Sports betting operators will soon have to pay twice as much to the state of Ohio.
Lawmakers agreed to double the Ohio sports betting tax rate from 10% to 20%. The increase was included in the budget deal reached Friday.
The tax increase is for the fiscal year that began July 1. But the bill doesn’t take effect until 90 days after the governor signs it.
PlayUSA first broke the news that Gov. Mike DeWine included the tax increase in his executive budget proposal in February.
Rep. Bill Seitz told PlayUSA that Ohio is increasing the sports betting tax rate to decrease what DeWine sees as an excessive number of sports betting advertisements in the state.
“The governor’s argument, which I didn’t buy for a minute, is ‘Look at how much money these folks are spending on advertising. They’re trying to get people hooked on sports gaming and mobile apps. We need to curb the excessive advertising by the mobile app licensees, and how better to do that than double the tax rate.’ ”
It’s the first time a state has increased the sports betting tax rate. The Ohio sports betting market only launched in January.
Sportsbook operators may have done this to themselves
Seitz’s description of the reasons behind the tax increase aligns with statements made to PlayUSA by DeWine spokesperson Dan Tierney after the executive budget’s release.
“It is part of the package designed to encourage better compliance with the rules,” Tierney said in February. “Ohio is serious about enforcing the regulations passed by the Ohio General Assembly.”
Sportsbook operators had a series of advertising infractions in the early going. These included $150,000 fines to BetMGM, Caesars and DraftKings promoting bonuses as without liability and failing to display problem gambling information. And another $350,000 fine to DraftKings for sending mailers to people under age 21. Penn Entertainment was hit with a $250,000 fine for encouraging college students to register with the Barstool Sportsbook.
Tierney declined to comment further Friday, saying the original statements still stand.
Seitz disagrees with Ohio sports betting tax increase
One of the original architects of Ohio’s sports betting bill, Seitz said he had no problem with the level of sports betting advertising in Ohio.
“I wasn’t upset by the level of advertising at all,” Seitz said. “It was a brand-new product, so they were trying to acquaint people with what’s newly on offer in the state of Ohio.”
Seitz added that Ohio lawmakers intentionally kept the tax rate to 10% in the original bill to promote advertising.
“The original concept, which I worked on, was that we wanted to keep the tax rate low to convince people to leave their illegal books and go with the legal, regulated entities. That was the whole idea. So when you double the tax rate, that’s maybe not the smartest thing to do.”
With the advertising and 10% tax rate, Ohio sports betting got off to a successful start. Through its first five months, legal sports betting in Ohio produced $507 million in revenue and $50.7 million for the state.
“To me, sports betting has proven to be very successful in Ohio so why would you mess with success?” Seitz said. “So I was against it and never dreamed we would end up doing it, but there you go.”
The fiscal report on the budget projects the tax rate increase will bring an additional $100 million to $135 million to the state annually.
But Seitz said the increase wasn’t about raising revenue. The added revenue means little in the state’s $85 billion budget.
“We didn’t need the money. We’ve got lots of money.”
Gaming study commission could reassess tax rate
The Ohio House did not include the sports betting tax increase in its budget proposal. However, the Senate agreed with the governor.
The budget went to a conference committee for the chambers to work out their differences. Seitz said the Senate insisted on making the tax rate 20%.
Part of the House agreement to accept the tax increase, according to Seitz, was to include a Study Commission on the Future of Gaming in Ohio. The commission could come back saying the state should lower the tax rate.
“The explanation given to me is we went along with the 20% but we fully expect the gaming study commission, which will be a bunch of legislators, would come back and say that the tax shouldn’t be 20%,” Seitz said.
The study commission also could look into matters such as online casino and iLottery, starting their path to legalization in Ohio.
Other gaming changes in Ohio budget
The budget included several additional changes related to gaming in Ohio. They included:
- Allows the Casino Control Commission to exclude from sports gaming a person who has threatened violence or harm against an athlete because of a bet.
- Adds breweries, microbreweries, wineries and distilleries to the liquor permit holders authorized for a type C sports gaming host license.
- Reallocates sports betting revenue to cap funding of youth athletics to $15 million and provide the rest to general K-12 education. Problem gambling services still get 2% of revenue.
With licenses issued for just 23 of 40 brick-and-mortar sports betting parlors, the House had tried to increase from five to seven the maximum number of these facilities allowed in the largest Ohio counties. But this did not make the final budget.