Maryland Ballot Initiative Analysis: Question 2 (2020)

Maryland Question 2: Expansion of Commercial Gaming, Sports Betting

Summary:

Maryland’s Question 2 would legalize betting on sports and events at licensed facilities including race tracks, casinos and Robert F. Kennedy Memorial Stadium.

Fiscal Impact:

Assuming that the current table games tax rate of 20 percent is applied, legislative analysis estimates the state’s share of gross revenues from taxes on sports gambling in fiscal 2022 would be $18.2 million.

Proponents Arguments For:

Proponents argue that legalizing sports betting through Question 2 would bring much-needed revenue for the state from activities that already happening in the black market. There is already a thriving online and underground sports betting market in Maryland, and it would be better for all parties if this market became legal and regulated, supporters note. More than 18 states have already legalized sports betting, including many of Maryland’s neighbors.

Opponents Arguments Against:

There are no formal or published arguments against Question 2 at this time.  But some commentators have pointed out that Question 2 is a referendum asking voters yes or no on sports betting while not providing any details on how sports betting would actually work. Those details are left to the legislature to enact if Question 2 is approved. There are concerns with giving legislators the ability to regulate the activities without giving voters a voice.

Discussion:

For most of American history sports gambling, with the exception of horse racing, has been illegal at the federal level. In 1949, the state of Nevada became the only state to fully legalize sports betting. Federal legislation against sports gambling continued until 2018 when the Supreme Court struck down the 1992 Professional and Amateur Sports Protection Act (PASPA), at that time the main federal law banning sports wagering. This ruling meant states were allowed to approve sports gambling if they chose. So far 22 states have done so.

There are many benefits to this change. Close to a third of Americans say they have bet on sports to a tune of an estimated $155 billion each year—97 percent of it illegally. Legalizing sports betting nationwide could increase GDP by over $12 billion, create over 125,000 jobs, and around $5 billion in tax revenue in the place of the costs of enforcing prohibition.

A study conducted in 2016 compared the prevalence of games of chance and gambling addictions from 1999 to 2013. The authors found that games of chance increased in prevalence with states legalizing lotteries, some casinos, electronic gambling machines, and racetracks. However, rates of addiction and problem gambling remained relatively stable, suggesting that legalized games of chance do not increase the number of problem gamblers.  This is likely because of the extensive nature of the black market, where those who wish to gamble excessively can already do so quite easily. A major benefit of legalizing sports betting would be increased awareness of gambling problems and likely less societal stigma attached to dealing with gambling problems. And in well-regulated legal markets, such as those in the U.K. and Australia, sports betting companies offer consumers ways to manage their betting in order to reduce compulsive gambling. (Many U.S. casinos already do this for other forms of gaming.)

The passage of the 1992 Professional and Amateur Sports Protection Act was intended to curb the abuse of game-fixing. However, the passage of this act appears to have done little to slow down the $150 billion dollar black market of sports gambling, the illicit nature of which undoubtedly contributes to corruption and price-fixing. A legalized industry would be much more transparent and easier to track game fixing because leagues can work directly with bookmakers to track questionable activity. This would improve the integrity of sports and encourage safer participation.

Consumer welfare may also benefit from a legal sports betting industry, as all of the data that are used to set and make bets would no longer be operated on illegal sites but be verified by the sports league and hosted on more-secure websites. These data are vital to the industry because bookmakers use them to set odds and consumers use them to make decisions about gambling.

It is true that Question 2 does not include the details of how legalized sports gambling would be regulated, taxed, licensed, etc, in the state. Those details are left to follow up legislation. Other state ballot measures to legalize sports betting—in California, Colorado and Arkansas—included implementation details so voters knew how legalized betting would be regulated. However, the central question is really whether sports gambling should be legal or not, and Maryland has a mature gaming market and existing rules that can easily be applied to sports betting.

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