Maryland Sports Betting: A Costly Business For Small Retailers

Start-up costs for small businesses vying for Maryland’s competitive retail and mobile sports betting licenses later this year into next year could be steep, industry executives say — and businesses need to be prepared. 

Businesses competing for one of up to 30 small retail licenses or one of up to 60 mobile licenses in Maryland as early as this fall can expect to pay around $750,000 in start-up costs in the first year, PointsBet Senior Vice President of Corporate Development Paul Hannon told business hopefuls at a May sports betting summit in Baltimore. Those costs will include a mix of investment capital, license fees, insurance, software and surveillance costs, training, and more. 

Those businesses should also expect a small profit margin. According to Hannon, small sports betting venues in Maryland will not be competing at the level of a pro stadium or major casino – all virtually guaranteed a retail license under the state’s 2021 sports betting law. 

Maryland’s sports betting law was designed to maximize participation, not necessarily revenue, for minority and women-owned businesses competing in the sports betting industry, he said.

“I think, for most small businesses in the state of Maryland, this opportunity from a revenue perspective is likely to be in the hundreds of thousands of dollars a year, not in the millions,” said Hannon. “I think the ultimate goal is to have participation here.”

New name, new attitude: Hollywood Casino Perryville sportsbook to don Barstool name

How Maryland Stacks Up

Sports betting license fees alone can be steep. In Maryland, a competitive “Class B” small business retail license will carry a license fee of either $50,000 or $250,000 depending on the size of the business. Mobile licenses, bid separately, will each cost $500,000.

That is less than a mobile license in Tennessee, a state of comparable size where each license carries a fee of $700,000. But it is still a big investment for small bars, restaurants, bowling alleys, and other places that may want to compete. And competition is the operative word especially when it comes to minority and women-owned businesses. Maryland law requires the state to ensure competition by minority or women-owned businesses, contractors, and investors in its sports betting licensing decisions. 

Grants and loans are being offered by the state to minority and women-owned businesses to defray costs and participate. Additional financial help could come from sportsbook operators that contract to help small business partners with compliance costs. But there are still inherent financial risks. 

BetMGM East Coast operations official Johnny Grooms spoke about those risks at the May summit. Grooms said small businesses should ask themselves if they are willing to accept the “potential to lose.”               

“I don’t want to be a doom and gloom guy, but to make sure anyone entertaining the process is going into this business knowing there’s risk involved,” said Grooms.

Money down the drain: Maryland could miss out on $200 million monthly sports betting handle

Potential Room For Growth Down The Road

According to Hannon, the success of small sportsbooks in Maryland will depend on partnerships with skilled partners. PointsBet is the retail partner for Riverboat on the Potomac, one of 17 locations designated by law to operate retail sports betting in Maryland. 

Mobile is another matter. No retail licensees, including the 17 designated by law, are guaranteed a mobile license. All mobile licenses will be competitively bid and awarded by Maryland regulators at the Sports Wagering Application Review Commission, or SWARC, once the mobile application process begins. 

PointsBet is expected to compete for a mobile license like other big-name sportsbooks, including Caesars, DraftKings, and FanDuel. But, to quote Hannon, PointsBet looks at its relationship with RIverboat on the Potomac “as a starting point for something much larger.” 

Could that also mean investment beyond the Riverboat? Potentially. 

“When small businesses think about getting into this space (of sports betting), achieving that scale is difficult and there has to be willing suppliers and operators on the other side to help,” said Hannon.  “I actually think in time, the Riverboat could be that for other small businesses. That knowledge and understanding the costs is important.”

Where are they now?: Maryland basketball 2001-02 NCAA champions

‘Equal Footing’ For Minorities A Must, Maryland Lawmaker Says

Maryland House of Delegates Deputy Majority Whip Darryl Barnes is chair of the Maryland Legislative Black Caucus. He spoke at the summit, telling attendees the success of sports betting in Maryland depends on minority business success. 

Barnes said he wants all competitive licenses – both retail and mobile – to be rolled out at the same time so minorities will be on “equal footing” with other competitors.

“I don’t want one group to have an advantage of being a couple of steps ahead of everyone else,” he said.

Instead, small businesses designed to be protected by Maryland’s sports betting law will be part of the ongoing conversation.

“If those conversations are not being had, and those deals are not being had, then those deals are not going to happen in the state of Maryland,” Barnes said. 

About the Author

Rebecca Hanchett

Rebecca Hanchett is a political writer based in Kentucky's Bluegrass region who covers legislative developments at Maryland Sharp. She worked as a public affairs specialist for 23 years at the Kentucky State Capitol. A University of Kentucky grad, she has been known to watch UK basketball from time to time.