Maryland committee declines to act on HHR, sweepstakes ban bills

Maryland’s Legislative Landscape: A Critical Look at Recent Gambling Bills

In a recent session of the House Ways and Means Committee held on March 11, Maryland lawmakers engaged in in-depth discussions regarding two significant gambling bills. However, despite the extensive testimonies and inquiries, neither measure garnered enough support for a committee vote.

The first proposal aimed to ban sweepstakes, while the second sought to introduce historical horse racing (HHR) machines at off-track betting (OTB) facilities across the state. As of late Tuesday night, a subsequent voting session scheduled for the following morning revealed that neither bill was included on the agenda. This session of Maryland’s legislature has seen no advancement in gaming expansion, particularly with regards to a legal online casino bill, as ongoing disagreements among lawmakers and stakeholders have resulted in a legislative stalemate.

In contrast, it is noteworthy that a Senate Committee on March 7 successfully advanced SB 860, designed to prohibit sweepstakes platforms, which to this point remain unregulated and untaxed. Casino operators argue that these platforms should face prohibition due to their detrimental impact on the licensed gaming market.

Sweepstakes advocates, however, argued during the hearings that their operations are already compliant with Maryland law. They raised concerns that HB 1140, which seeks their prohibition, may inadvertently extend to online casinos, thus imposing unintended limitations on legal gaming alternatives.

Representing the Australian-based sweepstakes operator VGW, Josh White described their offerings as akin to popular mobile games such as Candy Crush. He emphasized that their platforms are free to play, with optional game tokens available for purchase. White likened VGW’s promotional tactics to those employed by mainstream brands such as McDonald’s and Microsoft, framing them as marketing strategies rather than illicit operations.

Conversely, Brad Rifkin of Light and Wonder delivered a strong rebuttal, asserting that these platforms are no less than illicit gambling operations. He cited a staggering estimate that the unregulated gaming market in Maryland could reach $6 billion, incorporating both sweepstakes and unregulated offshore digital casinos and sportsbooks.

Concerns Over the Scope of the Sweepstake Ban

One of the most compelling arguments came from attorney Jeff Ifrah, representing the Social and Promotional Gaming Association, which includes notable members like Fliff and Woopla Gaming. Ifrah argued that under existing Maryland Commercial Code 13-305, sweepstakes games could be deemed legal. He cautioned that the language of SB 860 is overly broad, potentially resulting in the unwarranted prohibition of online casinos. Ifrah posited that such actions would do little to address the illegal gambling landscape, which would continue to thrive unregulated.

This perspective gained traction among lawmakers, prompting an extended discussion regarding the implications of the proposed legislation. Ifrah raised pertinent issues around how the bill might unintentionally affect legitimate promotional activities conducted by non-gaming businesses, such as sweepstakes run by entities like McDonald’s.

Delegate Jason Buckle highlighted the complexities involved in distinguishing between legitimate consumer promotions and pure online gaming, questioning the feasibility of a targeted regulatory approach.

The Necessity of Additional Income Streams for OTBs

The second bill under consideration, HB 1048, aimed to introduce HHR machines at five designated OTB venues across Maryland. While major casino entities such as MGM and Penn Entertainment opposed the measure, the OTB operators argued that the implementation of HHR machines is crucial for their financial sustainability.

Alyse Cohen, owner of Long Shot’s OTB in Frederick, shared a sobering statistic: since the launch of online sports betting in Maryland in November 2022, her venue has experienced a 33% decline in handle. She lamented the unexpected market dynamics that have emerged, stating, “We were once hopeful that retail sports betting would provide a significant sales boost; however, the overwhelming trend toward online betting has diminished our expectations.” In states with comprehensive digital sports betting frameworks, it is observed that over 95% of wagers are placed online.

Leslie Feliz, representing the Chesapeake Gaming Group, echoed Cohen’s concerns, noting that the anticipated profitability from retail sportsbooks has consistently fallen short, making partnerships increasingly challenging for smaller operators.

Maryland’s legislative session sought inclusivity, incorporating minority and small-business provisions to ensure equitable participation in the gaming market. However, the growing popularity of online wagering has disproportionately affected smaller OTB businesses, some minority-owned, leading to significant operational struggles.

Pushback from Casinos on HHR Machines

In their opposition to the introduction of HHR machines, Maryland’s casino operators contend that these machines function similarly to traditional slot machines. They also raised concerns regarding the proposed tax rate of 15% for HHR operations, arguing that it greatly undercuts the tax burdens shouldered by licensed casinos, which range from 40% to 50% based on American Gaming Association data.

Proponents of HHR machines argue they constitute games of skill rather than chance, suggesting that the mechanics within the machines are central to their classification. However, Marta Harding of MGM emphasized the ultimate irrelevance of these operational distinctions to the player experience, arguing, “The player experience remains the same across both HHR and traditional slot machines.”

Harding concluded that introducing an additional competitor against Maryland’s existing casino landscape could detrimentally impact the successful collaboration between casinos and the state, which has generated substantial contributions to the education trust fund.

As Maryland weighs these extensive gambling reform proposals, ongoing dialogue between legislators, industry stakeholders, and the community remains critical to shaping a responsible and equitable gaming landscape for all participants.