When Ohio launched sports betting at the start of the new year, the state expected to come across as a successful veteran not a newcomer to the business. And the laws that created the system more than supported the results.
Two things stand out: a low tax rate of 10 percent and after an initial refusal to allow promotional deductions from the taxes, the state will ease deductions in place little by little. No tax breaks at the outset, but later on.
In 2027, sportsbooks can subtract up to 10 percent of their promotional spending from taxable revenue. Beginning in 2032, the rate climbs to 20 percent.
In the first month of play, bettors wagered more than $1.1 billion. The $208.9 million in revenue topped any legal U.S. jurisdiction.
Ohio collected just under $21 million in taxes in January. By contrast, Maryland operators paid less than $3 million in taxes since debuting last November, because they can deduct almost 100 percent of the costs.
Ohio sportsbooks “gave away” nearly $320 million in bonuses, matches and other forms of promotion in January, according to the Ohio Casino Control Commission.
In the five years since the Supreme Court legalized sports betting, sportsbooks offered financial incentives to attract and keep customers, building brand loyalty,
But sportsbooks took a different approach in Ohio, a latecomer to sports betting. The big three—FanDuel, DraftKings and BetMGM—are well-known in Ohio. They don’t need as much promo spending.
In the meantime, the expected volume in Ohio (which has, thus far, been accurate) exceeds other states except for New York in its first month.
The low tax rate will be a boon to smaller operators, thus increasing competition.
Still, Governor Mike DeWine wants to double the tax rate according to his 2024-25 budget proposal.
Tax collections for 2023 could exceed $100 million. Based on the early returns, PlayOhio forecasts the market to trail only New York and possibly Illinois as the largest (and most profitable) industry.
