As Maryland state senator Craig Zucker was walking to a late January committee hearing regarding his bill that would legalize sports gambling in the state, someone asked him about the chances for such legislation passing.

Zucker, a Democrat from Montgomery County, responded: “I would bet on it.”

That attitude seems to be the prevalent mood in Annapolis, Md., where state lawmakers in both the senate and the House of Delegates are mulling several bills that would put the question of legal sports betting to the voters in the November general election.

Maryland’s constitution requires passage of a referendum bill by the General Assembly, the governor’s OK and, finally, approval at the ballot box.

However, while the question of sports betting may seem to be a straightforward one, there are numerous details yet to be addressed that will dictate how fans will be able to bet on sports. In the process, how fans consume sports and how they relate to the games and their favorite teams and players in the future will be profoundly affected.

Zucker is the sponsor of a sports wagering bill (Senate Bill 4) that was introduced in January. Tax money raised through sports wagering would be directed toward education.

“This is about making Maryland competitive with other states,” Zucker told the senate Budget and Taxation Committee at a hearing in January. “Just in the last couple of months, 14 states have come on board [with sports betting], and we are at a competitive disadvantage.”

“This is something the next generation, especially millennials, is interested in,” he added, “and I’ve been hearing a lot about it from my constituents.”

Zucker is correct about the speed of the spread of legal sports wagering since May 2018, when the U.S. Supreme Court struck down a federal law that had blocked states from offering sports betting, with the grandfathered exception of Nevada and a few others.

With that green light, 14 states now have flipped the switch on allowing sports gambling. The most convenient sports book for Baltimore-area sports fans to reach has been Delaware Park, south of Wilmington. Another seven have legalized sports wagering but don’t have it operational quite yet. And 17 more states, such as Maryland, have active legislation.

It is reasonable to assume that by the next Super Bowl, more than half the states will allow residents to bet on sports in some fashion. In Washington D.C., sports gambling is approved but not running yet.

New Jersey The Model For Maryland?

So far, all sports gambling is intrastate, meaning the bettor has to be physically inside a state that has legalized sports gambling to place a bet but not necessarily be a resident of that state.

However, there are stark differences in how fans in various states can go about the business of betting on games

In Delaware, sports gamblers can bet in a so-called “retail” atmosphere, meaning an actual bricks-and-mortar establishment, such as a casino. While online sports gambling is technically legal, it’s not offered.

In Tennessee, sports gambling was authorized last year, but when it does go live, it will be unique among states in that it will be online only.

In New York, several casinos, most of them upstate, have sports books. So far, no online sports betting has been authorized, but that may change.

The most effective model so far — from a standpoint of ease of customer participation and generating revenues and tax money — is the one used by New Jersey and Nevada.

In both states, bettors can place wagers in a retail setting, such as a sports book with comfy seating, giant TVs, bars and food outlets. And they can also sit at home and wager on their computers or on mobile devices, such as smart phones or tablets.

If sports gambling comes to Maryland, it will most likely look like the models in New Jersey and Nevada.

A bill in the house sponsored by Del. Eric Ebersole (D., Baltimore-Howard Counties) most resembles the New Jersey model because it would allow sports betting at both the state’s casinos and racetracks, as is the case in Jersey. Zucker’s senate bill limited sports betting to Maryland’s six casinos when it was introduced.

In 2018, prior to the Supreme Court ruling clearing the way for sports gambling expansion, the Maryland House of Delegates overwhelmingly approved legislation similar to the one proposed now by Ebersole, 124-14, but sports betting died in the state senate two years ago.

Contrasting Views

The discussion about where sports gambling should be permitted has been renewed in 2020. Vocal on the issue has been the leadership at Live! Casino & Hotel, the Cordish Companies’ casino-hotel in Hanover, Md. The company’s position has been that sports betting should be limited to the six casinos.

Joe Weinberg, a principal at the Cordish Companies, noted the huge amounts of cash that casinos send to state government in taxes. The six casinos, he pointed out, contribute as much in taxes as all other corporations within the state combined. With the 19th-largest population base in the United States, Maryland received the fourth-most tax money from gaming, Weinberg added.

“In essence, the state is our majority partner because it gets the majority of the revenues from our facility,” he said.

When it comes to sports gambling, Weinberg argued, the real tax benefit for the state won’t come from the sports wagering itself because it’s a relatively low-margin product for the casinos.

“Where the state can generate real revenue from thoughtful sports betting policy is by focusing all the sports betting traffic through the casinos where it’s proven that there is significant spinoff play from sports bettors,” Weinberg said.

He estimated tax revenues from that spinoff play elsewhere in the casino, slots and table games, to be worth an estimated $115 million a year to the state.

Not surprisingly, Maryland’s horse racing interests have a different take on sports betting.

Earlier in the 21st century, the racing business in Maryland was struggling badly because it was unable to compete with nearby states, especially Pennsylvania, where casino revenue was used to fatten racing purses. The playing field was leveled with the introduction of slots gambling in Maryland in 2010, with some slots money being earmarked for racing. Since then, Maryland’s horse racing industry has stabilized.

A sports wagering plan that limits sports books, both retail and online, to the casinos would once again put racing at a competitive disadvantage, the horse folks say, this time from an in-state standpoint.

“What [sports betting] will do for us is that people will want to come to the race track,” said Robert Enten, a lawyer who represents the Maryland Thoroughbred Horsemen’s Association. “It’s not going to dilute in any significant fashion the number of people who want to go to a casino. But it is going to help us because those people are going to come to the race track and maybe they’ll bet on the sports and hopefully, on the horses as well.”

The Stronach Group, the Canadian company that owns Pimlico Race Course, Laurel Park and the Preakness Stakes, has a huge stake in the debate. Stronach Group COO Tim Ritvo said with the help of the casino money, racing has made a comeback in Maryland, going from 134 race days and a $418 million in handle in 2014 to 181 race days and a handle of $621 million in 2019.

“The relevance of all that is that it creates more economic impact, more green space, more farms, more [horse] breeding,” Ritvo said. “Maryland is one of the few states that grew its breeding industry in 2019 and it should be very proud of that.”

Failing to allow the horse tracks — and the state’s handful of off-track-betting facilities — to have sports gambling would be a setback, those connected with those businesses have argued.

A New Era Of Sports Betting?

A key component of sports betting in the 21st century is online wagering and in conjunction with that, in-game betting. In-game betting allows bettors to wager on a game’s events as they’re unfolding — say, whether a football team will score on its next possession or whether a baseball player will reach base in the next at-bat.

Virtually all illegal sports betting, an elusive figure but estimated at $80 billion, occurs online. A goal of a legal sports wagering market is to capture those gamblers with the promise of more certainty about getting paid, confidence that their money on deposit is safe and an opportunity for redress in a dispute.

But as part of all that, the expenses of operating a legal, regulated sports book — whether retail or online — have to be considered so those extra costs don’t fall too heavily on consumers.

“The key is reasonable tax rates on sports betting,” said David Forman, the senior director for research for the American Gaming Association, the trade group that represents the casino industry. “Sports betting is a pretty low-margin business to begin with. You hear all the time about the huge handle numbers bandied about. But those numbers are the total amounts bet on an event or sport. That’s not the amount of money books are making. They’re making about 5 percent [of the handle] and unlike some other casino games, it’s possible to lose to the public.”

Perhaps the most relevant experience for comparison for Maryland is what has been happening in New Jersey, where both casinos and racetracks offer sports betting, both retail and online. The tax rates there are 13 percent for online bets and 8.5 percent for retail betting (assuming a higher overhead) — and a 1.25 percent additional tax on retail. Additionally, 75 percent to 85 percent of all bets are made online, not in the actual sports books. For 2019, New Jersey’s retail and online sports books combined for $299.4 million, about 82 percent online and trending upward.

So far, the tax rate that has appeared in Maryland sports betting bills is 20 percent, with initial licensing fees as high as $2.5 million and annual renewal fees on top of that. Those fees and taxes put Maryland among the highest taxing states for sports gambling.

So what does that mean for bettors?

“If the operators have to pay a larger percentage of revenue [in fees and taxes], it could result in them offering worse lines or odds to the consumer. You have to ante up more money to win the bet,” said Ryan Rodenberg, a sports law professor at Florida State University. “The Las Vegas norm on a straight bet has been $110 to win $100 and that has become sort of the industry standard but Nevada has always had what is considered to be a reasonable tax rate [6.75 percent].”

Worse odds that result from higher expenses could cause some gamblers “to view the legal, regulated environment as undesirable and they’ll simply opt to go with the illegal market that’s always been there,” Rodenberg said.

The highest sports gambling tax rates so far are in Pennsylvania where the tax stands at 36 percent and the licensing fee was $10 million in 2019, expenses that gave gambling operators pause.

Costs that both lawmakers and gambling operators have mostly resisted are fees that professional sports leagues have tried to get inserted into new gambling laws. Early on, it was so-called “integrity” fees that the leagues argued would go toward making sure the games were clean. That idea went nowhere.

More effective, though, might be an argument that there are certain “official” data and statistics the leagues would distribute to operators to settle wagers.

While it seems unlikely that gambling operators would see any need to purchase data and statistics that have typically been used to resolve wagers, it is possible and even likely that sports leagues will employ technology, such as RFID chips embedded in equipment, to create new data. Imagine sports books offering wagers on the fastest touchdown scored on a given day (already a feature on some NFL telecasts) or an over-under bet on the fastest pitch thrown during an inning or the longest 3-point shot in an NBA game. Such data could be proprietary and be sold by the leagues.

The bottom line is that any such additional expenses could adversely affect the overall return to bettors.

Sports Fandom Evolving

What will ultimately drive revenues in sports gambling is the emerging popularity of prop bets and in-game wagering. Examples of in-game bets are a halftime wager on a football game with a readjusted point spread that reflects the first half of play, or even more immediate, such as whether a team scores, punts or has a turnover at the beginning of an offensive possession.

“I believe all states that currently have sports betting allow for that kind of betting,” said Sarah Koch, director of government affairs for daily fantasy sports and sports book operator DraftKings during a house hearing earlier this month. “That’s a really growing area in the products we offer. And in Europe, it’s the majority of what people engage in. That’s why it’s really important to include it.”

DraftKings is just one sports wagering company that would be interested in exploring the Maryland market. In December, the Cordish Companies and FanDuel Group — a company that, like DraftKings, started as a daily fantasy sports operator — announced “a strategic partnership to bring FanDuel’s fantasy and sports betting operations to Cordish’s Live! Casino & Hotel and Entertainment Districts properties throughout the country.”

Not to be lost in the discussion regarding sports betting in Maryland and everywhere else are two effects on fans and bettors: how will betting affect the traditional allegiance that sports fans have felt for their teams and what addiction dangers are posed by more accessible sports gambling.

As long as spectator sports have been an important part of American culture, fans have aligned with the hometown team or their alma mater or favorite athletes who have a certain panache. Now, with increased sports betting, more fans may find something else to root for — their own vested interest.

“Look, there’s always been a subset of sports fans whose interest was primarily in betting,” said Rodenberg, the Florida State professor. “But potentially, there’s a much bigger chunk of fans who have traditionally followed a favorite team or players and their interest was mainly on the field or the court. … With more sports gambling, we could see a change that’s pretty profound and it will certainly affect how we attend the games and watch them on TV.”

Indeed, the gambling experience is likely to make its way into sports venues, which have been considered refuges of family fun. Washington, D.C., has given approval for several sports venues, including Capital One Arena, home to the Washington Wizards and Washington Capitals, and Nationals Park, home of the World Series champion Washington Nationals, to have sports books. The Washington Redskins are lobbying Maryland lawmakers for the same at FedEx Field in Landover, Md.

With mobile devices giving fans access to betting opportunities for the game being played in front of them, the fan experience even at live events can’t help but be changed.

Brian Hess, executive director of a group that represents sports fan interests, the Sports Fans Coalition, told Maryland lawmakers at the hearing where Zucker’s bill was discussed that more attention should be paid to consumer protections including transparency (that fans understand who is behind various online websites), privacy of personal data, the ability for gamblers to self-exclude themselves either partially or entirely from betting, and recourse for complaints.

Potential Pitfalls

The new age of sports betting also opens the door to increased problem and disordered gambling, in part because the online component provides far greater access and can accelerate betting event velocity, meaning the rapidity of the gambling activity.

Instead of betting on a sports event and waiting for the game to end a few hours later, in-game wagering gives gamblers the option to place wagers every few minutes on a variety of outcomes.

“It’s kind of like that dopamine hit that people get when they hit that slot machine button, it’s sort of like a little high. If you win, the payoff is immediate,” said James Karmel, a casino analyst and history professor at Harford Community College.

“So the downside is that it brings the potential for people who are already inclined to be compulsive or problem gamblers — even though it’s a small percentage of the population, about 3 percent — to be brought into that and cause problems for themselves and their families.”

Neva Pryor, executive director of the Council on Compulsive Gambling of New Jersey, said calls to her group regarding gambling issues have increased 17 percent since sports gambling went live in the state in the summer of 2018. People seeking help are referred to groups who specialize in addiction behaviors, such as Gamblers Anonymous or SMART Recovery, or counseling professionals.

Despite any potential downsides of sports gambling and all the questions about how it may be offered to fans who want some action, the sure thing is that betting on the games and the players will continue to sweep across the sports landscape. And there’s every chance that soon, it will come to Maryland, whether that’s in a casino, at a racetrack, at the ballpark or arena — or even on the cell phone in your pocket.

Issue 261: February/March 2020