Under the proposed changes to Chapter 13 of the state’s “Sports Wagering Licensee Minimum Internal Control Standards,” online sportsbooks could deduct only 5% of their previous year’s gross gaming revenue in free play, down from the current 20% allowed after the first year.

Currently, a sportsbook (retail or mobile) can deduct all free promotional play from its taxable proceeds in its first year. After, the figure drops to 20%. Retail sportsbook will still be able to deduct that 20% if the lottery’s changes are implemented.

If operators exceed these limits, the excess promos would be treated as taxable revenue.

Maryland Recently Raised Sports Betting Tax

The proposal comes on the heels of the recent tax rate increase for online sports betting operators from 15% to 20%.

The 5% increase was still some relief for operators. Maryland Gov. Wes Moore had proposed a 30% rate as part of his larger Budget Reconciliation and Financing Act.

Moore had argued that the rate will keep up with some neighboring states, such as Pennsylvania (a 36% tax) and Delaware (a 50% tax).

Maryland is already among the more aggressive states when it comes to gambling taxation. For example, slots at retail casinos are taxed between 50% and 61% depending on the casino.

Additionally, while it did not pass, Maryland considered legalizing online casinos in 2024 with a proposed tax rate of around 46%. That would have been the highest among iGaming states.

Besides tax rates, Maryland has relatively high licensing fees for sports betting operators. Mobile sportsbooks must pay up to $2 million upfront, which consists of the license fee and a performance bond.

Meanwhile, large retail sportsbooks must put up to $1 million. These figures rank Maryland among the most expensive states to enter.

Other States Have Implemented Similar Changes

The Maryland Lottery proposal is not unprecedented. Limiting promo deductions is a common move by states after the initial launch of sports betting, when operators rely heavily on promos to attract customers.

As the markets mature, some regulators move to remove or reduce the deduction cap as a means to increase tax revenue. At the same time, they close a “loophole” that operators use to pay less taxes.

If Maryland adopts the proposed changes, it will join several others. Recently, Colorado passed a bill that will reduce the promo deduction percentage to 2% until December 31, 2025. Between January 1, 2026, and June 30, 2026, the rate will decrease to 1%, and thereafter, it will be zero.

In 2022, Virginia limited promotional deductions to the first 12 months of the operator’s activity, effectively phasing out deductions after that.

Meanwhile, Connecticut has adopted a gradual decrease from 25% downward by 5% annually until full elimination.

Some states have attempted but failed to enact similar measures. North Carolina proposed a gradual elimination of promo deductions in 2024, but the measure did not pass in the legislature.

Meanwhile, in Missouri, which expects to launch sports betting in December, voters rejected a ballot proposal to cap promotional deductions at 25% of total wagers.

One notable outlier is Ohio, which initially banned promo deductions when it launched the sports betting market in January 2023.

However, the state has decided to loosen the rules. Starting in 2027, operators will be able to deduct up to 10% of promotional credits wagered. From 2032 onward, the figure will increase to 20%.

The post Maryland Proposes Strict Limits on Sportsbook Promo Deductions appeared first on CasinoBeats.

The news was first reported by Daniel Wallach, a betting legal expert who posted on X (formerly Twitter) this morning.

Kalshi sees the MD Lottery’s threat as unconstitutional and violating federal law. In its lawsuit, the platform asked the Maryland federal court for an immediate TRO and to schedule an injunction hearing, as the sports betting and gaming lawyer reports.

In the document, Kalshi argues that the Maryland Lottery and Gaming Control Commission’s (MLGCC) actions could cause “irreparable harm” to Kalshi’s business. 

Unless these actions are prevented, Kalshi argues, it could lead to a state-by-state patchwork of regulations that Congress wanted to avoid when it subjected CFTC-regulated exchanges to exclusive federal regulations.

Kalshi Pushes Back Against Maryland

The predictions market platform argued a similar point earlier this month when it scored a partial win in a legal battle with Nevada. Kalshi claims that, as it is federally regulated, it is not required to follow state-by-state gambling regulations or taxation laws.

Furthermore, the platform heavily leans on the Nevada preliminary injunction order, emphasizing that a federal judge has already ruled in its favor and permitted it to continue offering sports event contracts in Nevada for now. 

It argues that these are the same event contracts that Maryland targeted in its cease-and-desist letter.

Kalshi reaffirmed that a CFTC-designated contract market offers event contracts on its exchange. As such, “it is subject to the CFTC’s exclusive jurisdiction, and state law is field preempted.” 

Kalshi Will Only Follow the Instructions Of The CFTC

While Nevada was the first to challenge Kalshi’s right to offer its sports-event contracts, Maryland was one of a flurry of states to send similar cease-and-desist orders. 

The Tennessee regulator recently wrote to the CFTC, strongly opposing sports event prediction markets within its jurisdiction. On 14 April, the state regulator sent a letter to the Commission asking the federal regulator to respect the state law, referring to the policy decision made by the Tennessee Legislature, and not permit the offering of sports-event contracts.

Kalshi continues to argue that its contested product offerings are financial derivatives in the eyes of the CFTC. Its CEO, Tarek Mansour, told TechCrunch that the CFTC is the platform’s regulator and that Kalshi will stop if the commodities regulator orders it to do so.

However, if this does not happen, Kalshi believes it is within its rights to continue offering its services despite the state regulators’ objections.

The post Kalshi Files Lawsuit Against Maryland Lottery After C&D Order appeared first on CasinoBeats.