Maryland legalized sports betting in 2021, enabling both online and retail betting. Here, Maryland’s licensing, market performance, tax structure, and responsible gambling measures are examined and compared with other states to highlight key similarities and differences in regulatory practices.
Licensing Structure and Oversight
Maryland sports betting legislation allows for the issuance of up to 60 mobile sportsbook licenses and 47 retail sportsbook licenses. Three of these retail licenses are reserved for major professional sports teams that might relocate to Maryland. The Maryland State Lottery and Gaming Control Agency oversees gambling activities within the state, while the Sports Wagering Application Review Commission (SWARC) is responsible for awarding the licenses.
In March 2024, Maryland sportsbooks handled nearly $536 million, contributing $4.8 million in state taxes. The total handle for 2023 tallied $4.62 billion, generating a revenue of $514.1 million and $46.2 million in tax revenue. The tax rate on sports betting revenue stands at 15%, with the taxes contributing immensely to the Blueprint for Maryland’s Future Fund, which supports public education.
Maryland sports betting includes 11 online sportsbooks such as BetMGM, Caesars, DraftKings, and FanDuel. Additionally, there are 13 retail sportsbooks situated in casinos and other venues like Bingo World Baltimore and MGM National Harbor. Mobile sports betting has gained immense traction, accounting for 96.7% of wagers in December 2023.
Market Performance and Revenue
Following the launch of mobile sports betting in Maryland, there was a rapid increase in betting handle. In the first nine days of mobile wagering in November 2022, sportsbooks garnered $186 million in online bets. This momentum continued through January 2023, when the handle reached $441.5 million, marking a 1000% year-over-year increase. The robustness of the Maryland sports betting market is evident with its consistent revenue generation and substantial tax contributions.
Responsible gambling measures are integral to Maryland’s sports betting legislation. The state has allocated nearly $3 million to the Problem Gambling Fund. Every licensed sportsbook addresses responsible gaming on its platform. The Maryland Center of Excellence on Problem Gambling conducts research and provides resources to mitigate gambling-related risks.
Comparatively, Maryland’s sports betting framework shares similarities with states like New Jersey and Pennsylvania, which also have robust online and retail betting markets. However, Maryland’s 15% tax rate on sports betting revenue stands in the middle range. New York, for example, imposes a higher tax rate of 51%, while states like Iowa and Nevada have lower rates of 6.75%.
The impact of mobile sports betting on brick-and-mortar casinos in Maryland has been pronounced. There was a noticeable decrease in physical sports betting revenue following the introduction of mobile betting. This pattern aligns with trends observed in other states where mobile betting options grew rapidly.
Comparing State Tax Structures
The 15% tax rate on sports betting revenue in Maryland is competitive but varies greatly compared to other states. New York’s tax rate is one of the highest in the country at 51%, reflecting a substantially different approach to revenue generation. Meanwhile, states like Nevada and Iowa have opted for lower tax rates of 6.75%. Tennessee employs a unique method with a 1.85% tax rate based on the betting handle rather than gross revenue.
New Jersey has a tax rate of 14.25% for mobile and online wagering. Its large market size and proximity to New York City and Philadelphia enable the state to generate substantial tax revenue despite a lower tax rate than New York. Pennsylvania, with a 36% tax rate, also sees considerable tax revenue, although the high rate has presented challenges for some operators. Promotional deductions in states like Colorado and Michigan significantly lower their effective tax rates, making operations more favorable for betting companies. For instance, Colorado’s effective tax rate is around 4.5%, while Michigan’s is approximately 3.4%.
In Maryland sports betting legislation, the revenues generated from taxes are allocated to the Blueprint for Maryland’s Future Fund. This allocation supports public education within the state, ensuring that the funds generated serve a beneficial purpose for the community.
Legal and National Comparison
As of 2024, 38 states and Washington D.C. have legalized sports betting in some form, with 30 states offering online sports betting. Among states with legalized sports betting, New York leads with $1.46 billion in tax revenue since the legalization. Pennsylvania and New Jersey follow with substantial tax contributions. However, smaller states like South Dakota and Montana generate less revenue due to limited betting options and smaller populations.
The differing state structures and tax rates across the U.S. showcase the variability in sports betting legislation and market outcomes. For instance, Illinois is transitioning to a progressive tax system with rates ranging from 20% to 40% based on adjusted gross revenues. Previously, Illinois had a flat tax rate of 15%, with an additional 2% local tax in counties with populations exceeding three million residents.
States like Delaware and Rhode Island have high tax rates of 51%, but their smaller populations limit the overall tax revenue generated. Delaware’s model includes a revenue-sharing approach, where the state takes a large portion of net proceeds after vendor fees.
