Cannibalisation front and center at Maryland igaming hearing

The discussion surrounding cannibalization emerged as a critical focus during the recent online casino hearing in Maryland, held on January 29. Bill sponsor Ronald Watson articulated concerns over the “fallacy of cannibalization,” while highlighting a staggering $200 million (£160.6 million/€191.9 million) illegal gaming market that currently thrives within the state.

The Senate’s Budget and Taxation Committee convened for a comprehensive three-hour informational session. Testimony was nearly evenly split, with stakeholders both in favor of and against SB 340, a proposal aimed at legalizing online gaming in Maryland. However, no votes were cast during this session.

As testimonies unfolded, the contentious issue of cannibalization dominated the dialogue. The transfer of gambling revenue from traditional land-based casinos to emerging digital platforms has become a significant point of contention nationwide as states contemplate the legalization of online gaming.

Cannibalization has polarized the gambling industry. Smaller regional casinos contend that digital platforms siphon customers and revenue from their operations, resulting in job losses and heightened pressure on the retail gaming landscape.

There is no denying that legal online gaming can contribute significantly to overall gambling revenue. In the seven states that have legalized online gambling, digital gaming revenues far exceed those generated by land-based facilities. The pivotal question remains: who truly benefits and who suffers?

Cordish Companies: “Igaming Is Detrimental to Maryland”

The Cordish Companies, which operates the Live! Casino in Maryland, was quick to raise alarms regarding the proposed legislation. Their testimony during the 2024 Maryland igaming hearings has stymied progress toward legalizing online gaming. Cordish representatives have also lobbied against similar measures in states like Louisiana, despite the company’s existing igaming operations in Pennsylvania.

Mark Stewart, a representative for Cordish, stated during the proceedings, “Although we recognize the financial potential of legal igaming in Maryland, we are advocating against it due to concerns for both the state and our employees.” He advised that while Cordish would theoretically benefit from legal igaming, their investments in brick-and-mortar facilities—amounting to $900 million—far exceed the mere $500,000 allocated to operate igaming.

Caitlyn McDonough of Penn Entertainment reinforced Stewart’s message, expressing opposition to the bill while clarifying her support for igaming in a more balanced regulatory framework that would complement their Hollywood Casino Perryville.

Comparison with Pennsylvania

John Pappas, representing the iDevelopment and Economic Association (iDEA), countered that according to Pennsylvania’s latest revenue report, both Cordish’s retail and online gaming operations saw impressive revenue growth, with an 11% increase in retail slots and an 18% rise in online gambling revenue.

“This data demonstrates that both sectors can thrive simultaneously,” Pappas argued, noting that in every state with legalized igaming, tax revenue increased significantly.

Conversely, Bobby Jones, General Manager at Ocean Downs Casino, shared her concerns regarding the negative impacts of online casinos on smaller brick-and-mortar establishments. Jones pointed to Pennsylvania’s experience, citing a 15% revenue drop at Presque Isle Casino, resulting in substantial layoffs. This trend raises alarms about potential scenarios in Maryland.

In support of legal online casinos, Alyse Cohen, owner of Longshot’s—America’s only women-owned sportsbook—asserted that online and retail gambling should be viewed as complementary rather than conflicting elements of the gaming ecosystem. She emphasized the need for diverse options for consumers to engage in gambling.

Similarly, Jerry Evans, representing Bingo World and Rod ‘n Reel bingo halls, urged amendments to SB 340 to include bingo facilities as potential licensees, expressing fears that the current bill could spell doom for commercial bingo operations in Maryland.

The Reality of Igaming Tax Revenue

Mark Stewart reiterated Cordish’s consistent opposition to igaming legislation across various jurisdictions, citing evidence citing an uptick in gambling-related issues such as increased helpline calls and underage gambling incidents following the legalization of online gaming.

“We must ask ourselves: What is the real net tax impact?” he questioned, presenting evidence that suggested legalizing igaming does not meaningfully curb the illegal gambling market but rather exacerbates it. “Would we legalize harmful substances like fentanyl? Enforcement should be our focus,” he asserted.

The Challenge of the Illegal Market

The issue of eradicating illegal gambling took center stage as supporters of online gaming asserted that the establishment of a legal framework could effectively combat black market schemes. West Virginia representative Shawn Fluharty testified about the ease of accessing illegal platforms, emphasizing the importance of a regulated market to mitigate such risks.

Former New Jersey Division of Gaming Enforcement chief, Dave Rebuck, shed light on the broader implications of the illegal gambling market, underscoring the urgent need for a multi-faceted approach to diminish these illicit operators.

In his opening remarks, Watson reminded the committee of the staggering $200 million illegal igaming market in Maryland and urged for legislative action to eliminate it, projecting a well-regulated igaming sector could generate approximately $300 million in legal revenue.

Advocacy for Minority Inclusion

SB 340 includes provisions aimed at fostering participation from minority and women-owned businesses, a component also seen within Maryland’s legal sports betting framework. However, discussions around this aspect were heated and contentious.

Dallas Barnes, representing Urban One, expressed support for SB 340, stating that it would significantly benefit the minority community in Maryland. Urban One has long sought entry into the legal gambling market in both Maryland and Virginia.

Antonio Jones, a partner in Riverboat on the Potomac, shared his experience of leveraging minority business opportunities in launching their sportsbook, advocating for amendments to the current bill to reduce licensing fees and expand funding for minority businesses in the gambling sector. He emphasized that the “debt account” for gambling businesses has been rapidly depleted and needs expansion.

Despite having provisions to support minority and women-owned businesses, the bill’s current version limits eligibility primarily to existing large operators, excluding smaller establishments. Many local entrepreneurs have voiced their desire to participate but face significant barriers due to high licensing fees.

Additional Concerns Against Legalization

Voices advocating for responsible and problem gambling also expressed concerns during the hearing. Some asserted that legalization could aggravate gambling-related issues unless proper funding for addiction treatment services is secured alongside any potential legislation.

Kristen Pironis from Visit Annapolis provided a compelling perspective focused on community impact, arguing that the shift to online gaming could diminish foot traffic in local casinos, ultimately harming tourism. She stressed that the experience surrounding casinos extends far beyond gaming revenue, encompassing a vibrant ecosystem of hospitality and recreational activities.

“You can’t foster a community from a digital platform,” she concluded, accentuating the value of in-person engagement and its broader economic contributions.