Ohio Legislature Approves Sports-Betting Tax Hike

July 3, 2023
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Ohio lawmakers have doubled the state’s sports-betting tax rate as part of a new state budget bill that the legislature approved on Friday.

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Ohio lawmakers have doubled the state’s sports-betting tax rate as part of a new state budget bill that the legislature approved on Friday (June 30).

The budget bill, House Bill 33, raises the tax rate from 10 percent of gross sports wagering revenue to a 20 percent tax rate, effective immediately upon the budget measure becoming law.

According to budget documents, the change is projected to bring an additional $100m to $135m in annual tax revenue to the state.

The change was initially pitched by Republican Governor Mike DeWine as part of his executive budget proposal in February, a move which came shortly after DeWine voiced concerns about the frequency of sports-betting advertising surrounding the state’s launch of mobile betting on January 1.

Although the advertising may have been bothersome, the state’s sports-betting operators have produced more than $500m in revenue since the launch, with more than $50m coming to the state in taxes under the existing 10 percent rate.

The state also does not allow companies to deduct promotional play from taxable revenues until 2027, which has been an additional boon for state coffers with operators reporting almost $500m in promotional spending since launch, including a massive $319m outlay in January.

Both chambers of the state’s Republican-controlled legislature voted to approve the budget deal Friday and sent a final version of HB 33 to DeWine for his signature.

Ohio's increase is perhaps the most dramatic of a series of recent moves by states to adjust their tax regimes for sports betting, with Tennessee recently pivoting to a handle-based tax and the likes of Virginia and Colorado adjusting how they treat promotional credits.

The tax hike, perhaps unsurprisingly, was not received positively by Ohio gaming industry stakeholders.

“At a 20 percent tax rate and in the current environment, it’s not hyperbole to predict Ohio will have 10 or fewer mobile operators offering bets in 12 to 18 months,” Dan Dodd, a former state legislator and lobbyist who has represented gaming interests in Ohio, said on Twitter after the budget was approved.

“[If mobile betting skins leave the market, the] state will also lose over $10m in license fees unless proprietors pay for a license themselves hoping to get a new operator,” Dodd added.

“The irony in doubling the Ohio sports-betting tax is several key legislators created the license framework purposely to break up the oligopoly on gaming that casinos/racinos have. With maybe two exceptions, the 20 percent rate will strengthen, not weaken, the grip of casinos/racinos.”

Alex Kane, CEO of betting exchange Sporttrade, added that Ohio was already a difficult state for smaller and start-up operators to enter due to the state’s license fee structure, which includes fees for some operators approaching between $6m and $8.5m depending on the types of agreements they have with land-based partners.

“This is a poor decision to make an expensive state even more untenable for new operators bringing innovative options to the market.” Kane wrote on Twitter. “[DeWine] has said no to smaller operators and decided to favor and protect the large incumbents.”

Kane added that “there appear to be no more than six operators with a chance.”

The budget bill also includes other gaming-related provisions, including codifying a rule that allows the Ohio Casino Control Commission to involuntarily exclude persons from wagering if they have threatened violence or harm to a person involved in a sporting event related to sports betting.

Matt Schuler, executive director of the commission, said earlier this year that the provision was one the regulator would look into following reports of threats to collegiate athletes.

“If social media is able to help us determine who these individuals are that are speaking out hate to kids, then the commission has a responsibility to ensure that ... certainly those people cannot engage in legal sports gaming in the state of Ohio,” Schuler said in January.

“We obviously don't have control over people's behavior, but we do have control over what venues they can choose to participate.”

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