Ohio Looking to Double Sports Betting Tax Rate in Budget Measure

Lawmakers in the Buckeye State are already seeking to make changes to the sports betting regulation law, with Ohio having just launched the industry earlier this year. The cash-strapped state is looking for all the avenues possible to raise funds, and among the fundamental proposals that have been suggested is the pertinent matter of doubling the sports betting tax rate.

As expected, the potential of doubling the tax rate has elicited mixed reviews from people privy to the happenings in the industry. So, while others are considering it as a much-needed revenue generation move, it has ruffled the feathers of some of the big sports wagering industry names operating in Ohio.

Ohio’s Governor is Leading the Charge

Governor Mike DeWine is at the forefront of calls to double the sports betting tax in Ohio. The Governor is calling for the tax to be increased to 20% from the current 10% rate. And while one would expect that both houses, which are under Republican control, would side with their Republican Governor, things are not quite as easy as they seem.

In some quarters, the Governor’s proposal is seen as a reaction to sportsbooks in the state performing better than they were initially expected to perform. Additionally, other parties consider Gov DeWine’s proposal undermining the lawmakers’ choices, with the bill being passed only a few months back by the lawmakers.

That said, an analysis from the Ohio Legislative Service Commission seems to back the Governor’s claim that, indeed, raising the taxes is sure to provide considerable resources for the state to work with. According to the report, adopting the additional tax would generate an additional $100 million to $135 million annually from what is being collected today.

Should the proposal sail through, Ohio will join a limited list of states who have already implemented a 20% tax rate, including Pennsylvania and Illinois.

Doubling the Tax Rate Could Scare Away Smaller-Sized Operators?

On the other side of the coin, there have also been concerns among the key industry players that the potentially higher tax will punish the wrong players. During its investigations on the potential changes, the Ohio Casino Control Commission (OCCC) announced that it was targeting four sportsbooks (Caesars, BetMGM, DraftKings, and Barstool) after they were found to have contravened some of its policies.

Further, the change in sports betting laws, as proposed by the Governor, goes beyond increasing tax rates. It also touches on giving the OCCC powers to bar anyone found to threaten athletes from betting and barring sportsbooks from offering promotional credit if operators break the rules against them.

And while most of the regulatory changes are considered reasonable, the tax hike could severely affect the industry players who may not be as big as the four targeted sportsbooks mentioned above. The mentioned quartet can afford to ride the tough waves of increased taxation because of their giant status in the market, but that can’t be said with certainty about smaller sportsbooks. It, therefore, remains to be seen how this tax hike will affect the relatively smaller operators.

Well, from how opposing legislators see it, this tax hike could mean the exit of some industry players from the Ohio sports betting scene. According to these legislators, the 10% tax rate set last year was to encourage the entry of as many participants in the sports betting industry as possible.

So, as you can imagine, there has been fierce resistance to this proposal by dissenting legislators. The opposition is being spearheaded by Rep Bill Seitz, who remarked:

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“We intend to fight the Senate on this issue. To my dismay, the Senate has chosen to eviscerate the original sports gaming bill in this regard by appropriating not a farthing of sports and extra-curricular activities but rather putting it all in school funding. It was originally anticipated that the sports gaming tax would only amount to $25 million per year. We now find that it is vastly more revenue-productive than that.”

Youth Funding Likely to be Eliminated

Under the current dispensation, Ohio and New York are the only states to pledge channeling sports betting tax proceeds toward sports. Should the Ohio state lawmakers have their way, this could be scrapped for Ohio. The next Ohio budget is expected to restrict, reduce, or entirely eliminate funding for youth sports depending on which provisions survive the House Committee that is expected to finalize its spending plans by the end of this year.

Under current Ohio laws, 98% of the sports betting proceeds are required to be split evenly between education and K-12 athletics. However, the changes being proposed in the budget will change that. For example, the Governor’s proposal calls for any funds previously earmarked for sports to be channeled toward reducing or eliminating pay-to-play fees for interscholastic athletes and extra-curricular activities.

The budget also calls for 98% of sports betting tax to be distributed according to Ohio’s funding formula for education. Additionally, the House calls for sports spending to be capped at $15 million annually, with at least $500,000 dedicated solely to funding adaptive sports programs in school districts across the state.

With all eyes on the Ohio legislators, only time will tell how the proposals will fair and if the party positions will play a factor in the voting patterns. For now, all we can do is wait for the process to play out, and as always, we’ll keep you in the loop of any new developments.