 would legalize mobile sports betting and retail sports betting at existing casinos and horse racetracks. Each retail licensee would be entitled to two online “skins” or brands.
According to the bill, potential licensees would be charged a $2.5 million application fee with a $250,000 per year renewal while being taxed at 20% on gross sports betting revenue. All of those numbers are well outside the bounds of what stakeholders consider reasonable, and would rank among the highest in the nation.
What was most interesting about Tuesday’s hearing was the lawmakers’ willingness to hear multiple sides to an argument, and bill sponsor Eric Ebersole repeatedly said he’s open to negotiation on most points in the bill. While there was spirited discussion about the tax rate and application fees, the biggest question in the meeting room seemed to be where sports betting could ultimately take place.
Though the bill calls for retail locations at existing casinos and horse racetracks, several casino operators argued that sports betting should be legal at casinos only, while Justin Ross of the Washington Redskins argued this his organization should have the opportunity to offer sports betting at FedEx Field, which is located in Landover.
“We’re asking that FedEx Field be included in this legislation, and be treated like any other licensee is being treated,” he said. “We would build a year round facility. We think of this as an amenity. This is how people are going to bet.”
Washington Redskins want in
And more to the point, the Redskins were absent from the discussion when the Washington D.C. Council approved sports betting in 2018 because despite their name, the team plays and practices in suburban Maryland. They now find themselves the odd men out as D.C. prepares for legal sports betting and Capital One Arena is poised to become the first professional sports stadium to offer legal sports betting.
Under D.C. law, Capital One Arena, Nationals Park and Audi Field can all offer sports betting, and Ted Leonsis, owner of Monumental Sports, which owns the NBA Wizards and NHL Capitals, has been hard-charging toward being the first to do so.
“We are competing eight miles away from three arenas that will be able to offer this,” Ross said.
— Erin Cox (@ErinatThePost) January 22, 2020
When Ross made his plea, Ebersole took an informal poll of stakeholders in the room, and only the representative from MGM said his company would amenable to opening the pool of licenses to include sports venues. Three others, including Marta Harding on behalf of Maryland Live!, were against the idea. Harding, in fact, made the argument that sports betting should only be legalized at casinos, and suggested that allowing horse racetracks to have sports betting would hurt, rather than help the state’s potential bottom line.
“For every bettor who goes to a track vs. a casino, you’re losing an opportunity for incremental revenue,” she testified. “It should be limited to casinos only, and casino apps.”
Harding’s argument is that sports bettors in casinos will spend additional dollars on food, beverage, other kinds of gambling, merchandise, and more. Since racetracks don’t offer some of those options — at least not on the scale that casinos do — a bet placed at a horse racetrack has less overall economic impact than one placed at a casino.
Horsemen support sports betting bill
Early in the hearing, representatives from the state’s horseman’s groups came out in force in support of both the referendum and the framework. Home to the Preakness Stakes, Maryland has a storied horse-racing industry, but as is the case across the country, it’s a struggling. In addition, the horsemen and some business owners asked that OTBs be included in the legislation.
“We’ve been hearing that only casinos should get an opportunity,” testified Randy Cohen, whose family owns Longshots, an OTB. “The fact is, the tracks and OTBs hit the whole state. We have a far wider reach than just the casinos.”
Maryland has six retail casinos, most located in heavily populated areas of the state, including in Baltimore where Caesars operates a Horseshoe Casino.
With regard to the application fee and taxes, it seems likely that both will come down as HB 225 moves through the House. The 20% tax rate would the second highest in the country for a state with competitive, commercial sports betting. Only Pennsylvania (36% state and local tax) and Tennessee (20% state tax) have the same or higher rates. Most states with legal sports betting set taxes at 12% or less. In terms of the application fee, the $2.5 million is third behind Pennsylvania ($10 million for retail or mobile application) and Illinois ($10 million for retail application, $20 million for mobile application). There is no “norm” for application fees, though most states with legal sports betting are keeping the number well below $500,000.
Ebersole said he came to the $2.5 million as the “sweet spot” after doing research. But during a question-and-answer period, Sarah Koch, director of government affairs for DraftKings said her company would “suggest lowering the taxes and lowering the fees. Right now they are in the top three in terms of competitive markets.”
Stakeholders: Taxes, fees too high
Lawmakers quizzed Koch about Pennsylvania. It took nearly a year after legalizing before the Hollywood Casino at Penn National Racetrack became the first to apply for a sports betting license Pennsylvania, and the state made 13 licenses available to existing casinos, but not all have been claimed. From the outset, potential stakeholders have complained about the astronomical application fee.
“It’s been a much slower process in that state,” Koch testified. She also pointed out that because iGaming is legal, some operators have found it “palatable” to pay for a sports betting license because they can cross promote mobile sports betting and iGaming.
Another key part of Tuesday’s testimony came from representatives of minority-owned businesses, who suggested that language in the bill to require minorities get a piece of the sports betting pie isn’t strong enough, and pointed to Washington, D.C., in which the law robustly calls for minority involvement in sports betting.
.@yanni_dc representing @iDEA_Growth at Maryland sports betting hearing. Advocating for mobile in support of Del. Ebersole's legislation. Pappas said mobile will eventually account for 90% of sports betting activity in the US.https://t.co/q3PhrLBDa1 pic.twitter.com/gATNvkExaF
— Brian Pempus (@brianpempus) February 4, 2020
On balance, stakeholders big and small support the bill, and the concept of legal sports betting in Maryland. But as in every state, the devil will be in the details.
“We love that is has mobile betting and we suggest that mobile should not be tethered to a casino,” testified John Pappas from industry group iDEA. “It’s attractive to all — the state, the operators, and the consumer.
“But there are two points of contention — the high tax rate and high licensing fees. We would recommend a tax closer to 10%. Licensing and renewal fees would put Maryland at the higher end, and we would recommend that those be lowered.”
Maryland lawmakers have only a few weeks to move the bills out of committee. According to the calendar, bills must be reported out of committee in the originating chamber by March 10, and the session is set to adjourn on April 6.