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States across the USA continue to generate millions through the legalisation of sports betting but where does all the money go?

Posted:: Nov 02, 2020 10:23 Category: Americas , Posted by Kai

As states across the U.S. legalise sports betting, we take a look at Maryland to analyse exactly where the money goes

States around the U.S are legalising betting in sports with expectations of generating millions of dollars and filling local government coffers, especially since the current pandemic has had a negative impact on local government revenues.  

In this article, we take a look at sports betting, casinos and all their monetary benefits within the Maryland area while analysing where the money actually goes.  

Slot machines were the first type of gambling introduced in Maryland and before 2018, Pennsylvania, Delaware and West Virginia where the only accessible gateways for one to legally gamble. Due to this intense competition from neighbouring states, Maryland decided to legalise table games in 2012.  

In order to gain support, due to the constant pressure from opposing groups against these gambling proposals and measures, gambling advocates vowed that the money raised from gambling would contribute towards social institutions such as education. This resulted in lawmakers creating the Education Trust Fund, specifically to measure the flow of revenue..  

The money has certainly flowed. Despite the pandemic affecting businesses worldwide, especially traditional casinos, online casinos generated $400 million in Maryland alone in education money. This is still a decrease from the previous year, with $542 million  generated in 2019. Nonetheless, the figure reported in 2020 is still a significant amount. 

A researcher for the Maryland Center on Economic Policy, Chris Meyer, outlined that “The state did in fact put the bulk of the casino revenue into what’s called the Education Trust Fund and that money then did go to schools,’ he continued to addbut at the same time, the state essentially cut back on education funding out of the general fund, which is essentially the state’s main checking account.”  

“The casino money did go into schools, but it was essentially money out of one pocket and into the other.” Meyer, also mentioned that money out of that other pocket was helping to fund and balance the state’s other budgetary components, particularly the transportation and health care sectors. 

He admits one could argue that even though casino gaming has produced billions in tax revenues for Maryland, the promise which was agreed upon in relation to the Education Trust Fund were not kept.  

In 2018 this all changed, Maryland voters amended the state’s constitution so that gambling proceeds will be secure for the Education Trust Fund, “Not only does that revenue have to go towards schools, but it has to be on top of the formula revenue required under law,” said Meyer. “The state has to fully fund the formula [for education] out of the general fund, and then add the casino revenue on top of that.”  

Presently, gaming revenues are slowly trickling into the city coffers, however, the amount that is actually making its way into the city’s exchequer is way less than expected and, as a result, initial promises made to key voters to move on with the sports betting bill have also been broken.  

When Washington D.C. lawmakers voted to legalis sports betting, it was agreed that the initial $200,000 in tax Sports betting | SiGMA Newsrevenues would support gambling addiction treatment programs. Subsequently, the money would be split evenly between early education (Birth to Three for All DC Act) and the Neighborhood Safety and Engagement Fund, which works to overcome violence in city neighbourhoods. 

Should the situation have turned out as expected by city leaders, the two programs would be benefiting from millions of dollars being reinvested into their system. However, this is not the case, since as early as last year Washington D.C was already lowering its primary expectations of $26 million in the 2020 fiscal year, which ended Sept. 30, to $17 million. 

The reality is that, since the city commenced the hosting of sports betting during the summer, some hundred thousand dollars in tax revenue were generated. During 2019, it was expected that sports betting would contribute around $27 million during the current fiscal year to the city’s earning. Those projections have already decreased drastically. Having said that, if the money was flowing in freely and at a high rate, it does not simply mean that Early Education and the City Safety programs would get the money promised to them. 

In 2019, the mayor and the D.C Council removed those provisions and diverted gaming revenue directly into the general fund, without the $200,000 to the gambling addiction programs. 

As of today, gaming revenue is still being funneled into the city’s general fund. However, any budget surplus over the next three fiscal years, including the current 2021 fiscal year, will go towards the Early Education and the City Safety programs.

In the meantime, the council has acted again since passing the 2019 budget which redirected the funds. Meaning, when the 2024 fiscal year begins, the first $200,000 generated by sports betting will still go towards gambling addiction prevention programs. The rest of the money will be split between the city’s Early Childhood Development Fund, the Neighborhood Safety and Engagement Fund evenly.  

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