Ohio Is The Most Interesting State In The Sportsbook World

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The most interesting state in the sportsbook world right now? It has to be Ohio.

If it was Gov. Mike DeWine speaking, in the parlance of a certain early-2000s advertising campaign, he might say, “We don’t always raise taxes, but when we do, we prefer it to be on sportsbook operators.”

Or if bet365’s CEO stepped in front of the camera: “We don’t always try to compete on U.S. soil, but when we do, we prefer it to be in Ohio.”

Or perhaps the team at Fanatics would like a turn: “We don’t always start a brand new business, but when we do, we prefer to do so in the Buckeye State.”

“Most interesting man in the world” metaphors aside, Ohio has been making waves in the sportsbook world of late and has slid in as the state to watch for numerous reasons.

Double down on taxes

Perhaps the biggest reason is the state’s decision to double the tax rate on operators, from 10% to 20%, a mere six months after launch.

This idea came straight from the desk of Gov. DeWine, who included it in his budget proposal introduced one month after the sportsbooks in the state went live.

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The legislature approved it, and on July 1, the new tax rate took effect.

Bait and switch on the operators? Some feel that way.

Speaking at the National Council of Legislators from Gaming States summer meeting in Denver, Stephen Krombolz, the senior vice president of business development for Tipico, did not mention Ohio specifically, but had this to say, about, well, Ohio: “I signed a 10-year deal to have market access in the states based on certain economic assumptions,” he said, according to SBC Americas. “From an operator perspective, we really are making long-term commitments to invest in your space that we chose to enter. So it’s helpful if the goalposts don’t move along the way, especially if you have operators that are operating within the letter of the law and following the rules.”

Some industry analysts were a little more direct.

“Ohio’s decision to raise the sports betting tax rate to 20 percent appears short-sighted and unfair to licensees who underwrote their market access costs assuming it would be 10 percent,” said Lloyd Danzig, the managing partner of Sharp Alpha Advisors. “The higher rate disproportionately challenges subscale operators, which already are struggling to gain and maintain share of wallet against market leaders nationwide.”

Danzig also pointed out the higher tax rate will present “headwinds” to the industry that is trying to attract customers away from the offshore sportsbooks. 

Brendan Bussmann, the managing partner of B Global, was also left scratching his head to understand the sudden doubling of the tax rate.

“The governor’s desire to try and kill the market through tax increases only hurts the local and smaller businesses,” he said. “It will slow the growth of the market while letting those that do not pay any taxes to the folk in Columbus to continue to thrive. I sure hope there are not a lot of legislators out there that signed a no-tax pledge, because your 100% increase is not going to look good on your report card.”

He also noted the higher tax rate is “not going to slow advertising,” which was DeWine’s rationale for raising the tax rate to begin with, according to Cleveland.com.

Bussmann went further, calling Ohio’s sports betting situation a “three-ring circus,” with kiosks at “grocery checkouts,” a governor who “clearly does not like the industry,” and “a commission that hands out fines like no one’s business and will put you on a list for criticizing anything, and I probably will get on the list for just saying that.”

Fanatics launches

Despite the list of grievances above, it hasn’t stopped a pair of operators from using Ohio as major testing grounds for their sportsbooks.

Fanatics Sportsbook soft-launched in the state this year, doing a modest $1.04 million in mobile handle in its first full month in May, but with $470,000 in promo spending that month, the new kid on the mobile betting block is clearly readying itself for full launch.

“Ohio was a great market to begin beta testing our sportsbook alongside Tennessee,” said Kevin Hennessy, the vice president of communications for Fanatics. “Ohio is one of those states with a very diverse sports landscape with multiple professional sports teams, particularly in baseball, that would help us learn about fanbases. We also felt that we could learn a lot from our customers. Being new to legal sports betting, we could get fresh feedback on what they might be looking for in a better sportsbook. We are excited about our beta testing program in Ohio and it has helped us in our beta testing expansion to Massachusetts and Maryland.”

Fanatics’ early experience in the state also includes trouble with the Ohio Casino Control Commission for running a promotion the OCCC found objectionable, tying potential bonus bets to purchases made at the Fanatics retail store. The issue was quickly resolved, as Fanatics immediately complied with the OCCC’s request to end the promotion.

bet365 rises

While the launch of Fanatics Sportsbook — in Ohio and elsewhere — is grabbing the headlines, the bigger sportsbook story may be what bet365, the British betting behemoth, has been up to.

One of the biggest revenue-generating operators in the sports betting world, the company has mostly been a non-factor in the United States, launching only in four states before Ohio: New Jersey, Colorado, Virginia, and Iowa.

And in the five years since PASPA, bet365 has been mostly watching from the sidelines as other companies fight for market share.

Until now, and until Ohio.

Making its first concentrated advertising and promotional push, bet365 put itself in third place in handle in Ohio in June, at $32.1 million. 

“It’s a very big business with literally billions of dollars of cash it can spend if it wants to,” Alun Bowden, the senior vice president for strategic insight at Eilers & Krejcik Gaming, said of bet365. “I think if Ohio works they will certainly look to repeat this in other new states, and eventually look to be more aggressive in existing states.”

So why Ohio? Bowden ticks off a few reasons: The company was ready and able to start in Ohio from day one with its platform and marketing; the American market has “calmed down” in terms of acquisition costs; and, quite simply, bet365 had been uncertain previously if there was a route to profitability in America.

“Ohio is a real concerted attempt to find out if the U.S. is a viable market for them, so nothing is being left on the field,” Bowden said. “TV, big bonusing spend, lots of digital marketing, and a product that is now much more honed in on the U.S. market.”

Watching, waiting

It’s been a busy half-year since Ohio sportsbooks went live. Between a governor determined to raise the tax rate, a casino commission ready to levy hefty fines, and a pair of sportsbooks — one up-and-coming, the other a sleeping giant awakening — using Ohio as ground zero for their efforts, it’s clear the state is, one way or another, being watched by virtually everyone with a stake in the sports betting industry.

And those eyes will undoubtedly be laser focused come September, when football season rolls around again. Will advertising slow as result of the tax hike? Will Fanatics make a splash? Will bet365 continue to rank highly in the first state it’s trying to rank highly in?

The answers await — as do, surely, other interesting developments to come.

Stay thirsty, Ohio.

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