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Ohio lawmakers Friday became the first in the nation to increase a state’s tax on sports betting operators after it went live in a U.S. jurisdiction.
The raise — from 10% to 20% — was first introduced by Gov. Mike DeWine when he shared his budget proposal early in the year. After a conference committee included the raise in its report and both legislative chambers approved it on Friday, DeWine signed the Fiscal Year 2024-25 budget bill with the increase into law, which went into effect on Saturday.
According to a line item in the bill, the new tax will generate an additional $100 million in revenue, which will be funneled mostly to the Sports Gaming Profits Education Fund. As mandated by the original law, 2% of the increase in tax revenue will be directed to the Problem Sports Gaming Fund.
The Ohio Casino Control Commission (OCCC) launched 16 digital platforms and 13 retail locations on Jan. 1, including national operators Barstool Sportsbook, BetMGM, Caesars, DraftKings, and FanDuel. There are now 18 live platforms.
Some stakeholders are concerned that the tax increase, which makes Ohio one of 10 among the 40 legal gaming jurisdictions with a tax rate of 20% or more, could mean that some smaller platforms will be priced out of the state. Betr, one of the newest entrants into legal wagering in the nation; BetJack, part of a local casino chain; and Betly, which is partnered with Miami Valley Gaming, are among those that launched on New Year’s Day.
Betr is also operational in Massachusetts, where the tax rate is 20%.
Higher tax rate has potential downside
Americans for Tax Reform points to the increase as a “tax risk” and wrote that at the 10% rate, Ohio operators are “already on pace to deliver the revenue that the Senate budget predicts under the proposed tax increase.”
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Former state representative Dan Dodd, who had previously championed legal wagering in the legislature, said the state could lose on licensing fees and potentially see a decline in the number of operators in the state.
At a 20% tax rate and in current environment, it’s not hyperbole to predict Ohio will have 10 or fewer mobile operators offering bets in 12-18 months. State will also lose over $10m in license fees (unless proprietors pay for license themselves hoping to get a new operator).
— Dan Dodd (@dan_dodd) June 30, 2023
DeWine first suggested the increase a month after wagering went live in Ohio. The initial House version of the budget did not include the tax hike, but the Senate amended the House version in June to include the increase, and a conference committee kept it. Both chambers passed the budget Friday, with the Senate giving its approval, 25-6, and the House voting 67-30.
The increase came just two days after the OCCC offered up its latest tightening of advertising guidelines. The agency updated its FAQs to reflect that sportsbook operators cannot market directly through non-sportsbook transactions, meaning that food delivery or other apps cannot offer pop-up promotional offers for wagering after an order is placed and that companies that sell other goods cannot offer promotional play to consumers after a purchase. The proposed regulations are open for comment until July 12.
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