Regulation

Maryland tosses out the old and advocates for a new era of sports betting

In his first monthly column, Corridor Consulting CEO John Pappas analyzes Maryland’s unique betting bill, and considers the potential damage of its restrictive licensing proposition

During season 4 of the critically acclaimed television show The Wire, one of the lead characters, Preston “Bodie” Broadus, is lamenting the changes in his Baltimore neighborhood and how different things are now from the “old days.” Before he can finish his sentence, Slim Charles cuts him off with a bit of wisdom, “Well, the thing about the old days, they the old days.”

The Wire is my favorite all-time drama series, but I may be stretching editorial boundaries by using one of the show’s great lines to hook you into reading more. Though it can’t be denied that Slim’s insightful comment has some relevance to the unfolding sports betting drama currently taking place in the Maryland State Capitol.

Rewind to just one year ago to March 11, 2020; the Maryland Senate unanimously passed a bill to authorize sports betting 47-0. The bill gave the state’s casinos and horseracing tracks the exclusive right to offer retail and online betting. A day later, the world changed drastically.

I don’t need to tell you how much Covid-19 changed everything, but at least in Maryland, it made the Senate-passed sports betting bill impossible to consider in the House. The legislature chose the path of least resistance and passed a scaled-back ballot referendum bill that simply asked the voters if they were okay with sports betting as a way to raise money for education. Fast forward to November 3, 2020 and the voters overwhelmingly (67% approval) voted to legalize sports betting.

Maryland state of United States flag

It’s easy to see why the “old days” are long gone as on March 11, 2021 the Maryland House of Representatives took the reins on sports betting and passed a bill vastly different to what the Senate had approved exactly one year before.

The bill creates three separate classes of license and establishes a Sports Wagering Application Review Commission (SWARC) to evaluate and approve potential retail and online sportsbooks. Bill HB940 sets forth a worthwhile — but never-before-seen in the world of sports betting — goal to maximize opportunities for Maryland’s minority and woman-owned businesses to become sports betting licensees. (While some may question the need to emphasize minority inclusion, it is hard to argue with the concept. When done appropriately, it could very well promote diversity in the industry.)

In another unique twist, the House-passed bill does not guarantee anyone a mobile sports wagering license. It instead allows for licenses to be competitively bid for and directs the SWARC to give preference to applicants that can demonstrate minority and woman-owned inclusion. This means that while state-licensed casinos and racetracks could be guaranteed a Class A retail-only license, they will need to compete for the fifteen available mobile licenses.

But the casinos and racetracks are not alone in the Class A category, as it also includes retail licenses for three professional sports team venues and for just one of the state’s OTB (off track betting) locations.

The bill also establishes Class B retail-only licenses. It is not clear who will get these ten licenses, but they will be competitively bid for. Presumably this allows for restaurants and bars to seek retail licenses, and again, a preference will be given to minority applicants.

This new bill charts a completely new approach for Maryland sports betting. With the full backing of the Speaker of the House, the Senate has now decided to not introduce their own bill this year and will instead take up HB940.

Its hard to imagine the Senate not putting their own stamp on the bill and there are many areas where they could make improvements. Some parts of the bill are far too prescriptive, even giving the regulator the ability to regulate the manner in which point spreads, lines and odds are determined. Meanwhile, other parts are not descriptive enough. There is no definition of what defines a sports betting supplier and what kind of services would fall into that category. Nor does it clearly delineate that customers can use credit and debit instruments to fund their accounts.

Betting regulation-induced heartburn

The Senate may also tackle some big-ticket items. During the House debate, Delegate Jason Buckel said that not tethering a mobile license to a casino gave him “heartburn.”

It’s worth asking whether there might be Senators with similar levels of indigestion. And how about the OTBs facilities that were not included as Class A licensees in the House bill? They are rightfully scratching their heads and should not be left out by the Senate.

Finally, placing an arbitrary cap on the number of mobile licenses could prove to be short-sighted and ignores what happened just across the Potomac River last year. Virginia also set a limit (14), only to have twenty-five companies apply for these coveted mobile sports betting licenses. Based on the incredible demand, the Virginia legislature came back this year and increased the number of available licenses.

The Maryland Senate would be wise to increase the number of available mobile licenses or remove the cap all together. In doing so they will maximize the mobile betting opportunity for minority / woman-owned businesses and for the existing land-based gaming, racetracks, and OTB facilities which employ thousands of state residents and infuse hundreds of millions in tax revenue into the state’s budget. Consumers benefit from the added market competition and ultimately it will generate more revenue for the state in the way of up-front licensing fees and long-term tax revenues.

With just a few weeks left in the legislative session, things are coming down to the Wire. The legislature must come together and produce a sports betting bill that delivers on the will of the voters. While the old days are seemingly behind us, a new day is dawning for sports betting in Maryland.

 [Bio] John Pappas is the founder and CEO of Corridor Consulting. For nearly 15 years he has been a leading advocate for regulated internet gaming in the United States.

Maryland | Regulation | Regulation | Sports betting

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