Punting Predatory Promotions: Maryland’s Approach to Regulating the New Era of Sports Gambling
By: Trevor Patschorke
In 2018, the Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA) in Murphy v. NCAA. The flood gates opened for sports gambling in the United States, and state legislatures were free to permit and regulate sports wagering for the first time in decades. They wasted little time. In 2022, the sports gambling industry generated $7.56 billion of revenue. However, that economic boom was met with significant criticism and backlash over the prominence of sports gambling and its potential negative effects on novice gamblers.
Gambling dates back to the beginning of recorded history. Throughout time, governments have wrestled with the economic incentives tied to sponsoring gambling and the moral dilemmas surrounding games of chance. This quandary has resulted in a seemingly cyclical pattern, with periods of government promotion of gambling followed by outright prohibition. By the early 1900s, nearly all forms of gambling, including lotteries and horseracing, in the United States were prohibited. Over the next century, gambling slowly clawed its way back but not without significant regulation, such as the Federal Wire Act of 1961, Professional and Amateur Sports Protection Act of 1992, and Unlawful Internet Gambling Enforcement Act of 2006. Although many attempts were made to break through the legislative barriers preventing widespread legal sports gambling, none were truly successful until Murphy v. NCAA when the Supreme Court ruled that the PASPA violated the anti-commandeering doctrine under the 10th Amendment.
In November of 2020, only two years after the obliteration of PASPA, Maryland joined the growing trend of states to legalize sports gambling. Over the next few months, Maryland experienced an immediate impact on its economy. With a 15% tax on gross revenue, the State has seen tens of millions of dollars, earmarked for healthcare, education, infrastructure, and more. While some estimates projected the State to accumulate approximately $30 million in tax revenue by the end of 2023, the State quickly faced heavy criticism about the detrimental effect of gambling and sportsbooks on residents.
The rise of mobile gambling has changed how bettors make wagers, how frequently they gamble, and their ability to gamble responsibly. While placing a small bet seems harmless, gambling is much more complex than it appears and can lead to serious problems down the road. In 2022, the Maryland Center of Excellence on Problem Gambling (MCEPG) conducted an extensive state-wide survey and found that 90.4% of Marylanders reported that they had participated in some form of gambling. Additionally, a 2017 study conducted by University of Maryland scholars found that the college students that were most likely to gamble were younger men involved in Greek life. Modern day sportsbooks have promoted their advertising through social media in a parallel fashion as big tobacco did with the rise of television post-WWII and into the 1960s. In both instances, these new technologies provided access to younger adults, the age group most likely to engage in risk-taking behavior and turn into lifelong customers. Sports gamblers in Maryland reportedly suffer from gambling disorder at higher rates than any other type of gambler, partly attributed to sportsbooks’ extensive advertising and promotional campaigns aimed at luring in prospective gamblers.
One of the primary recruitment methods of sportsbooks is offering promotions to novice gamblers that include “free money” or “insured bets.” These “risk-free bets” either award the bettor a certain dollar amount to place on a wager with a free credit, or have the bettor place a wager with their own money and if the wager loses, the bettor receives a refund of the original wager amount to use on a future bet. These promotional offers lure in first-time users with the illusion that there is little to no risk of them losing their own money. They are intended to get new gamblers hooked on the thrill associated with gambling.
In 2023, Maryland legislators passed Senate Bill 621, as well as Senate Bill 620 and House Bill 802, to address these concerns. The first bill, which went into effect on July 1, 2023, mandates that the Maryland Lottery and Gaming Control Commission “shall license independent evaluators to evaluate and rate sports wagering content provided by sports wagering experts, sports wagering influencers, and content partners.” Key features of the law require third-party evaluators to meet certain standards and have no ownership or interest at stake in the gambling entity being reviewed to ensure transparency and fairness. The State’s new legislation-requiring sportsbooks’ promotional materials to undergo evaluations by independent auditors-creates a safer environment for bettors because any misleading or unfair promotions will no longer reach their screens. Furthermore, this regulation creates a new sense of transparency and accountability on sportsbooks, who will be watched closely and subject to greater scrutiny.
A similar approach to regulating sports gambling advertising, as was done with tobacco and alcohol in the past, should be implemented. Maryland excels in gambling research through the MCEPG, which was established about a decade ago and compiles extensive reports of the state’s gambling statistics. However, a gap in the sharing of gambling research is evident as a chair of the State legislature’s joint Audit and Evaluation Committee claimed they were unaware of how significant of a problem existed until they received the most recent report. A lack of collaboration among regulatory and enforcement organizations can be to blame for the existing gap. An interagency task force model, like the one created in regulating big tobacco, would be beneficial in a sports gambling context. To be the most effective, Maryland must align its research partners, executive agencies, and the newly required independent evaluators to combat predatory sports gambling promotions.
The second pair of bills, cross filed and enacted together, are aimed at protecting younger gamblers. The new laws prohibit state universities from entering into contracts with sportsbooks, casinos, or with third-parties associated with gambling entities that provide the university compensation for individual users signing up for the platform. Additionally, while not all contracts between universities and sportsbook entities are prohibited, the laws create greater transparency since all contracts are “subject to public inspection in accordance with the Maryland Public Information Act (PIA).”
In 2021, the University of Maryland reached a promotional deal with the sportsbook PointsBet, but after significant criticism, the deal ended in 2023. A law discouraging sports gambling advertising aimed at college campuses is necessary to prevent students from becoming addicted to gambling. Counselors at the National Council on Problem Gambling assert that universities are not equipped to handle the mental health and addiction issues presented by gambling. With the denial of additional financial compensation for pressuring students to sign up for accounts, Maryland universities are expected to be less inclined to enter contracts promoting sports gambling on their campuses, thus providing a safer educational experience for the group most susceptible to dangerous sports gambling behavior. The current state of the legislation is sufficient: allow universities to raise revenue by entering into partnership agreements with sports gambling entities, while protecting students from exploitation by prohibiting compensation bonuses for students signing up, and providing transparency if any deals are reached.
Gambling is an enormous source of revenue for the State, and legislators must find a balance between promoting economic growth and protecting its citizens from unfair or unsafe business practices. Maryland responded effectively to the criticism of legalizing sports gambling by passing necessary legislation that will provide more transparency for potential bettors, hold sportsbooks accountable for their content and conduct, and better protect its citizens from engaging in problem gambling due to predatory sports gambling practices.