O’Malley’s office halts Internet lottery plans after opposition from retailers’ lobby

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ANNAPOLIS — A plan to allow the purchase and play of lottery games on the Internet has been halted by the governor’s office, and several lawmakers are sponsoring legislation that would strip the state’s lottery director of some regulatory authority.

The plan, which had been poised for approval and would have allowed Marylanders to buy traditional lottery games such as scratch-offs in an Amazon.com-like setting, was put on hold after a coalition of restaurant, retail and convenience store lobbyists complained to members of Gov. Martin O’Malley’s staff in a meeting last fall.

Raquel Guillory, a spokeswoman for O’Malley, confirmed that plans by the Maryland State Lottery Agency for an Internet gambling platform were “on hold.” The lottery did not immediately respond to a request for comment.

The state’s decision comes during a financial year in which the lottery has seen fewer players, putting in jeopardy a streak of 15 straight years of record revenue. Lottery staffers believe some of the decline has been caused by the June opening of Maryland Live Casino at Arundel Mills mall.

State officials had hoped the program dubbed iLottery would help the agency dig out of that revenue hole, in part by attracting a younger crowd.

In September, Lottery Director Stephen L. Martino said iLottery could go into effect later this year, after the Maryland Attorney General’s Office opined that Martino had authority to launch the program, with consent of the Maryland State Lottery and Gaming Control Commission.

But before the General Assembly session began, Martino sent a letter to key legislative committees that said Internet lottery plans were on hold.

That’s because multiple retail and small business advocacy groups complained that allowing Marylanders to buy lottery tickets online would hurt business at gas stations and convenience, grocery and liquor stores.

Jeff Zellmer, a lobbyist for the Maryland Retailers Association, said members of his and other organizations pleaded with the governor’s staff to stop the plan, saying that it would hurt brick-and-mortar retailers. The governor’s office sided with the retailers, Zellmer said.

“They were the ones that had [Martino] send the letter,” he said.

Afterward, some lawmakers decided the lottery had too much power. Sen. Ulysses Currie, D-Prince George’s, is the lead sponsor of SB 272, a narrowly worded piece of legislation that would prevent Martino from adopting regulations that allow Marylanders to buy lottery tickets online without first seeking the approval of the legislature.

Five other members of the Budget and Taxation Committee, including its chairman and vice chairman, are co-sponsoring the bill.

Sen. James E. DeGrange Sr., an Anne Arundel County Democrat who serves on the Senate’s budget panel and is a cosponsor of SB 272, said the lottery should have to submit legislation that would create an Internet lottery program or ask for such a program to be included in the budget.

Doing so would force a public hearing on the issue. DeGrange said several retail groups came to him saying that they did not have the chance to weigh in on the lottery’s plan, an argument Martino rebutted last fall. DeGrange said he was unsure what really happened but was certain SB 272 would fix the problem.

“This will ensure they’re at the table,” DeGrange said. “Who does this hurt? It hurts retailers. Business is being taken away from them.”

Ellen Valentino, who lobbies for 7-Eleven convenience stores in Maryland, said the lottery director had been given too much authority.

“We think it’s important the General Assembly have the final say in any significant expansion of gaming,” Valentino said. She added that Martino’s report to the lottery commission was too “aggressive” and that it “misinformed” commissioners about retailers’ feelings about Internet lottery.

In that report, lottery staff detailed a commission system through which retailers would receive a percentage of iLottery revenue generated in their Zip codes.

The revenue percentage — which had been set at 5 percent — would have been disbursed to retailers in a given Zip code based on ticket sales at individual stores. For example, the store that sold the most lottery tickets in a given week would receive the largest share of the week’s iLottery revenue in that area.

Eighteen other states already have some form of Internet lottery, are in the process of implementing one or are considering one. No state, other than Maryland, has or is considering rules that would require some payment to brick-and-mortar retailers.

Internet gambling was approved by the Delaware legislature and governor last year, and online gambling is expected to start there this summer.

DeGrange said the decision on what to do in Maryland ought to come from the legislature, not the lottery director.

“We should play this role,” DeGrange said. “We don’t want to take any chances of hurting our retailers and businesses.”

Fowler resigns

In other news, J. Kirby Fowler Jr. has resigned as the lottery and gaming control commission’s chairman.

Fowler, who is also president of the Downtown Partnership of Baltimore, said Thursday he resigned at the end of the year to avoid any hint of impropriety as construction begins on Baltimore’s future casino on Russell Street.

Fowler, chairman of the commission for three and a half years, said being an advocate for the proposed Horseshoe Casino while serving on the commission would have been “bizarre.”

“On the one hand, my team will be communicating with them, and on the other hand I’ll be regulating them,” Fowler said, explaining why the situation didn’t allow him to remain as chairman.