Sports Betting Becomes Legal in Maryland, Echoes Lessons Learned From Marijuana

With legal sports betting going into effect June 1, state officials aren't only focused on how much money the new industry will bring in — but also who gets to make money from it. And in that, they say they've learned lessons from another revenue source: marijuana.

The bill signed Tuesday by Gov. Larry Hogan includes a number of provisions advocates say will allow small, local and minority-owned businesses to get a piece of what's expected to be a $17 million-a-year industry. It goes into effect June 1.

Experts with PlayMaryland, a research and analytic firm that tracks online gaming among states, say it could generate an estimated $35 million a year in tax revenues for the state.

"Maryland will be an attractive market for operators in large part because regulators have embraced an open market," Eric Ramsey, an analyst for PlayUSA.com network which includes PlayMaryland.com, said in a statement. "The best predictor of a successful market has been whether it is designed to foster competition among numerous operators, which Maryland has done. A competitive market is more appealing to bettors, which in turn makes the industry a reliable revenue producer for the state."

In a compromise between House and Senate lawmakers, the state is expected to issue 10 sports betting licenses to the state's larger casinos like MGM Grand in National Harbor, the Laurel Horse Racing track, large bingo facilities, and sports teams like the Ravens and Orioles. There would also be 30 licenses issued for restaurants, bars, small race tracks, and other businesses for on-site betting. Up to 60 companies will be able to get a mobile license for online betting.

The legislation also says that two of the state's historically Black institutions, Morgan and Bowie State universities, will receive $1.5 million each to establish a center for the study of data analytics and sports gaming. The institutions will be responsible for studying the participation of minority- and women-owned businesses.

Senate Corey McCray (D-Baltimore City), vice chair of the Senate's budget and tax committee, said the state is partnering with the two universities to assure that the sports betting industry is diverse.

"This is us making sure that we recognize them as institutions and plant that seed for the workforce that's going to be established going forward," McCray told DCist/WAMU.

Some Republicans, like Senator Stephen Hershey (Eastern Shore counties), argued that they thought it would be better to have an unlimited number of licenses for smaller venues like bars and restaurants.

"We had a number of concerns with medical marijuana when that was capped, and not everyone that wanted to participate in that program was able to do that," Hershey said. "It just brings a selection process into this that is uneasy and unsure."

Hershey adds that licenses will be given to any persons that operate sports wagering, but has no additional detail about requirements or quotas for minority- and women-owned businesses.

But Jeff Ifrah, founder of a law firm bearing his name that covers the local gaming industry, said lawmakers wanted to avoid "litigation risk," so there's a measure in the bill to track applicants by requiring them to file an affidavit stating whether they're a minority- or women-owned business.

"So if you are partnered with a MBE [minority business enterprise] [they're] going to prioritize your application," Ifrah told DCist/WAMU. "So I think what you're going to see is that the first operators to come to market in Maryland are going to have MBE partners because I don't think anyone's going to bother trying to get an application passed the commission in Maryland without having a MBE partner."

Ensuring diversity in the industry echoes back to when the state established the medical marijuana industry — even though, like most states, Maryland already has programs that give contracts to minority and small businesses.

When the industry first started in 2016, almost all of the businesses that received medical marijuana licenses were white-owned. Then in 2018, state lawmakers went back to the drawing board and increased the number of possible licenses to boost the number of minority-owned businesses and those based in economically disadvantaged areas to get into the lucrative new industry. But, those measures were held up by a lawsuit alleging technical mishaps, as well as renewed complaints from minority entrepreneurs who say they're being shut out by bigger out-of-state players who aren't actually minority-owned.

Hogan is hopeful the same mistake won't be made with sports betting.

"They made a lot of mistakes in that bill, the Black Caucus wrote that bill and tried to correct it later, but hopefully they won't make that mistake with gambling," Hogan told reporters when the bill passed in the legislature in April.

Senate President Bill Ferguson (D-Baltimore City) said there's been a lot of consideration for the bill and that even though there is a 30 applicant cap on license for smaller sport betting venues "it is a high cap."

"I think when people come down to really make a hard decision, do they want to make that investment in that license fee?" Ferguson said.

Like neighboring Virginia, license application fees for large casinos, sporting venues, and stadiums cost $250,000. Those venues will also pay $50,000 annually to the state's sports betting commission and have to renew the license every five years. Like the District, small venues like restaurants and bars in Maryland can also obtain licenses for a $50,000 fee and an annual fee of $10,000. For companies wanting to partake in online mobile betting there will be a $500,000 application fee and a $100,000 annual fee.

"I think at the end of the day, if you look at other states, there had been a lot of interest about applications, but when they actually became open for businesses to apply, they never really fully hit their caps," Ferguson said. "So I think we're in a good enough spot to make sure that there won't be a crowding-out effect that will disincentivize minority businesses from being able to participate."

Ifrah said the state's 60 license cap on mobile betting is the most he's seen in a state.

"I don't recall another state that went into law with 60 as the number of licenses. There are not 60 operators in the country," Ifrah said.

As for the 30-license cap for smaller venues like restaurants and bars, it's yet to be seen if that's enough, but Ifrah said it's a "big challenge economically" for "restaurants to get enough money off of having a sports betting license available only to the patrons inside that restaurant."

This story is from DCist.com, the local news website of WAMU.