As a legal sports betting state matures, both the operators and regulators start to pay more attention to revenue instead of handle. This week, the Maryland Lottery and Gaming Control Commission proposed new rules for sportsbooks, and one of them, if enacted, would do away with promotional deductions.
Free bets are an easy target for states since they don’t feel an obligation to help sports betting operators boost their market share, especially after the first year when sportsbooks argue is the most important time to find bettors.
But, in this case, new entrants to Maryland would be hurt by the regulation. One of the common ways a sportsbook gains market share is through these kinds of giveaways to lure bettors.
As a company interested in entering the regulated OSB market in Maryland, this is concerning language.
— Alex Kane (@a_kane47) September 27, 2024
A fair compromise would be to allow all licensees to deduct free bets from revenue for the first 24 months of operation. https://t.co/IqCLrNc8PW
How states are boosting revenue
Many states have already changed their regulations after launching sports betting. Ohio and Illinois increased their tax rates and Tennessee started to tax handle instead of revenue, to name a few.
Neighboring Virginia already acted against promotional deductions in 2022, although not as severe as what Maryland is considering. Virginia sportsbooks can deduct promotional dollars for their first 12 months.
How Maryland betting has fared
A state doesn’t have to be struggling to consider squeezing its operators. Maryland sports betting has been one of the stronger states in drawing sports betting revenue.
In the last fiscal year July 2023-June-2024, the Old Line State reported a 10.6% hold off of $5.3 billion in bets, before deductions. After promo deductions, which totaled a whopping $167.2 million, the hold fell to less than 8%. FanDuel led the way with $70 million in promos, followed by DraftKings at $46.5 million.
Had Maryland been able to tax those dollars, an additional $25 million would have been contributed to the state’s Blueprint For Maryland’s Future Fund, dedicated to school funding.
