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With their state facing a billion-dollar budget crisis, Maryland lawmakers heard testimony this week on the merits of expanded gambling.
Tuesday’s discussion was part of a House Ways and Means briefing presented by Gordon Medenica, the director of the state’s Lottery & Gaming Control Agency, as the committee considers ways to bridge the growing gap in gaming revenue caused by the COVID-19 pandemic.
According to Medenica, iLottery represents one of the most obvious solutions.
The state’s six casinos shut down on March 16 and didn’t begin to reopen until late June, erasing nine figures of anticipated state revenue. That number will only continue to grow as long as operations remain limited.
“I think we have to accept a long-term lowering of our expected casino contributions,” Medenica cautioned, pulling up this slide:
The director was reluctant to forecast how much revenue casinos can recapture at 50% occupancy but optimistic that it will be more than half.
Still, a double-digit drop carries enormous implications. Local NBC affiliate WBAL-TV reported that year-to-date contributions to the Maryland Trust Fund are already down 27.3% compared to 2019.
State lotteries in the US are meanwhile reporting mixed results during the pandemic, and Maryland’s numbers look pretty strong.
Rebounding from the big dip in sales in March and April, its program is now expected to surpass the $571 million in revenue forecast for the fiscal year.
Medenica cited the lack of other options as the key driver of recent growth.
“There really is just no place else for people to spend some discretionary entertainment dollars,” he said. “We think that has translated into people who, locked at home, have decided — especially on instant scratch-off tickets — when they’re in the grocery store, to pick up a few.”
Lottery operations haven’t been completely free from disruption, mind you.
The coronavirus forced the shutdown of bars and restaurants, which together account for a significant percent of ticket sales in Maryland. That initial downturn forced the lotto to cancel one planned product launch, postpone another, and temporarily pull all paid advertising.
Medenica further highlighted that the lack of online lottery sales in Maryland leaves a lot of meat in the shell.
“Those states [that] offer iLottery have seen their iLottery sales absolutely explode,” he testified.
Neighboring states have been especially ambitious in that regard. Virginia began selling tickets over the internet just this year, while 2017 legislation in Pennsylvania has allowed its lottery to craft what is arguably the most modern and diverse program in the country.
Medenica called such an expansion inevitable in Maryland given the surrounding landscape and the current dynamic. At the same time, the existing retail framework will continue to be an important channel for sales for the foreseeable future.
“From all the experience everyone’s had with iLottery, it doesn’t hurt bricks-and-mortar sales,” he told the committee.
Though his slides did not include casino-style online gambling, the line of conversation naturally wandered down that path.
This is once again an area in which Maryland’s nearby neighbors have excelled. And as Medenica noted, the line between the iGaming and iLottery has grown blurry. There are digital lottery products that approximate both slots and table games.
In response to a question about online table games, the director told Del. Eric Luedtke that payout percentage is the primary thing that differentiates the two. And there’s growing evidence that the high-payout gaming model is more profitable than high-hold lottery model.
“Pretty much the experience from lotteries, the successful ones like Michigan and Pennsylvania,” Medenica said, “is the higher the payout of the game, the more revenue it generates.”
Luedtke is the House Majority Leader and one of those who voted overwhelmingly in favor of authorizing the pending referendum on Maryland sports betting this year. Voters will decide that issue at the ballot box in November.
Additional gambling expansion does not seem to be among the immediate legislative priorities, however. State lawmakers only recently embraced land-based casinos and have shown little interest in online slots and table games to date.
Here’s the archived video of Tuesday’s virtual proceedings: