Maryland Sports Betting Launch: Where Will the Tax Revenue Go?

Maryland Sports Betting Launch: Where Will the Tax Revenue Go? article feature image

Photo by Robb Hill for The Washington Post via Getty Images.

On Wednesday, Nov. 23, Maryland will officially launch online sports betting, becoming the 22nd state (along with Washington, D.C.) where sports fans can bet legally online and on mobile devices.

While sports fans throughout the state are rejoicing, some might wonder where the tax revenue generated by Maryland on mobile sports betting will go.

Here's what you need to know about Maryland's legal online sports betting, the taxes, and how the revenue is allocated to be spent by the state government.

The vast majority of fees and taxes generated from sports betting revenue in Maryland, including all of the taxes on revenue from actual betting, will go to the Maryland Department of Education's Blueprint for Maryland's Future Fund. According to the official website, the Blueprint for Maryland's Future:

"The Blueprint is a landmark piece of legislation passed in 2021, which includes comprehensive changes to Maryland’s early childhood and public schools. Increasing education funding by $3.8 billion each year over the next 10 years, the Blueprint will enrich student experiences, accelerate student outcomes and improve the overall quality of education in Maryland.

"Delivering opportunity and promise of a better future to every Maryland child, the Blueprint for Maryland’s Future will transform the State’s education and early childhood systems with sweeping policy changes and an unprecedented investment of State and local resources.

"Prioritizing equity, the Blueprint prescribes new programs and innovative approaches to catalyze a world-renowned education system that aims to eradicate achievement gaps and ensures opportunity for every student, regardless of family income, race, ethnicity, and/or ability."

In addition, according to the official Maryland state legislation, "The Governor must include in the State budget for fiscal 2023 an appropriation of $1.5 million each for Bowie State University and Morgan State University to establish centers at each university for the study of data analytics and sports gaming."

Furthermore, "The bill creates the SMWOBSWA Fund to provide grants or loans to small, minority-owned, and women-owned businesses to facilitate participation in the sports wagering industry. The fund receives 5% of the fees collected for each Class A-1 and A-2 sports wagering facility license." That means the SMWOBSWA (Small, Minority-Owned, and Women-Owned Business Sports Wagering Assistance) Fund won't receive additional tax revenue from day-to-day operations, but instead from the granting of each license to a sportsbook in Maryland.

Lastly, the State Lottery and Gaming Control Agency will collect $4.9 million from those same sportsbook licensing fees. That revenue is earmarked for Fiscal Year 2022, but the bill clarifies:

"Although license application fee revenues distributed to the State Lottery and Gaming Control Agency (SLGCA) shown above are assumed to be entirely realized in fiscal 2022, the estimated $4.9 million is assumed to cover a portion of SLGCA costs under the bill for the full five-year period shown and disbursed accordingly. A portion of the licensee share of revenues shown will be used to reimburse SLGCA for costs associated with background investigations; this amount is not repeated under State revenues."

As for just how much taxable revenue online sports betting in Maryland will generate, estimates vary widely. The state officially projects annual revenue of just under $20 million, while other unofficial estimates forecast revenue potentially closer to $100 million.

Regardless, we know the tax rate on sports betting in Maryland, which is 15%, the same as Louisiana, Illinois and Virginia, and similar to the 13% and 13.75% tax rates on online sports betting in New Jersey and Connecticut, respectively.

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