In the house ways and means committee on Tuesday (11 March), a two-part hearing yielded no movement for a bill that would ban sweepstakes and another that would allow for historical horse racing machines at Maryland OTBs.
The committee had another voting session scheduled for Wednesday morning, but neither bill was on the agenda as of late Tuesday night. Maryland’s legislature has not passed any gaming expansion bill this session. So far, house and senate committees have declined to move a legal online casino bill. Lawmakers and stakeholders are at odds on whether or not to legalise, resulting in a stalemate.
But a senate committee 7 March did advance SB 860, which would ban sweepstakes platforms. The platforms are currently unregulated and the companies that run them do not pay taxes to the state. Casino companies say they should be prohibited.
Sweeps use promos just like McDonald’s does
Sweepstakes proponents maintained in testimony that their platforms are already technically legal in the state. They went on to say that HB 1140, which calls for prohibiting them, would also explicitly ban online casino and could have unintended consequences.
Josh White of KO Public Affairs testified on behalf of Australian-based sweepstakes operator VGW, saying the games are “just like Candy Crush”, the popular online tile game. Both that game and sweepstakes sites are “always free to play”, but consumers can purchase “game tokens for enhanced play”. He suggested that VGW uses sweepstakes-style “promotions in the same way that McDonald’s or Microsoft does”, as a marketing tool.
But Brad Rifkin, testifying on behalf of Light and Wonder, said, “If it walks like a duck and quacks like a duck, it is a duck. It’s an illicit game.”
Rifkin estimated the illicit market is $6 billion in Maryland. This likely includes unregulated games like sweepstakes, as well as offshore digital casinos and sportsbooks.
Sweeps-ban bill language too broad?
The most interesting testimony came from attorney Jeff Iffrah, on behalf of the Social and Promotional Gaming Association. Fliff, Gold Coin Group and Woopla Gaming are among the members. The SPGA is a US trade group, so companies like VGW or offshore operators are not members.
Iffrah argued that under the Maryland commercial code 13-305, sweepstakes games are legal.
He went on to say that the language in SB 860 is so broad that if the bill passes, it would explicitly ban online casinos while “the black market would remain illegal”. He said the bill is unnecessary and would “do away with something that is already legal”.
The argument piqued lawmakers’ interest and Iffrah spent considerable time detailing current law, his clients’ platforms and how SB 860 could ultimately also mean that non-gambling companies like McDonald’s or Starbucks would have to eliminate their sweepstakes promotions.
Delegate Jason Buckle tried to make sense of it by saying, “We have to ban companies that are offering pure online gaming, not [games] tied to regular, legal consumer activities. Could we do that?”
OTBs need another income stream
The second gambling bill considered was HB 1048, which would allow for HHR machines at five OTBs across the state. The major casino companies – representatives from MGM and Penn Entertainment’s Hollywood brand testified – oppose the measure. But the OTBs say having the machines are paramount to their survival.
“We want to thrive, not just survive,” testified Alyse Cohen, owner of Long Shot’s OTB in Frederick. She said that handle has dropped 33% since sports betting went online in Maryland in November 2022. In-person betting went live about a year earlier in December 2021.
“We were once hopeful that retail sports betting would provide a much-needed sales boost,” Cohen said. “We’ve instead seen the entirety of sports betting go online.”
In states with digital sports betting across the nation, 95% or more of handle comes online rather than at retail sportsbooks.
Leslie Feliz of the Greenville Consulting Group testified on behalf of Chesapeake Gaming Group. She echoed Cohen’s argument.
“At the base with retail sportsbooks, we thought there was going to be a sustainable profit,” she said. “The reality is that it’s falling short and, with online sports betting, it’s made it very difficult for Chesapeake Gaming to even get a retail partner.”
When Maryland lawmakers legalised sports betting, they included a comprehensive minority and small-business clause. The idea is that smaller companies and those owned by minorities would have the opportunity to participate. But online wagering has drawn more consumers online. The OTBs, some owned by minorities – and all of them smaller businesses than the casinos – say that shift has hurt them.
Casinos: “Player experience is the same”
Maryland’s casino companies oppose adding HHR machines at the OTBs because they say the machines mimic their slot machines. They also note that the proposed HHR tax rate of 15% is well below what they pay. The tax rate on slot machines varies by casino in Maryland, but most pay more than 40%, according to the American Gaming Association.
Some stakeholders argue that HHR machines are games of skill instead of games of chance. They suggest that the guts of the machines are what’s important. “The bells and whistles are irrelevant,” one said.
But Marta Harding, on behalf of MGM, which has a land-based casino in Baltimore, said the difference in how the machines work is what is irrelevant when it comes to the bottom line.
“The way that HHR machines operate is really not the issue,” she said. “The issue is the player experience and the player experience is the same” as on traditional slot machines.
“To create another competitive force against Maryland’s casinos… we don’t think that is a good approach,” she said. “We have a very successful relationship with the state and we just don’t think that any threat to that model that has brought so much to the education trust fund is warranted at this time.”
Original article: https://igamingbusiness.com/gaming/online-casino/maryland-hhr-sweepstakes-hearings/
