By Michael Dresser, The Baltimore Sun
7:33 PM EDT, August 2, 2012
Internet gambling, which could bring casinos to every home, office or smartphone, has moved from the periphery of Maryland's debate over expanded gambling to center stage.
Speaker Michael E. Busch informed Democratic members of the House of Delegates on Wednesday that Internet gambling should be among the topics explored in next week's special legislative session. And Thursday, a spokeswoman for Gov. Martin O'Malley gave the proposal a little more momentum when she refused to rule out inclusion of Internet gambling in an overall casino expansion bill.
"There have been conversations about it," said Raquel Guillory, O'Malley's communications director. "Nothing is final yet on the bill. It's a work in progress."
The sudden emergence of the Internet gambling issue raises the possibility that the General Assembly could approve a radical change to Maryland's gambling program with little more than a week for public discussion and limited time for hearings.
"It's not late in the game for something like this to be part of whatever the final package is," said Todd Eberly, professor of political science at St. Mary's College of Maryland. "It's absolutely late in the game for something like this to get the discussion it deserves."
Critics say such a move, which was hardly mentioned in a recent work group's study of casino expansion, is fraught with dangers, including an increase in the number of gambling addicts — including minors who would be denied entry to a conventional casino. But others see it as the natural evolution of Maryland's venture into legalized gambling and a necessary step to compete with neighboring states.
The issue emerged early in the week, when Maryland Live Casino owner David Cordish listed permission to offer Internet gambling as one of the conditions that could persuade him to ease his opposition to a proposed casino in Prince George's County. The addition of a sixth casino — and related matters, such as allowing table games at all casinos — are pivotal issues for the special session.
Cordish's wish received a boost Wednesday when Busch emailed members of his caucus to say that online gambling should be considered in the context of Maryland's effort to remain competitive.
"Since the voters overwhelmingly approved the establishment of a Maryland gaming program in 2008, every surrounding state with a gaming program has expanded to include table games and, in some cases, other forms of gambling," Busch wrote. "In order to maintain a healthy and competitive gaming program that attracts players from beyond Maryland's borders and keeps Maryland gamers at home, we must put our gaming program on par with other jurisdictions in the Mid-Atlantic."
Alexandra Hughes, a spokeswoman for Busch, said Thursday that the speaker's focus during the special session will be on crafting a gambling program that yields the best return for state taxpayers.
"To that end, the House will consider Internet gaming among a menu of options. Only if it is determined to be in the State's best interest will it be put before the voters in November," Hughes said.
Senate President Thomas V. Mike Miller, like O'Malley a Democrat, could not be reached to comment Thursday.
In June, Delaware became the first state in the region to open the door for such gambling. Its legislature gave the OK for casinos to let customers play Internet electronic poker, blackjack and slots from remote computers, cellphones and other electronic devices in that state.
Warren Deschenaux, chief policy analyst for Maryland's Department of Legislative Services, said the Delaware program has yet to start up. Among the hurdles the state faces, he said, is that it's unclear whether technology exists to let a casino tell with certainty that a customer's computer is within the state.
Delaware moved forward with Internet gambling on the strength of a Department of Justice ruling. It reversed a 50-year interpretation of the 1961 Wire Act that outlawed most forms of gambling over electronic wire. The ruling held that the law applied only to sports betting — clearing the way for in-state lottery sales over the Internet.
Some states, including Delaware, have interpreted that as opening the door for casino gambling as well.
John Warren Kindt, a business professor at the University of Illinois and a leading critic of the gambling industry, said states that launch Internet gambling programs based on the ruling are taking a big risk. He said the Department of Justice's ruling was poorly received by Congress and is likely to be reversed if there's a change of presidential administrations.
Kindt said the casino industry is determined to find ways to break out of their buildings and bring the full range of gambling offerings to every work station, even at the risk of lost productivity.
"This would absolutely strategically devastate the U.S. economy," he said. "This is like throwing gasoline on the fires of the recession."
Deschenaux said legislative analysts are looking into Internet gambling in the expectation it could come up as part of the special session O'Malley called for next Thursday to grapple with the broader issue of gambling expansion.
The top issues in the session were expected to be opening the state to table games, whether to permit a sixth state-licensed casino in Prince George's County and how much to tax various forms of gambling.
Cordish, who has bitterly fought the entry of a casino to the south of his Arundel Mills location, outlined a series of demands this week that could — if met by the legislature — dampen his opposition. Among them: giving him permission to offer gambling over the Internet and taxing it at 10 percent — far less than the 67 percent tax on slot machine revenue generated at Maryland casinos.
Kindt called Cordish's proposed 10 percent rate "a joke."
"He must think the Maryland legislature is filled with suckers and rubes," Kindt said. "A 10 percent rate is positively ridiculous."
Deschenaux said legislative analysts have no estimate of the revenue potential of Internet gambling and are unlikely to come up with one in time for the special session. He said Delaware went forward with its program without such an estimate.
Though Maryland legislative committees have held extensive hearings over the years about other gambling issues, Deschenaux said lawmakers have not taken an in-depth look at the issues raised by Internet gambling.
John Morton III, who chaired a work group appointed by O'Malley in May to conduct a study of gambling expansion, said the panel talked about Internet gambling very briefly as something that could become popular in the future. But Morton said there's no reason the legislature shouldn't take up the issue now.
James Karmel, a history professor at Harford Community College and a gambling industry analyst, said it's not surprising that the Internet issue has surfaced in Maryland's debate. He said it makes sense from Cordish's point of view.
"It could really offset some of the revenue loss from adding a National Harbor casino," he said. The National Harbor development is viewed as the leading contender for a Prince George's casino site, though it would likely have to compete with other locations.
Karmel said it's not a bad idea to consider Internet gambling during the special session even if it doesn't make the final cut this summer. "It's inevitable that one day it'll be legal in Maryland one way or another," he said.
Joe Weinberg, a spokesman for the Cordish Cos., said other Northeastern states are following Delaware's lead in exploring Internet gambling.
"Maryland should not once again be put at a competitive disadvantage to neighboring states," he said. Approval of Internet gambling, will "put Maryland at a competitive equilibrium and provide an additional source of revenues to the State."
But Jerry Prosapio, a former compulsive gambler who co-founded the GamblingExposed website in Crestwood, Ill., said slot machines tied into the Internet could bring the most addictive form of gambling directly into the home.
"The real threat is that it exposes the youth to gambling," he said. "They can run up some really big numbers with the credit card."
Weinberg dismissed the notion of a threat to young people.
"There are well-recognized technological safeguards to ensure minors do not play on the Internet and the Internet would be regulated by the State with similar technological and human oversight as the bricks and mortar casinos," he said.
But Deschenaux said no foolproof age verification system now exists.
Fears of casinos finding a way into the home are among the reasons Internet gambling has fared poorly in recent polls in Iowa and New Jersey, states where legislators have considered such proposals.
Weinberg said an Internet gambling provision would not affect the chances that a bill will pass during the special session or be upheld at referendum.
Cordish has nothing to lose by raising the issue, Eberly said. If he gets Internet gambling, he gains a lucrative hedge against a loss of business at his brick-and-mortar investment in Maryland Live. And if the expected November referendum on the issue were to fail as a result of Internet gambling being in the same bill, Cordish's investment could be safe for now from competition to the south, Eberly said.
Still, Eberly wonders why Busch, who has been cool toward gambling expansion in the past, would put Internet gambling on the agenda.
"If I didn't know better, I would think that Mike Busch floated this idea to ensure that the idea dies at some point," Eberly said. "I'm just not cynical enough to believe that's possible."