Major changes came to the Ohio legal sports betting industry July 1, the biggest of which threatens to send shockwaves through the state's sports wagering landscape.
A doubling of tax contributions from Ohio sports betting apps and its retail sports wagering sector is already in effect, but not everyone is happy with the news out of the Buckeye State.
After just six months of operation, Ohio's Gov. Mike DeWine (R) has signed his state's fiscal year 2024-2025 budget into law. It included a somewhat controversial increase in the tax rate for Ohio sports betting from 10% to 20%.
The decision to raise the tax rate had been a work in progress. Gov. DeWine had suggested the increase back in February, just one month after the full-scale Buckeye State sports betting industry launched. The plan has been debated in the state House of Representatives and Senate with the upper chamber being the ultimate catalyst for the increase.
How the doubling came about
As mentioned, Ohio's governor proposed an increase in the tax rate on retail and the best sports betting apps back in February, just one month after the launch of the platform in the Buckeye State. It was to be part of the 2024-2025 budget that was to be passed by the state House and Senate, before being signed into law.
The Buckeye State House of Representatives in April proposed their version of the budget earlier this year. It curiously left out the possibility of raising the tax rate, despite the governor's public desires to see the increase.
On June 15, the state Senate amended the House version of the budget to include the raise in taxes. The vote was an overwhelming 24-7 “For” in the Senate on the budget that included the 20% tax on legal sports betting.
Once back in the House, Representatives voted against the new Senate budgetary plan, although there was no mention on the House floor about the increased sports betting tax rate. That was about two weeks ago.
Last week, the Senate budgetary plan was finally passed in the Ohio House of Representative, and signed into law, starting July 1.
What it all means
Ohio's legal sports betting industry has been a welcome surprise since launching in January. It saw over $1.1 billion in wagering activity that month and has since easily maintained it standing as one of the top-six sports betting jurisdictions in the country.
Ohio's sports betting sites and its retail wagering outlets took in just under $3.5 billion in wagers during their first five months of operation, generating about $507.08 million in taxable revenue over that time. Thanks to the state's 10% tax rate over that time, $50.7 million in taxes was contributed from the state’s providers to the Sports Gaming Profits Education Fund with 2% going to Problem Sports Gaming Fund.
A doubling of the taxes would have seen $101.4 million in tax contributions from Ohio's legal sports betting sector - a nice boost to the programs that benefit from such funding.
The possible effect of high taxes
While not the highest sports betting tax rate in the country, it is feared by some that the doubling of the tax rate could have an adverse effect on the legal sports betting industry in Ohio.
The group Americans for Tax Reform noted that the increase in taxes “would take Ohio from having one of the lowest tax rates to the third highest in the US – higher even than Illinois.”
High taxes, in theory, could make the Ohio scene less attractive to present and prospective sports betting providers. In April alone, four of Ohio's 18 best sportsbooks failed to make $100,000 in revenue. SuperBook failed to see any profits over the month.
Simply put, if the crowded market in the Buckeye State doesn't maintain its present list of sportsbooks, and if potential new providers are not attracted to the state, overall revenues could suffer in terms of overall handle and licensing fees which go directly to the tax-funded programs aided by the industry.
There is potential for present Ohio sports betting apps to vacate the state's industry altogether thanks to the new tax rate, not to be replaced.
All eyes will be on the Ohio legal sports betting scene to see how the change in their taxation policy impacts sportsbooks and the tax program bottom line.