MLGCA aims to reduce promotional deductions from 20% to 5% to increase tax revenue and address budget shortfall
The Maryland Lottery and Gaming Control Agency (MLGCA) is proposing a significant reduction in the amount of free bet promotions that online sportsbooks can deduct from their taxable revenue. The new rule would slash the current 20% cap down to just 5%, as part of a broader effort to boost state tax collections from sports betting operators.
From 20% to 5%: A Major Cut in Promotional Deductions
Under current Maryland regulations, sportsbooks are allowed to deduct up to 20% of their online sports betting revenue in the form of free promotional play after completing their first full fiscal year. However, the MLGCA’s newly proposed amendment to Chapter 13 of the Sports Wagering Licensee Minimum Internal Control Standards would reduce that cap to 5%.
According to the revised language:
“After the first full fiscal year of a mobile sports wagering licensee’s operations, the amount of money given away as free promotional play in a fiscal year may not exceed 5 percent of total sports wagering proceeds that the mobile sports wagering licensee generated in the prior fiscal year.”
The updated regulation also clarifies that the 5% cap applies exclusively to mobile sports wagering revenue and not to retail sportsbook operations.
Reporting Requirements for Sportsbooks
To ensure transparency and compliance, all licensed sportsbooks in Maryland will be required to submit a detailed annual report to the Commission within 90 days of the fiscal year’s end. This report must include:
- Total amount of free promotional play used
- Analysis of promotional impact
- Recommendations for adjusting the cap, if necessary
This reporting mechanism is designed to help regulators monitor the effectiveness of the cap and assess whether further adjustments are needed.
Maryland Targets Higher Sports Betting Tax Revenue
The proposed 5% promotional cap is part of Maryland’s broader strategy to increase tax revenue from sports wagering. In May 2025, Governor Wes Moore signed legislation raising the sportsbook tax rate from 15% to 20%, with an initial push to raise it as high as 30%.
These changes come as the state faces a $2.7 billion budget deficit, prompting lawmakers to explore new revenue streams without introducing entirely new taxes.
National Trend: States Tighten Sports Betting Deductions
Maryland is not alone in reining in sportsbook promotional deductions. Across the U.S., several states are implementing similar measures:
- Colorado passed legislation to phase out its promotional deduction from 2% to 0% by mid-2026.
- New York and Pennsylvania already impose strict limits on promotional deductions.
- Ohio and Massachusetts have also reviewed their tax structures to maximize revenue from mobile betting.
These moves reflect a growing consensus among state regulators that unlimited promotional deductions reduce taxable income and hinder the public benefit of legalized sports betting.
What’s Next?
The proposed rule change must still be approved by both the Maryland Lottery and Gaming Control Agency and the Joint Committee on Administrative, Executive, and Legislative Review. If passed, the new 5% cap could take effect as early as the next fiscal year.
