Governor Mike DeWine said he was going to do it, and darned if he didn’t. Ohio has increased its tax rate on sports betting from 10 to 20 percent just six months since the debut of the market. The move comes as a result of an agreement by the Ohio House of Representatives and Senate for a state budget for the fiscal year 2024-2025.
The budget, worth $85.8 billion, went into effect on July 1.
In January, the Ohio Casino Control Commission (OCCC) launched 16 digital platforms and 13 retail locations, including national operators Barstool Sportsbook, BetMGM, Caesars, DraftKings and FanDuel. The state now houses 18 live platforms. And underperforming kiosks in bars, restaurants and the like.
Since its launch in January, Ohio’s sports betting market has generated over $507.1 million in taxable revenue. The total tax generated from this revenue, at the 10 percent rate, was over $50.7 million. At a 20 percent rate, that figure would have doubled to $101.4 million.
The tax could generate an additional $100-$135 million in tax revenue a year. Most will end up in the Sports Gaming Profits Education Fund, with some two percent of the tax revenue directed to the Problem Sports Gaming Fund.
Others have said the increase in the tax rate could lead to the smaller platforms being unable to make a buck. Americans for Tax Reform called the increase a “tax risk.”
Former Ohio lawmaker Dan Dodd said on Twitter the state might lose licensing fees and possibly the number of operators in the state.
Apart from the increase in the tax rate, the budget also saw a provision wherein the state regulators can put bettors on the involuntary self-exclusion, if “the person has threatened violence or harm against a person who is involved in a sporting event, where the threat was related to sports gaming and made before, during, or after a sporting event.”
Thanks to their ease of use and accessibility, Ohio online sports betting accounted for about 98 percent of the state’s sports betting revenue in the first five months of operation, with around 2 percent coming from brick-and-mortar retail sportsbooks located at casinos, racinos and pro sports stadiums.
A smaller percentage of Ohio’s overall sports betting volume has come from the sports betting kiosks located inside bars, restaurants, stores and other businesses across the state.
While the OCCC oversees Ohio’s retail and online sportsbooks, the Ohio Lottery Commission is charged with regulating the sports betting kiosks. Go figure.
Handle and revenue for the sports betting kiosks have been steady, according to numbers for the first five months of operations. But the Ohio Lottery’s share of revenue from the kiosks doesn’t come close to covering administrative costs to oversee the kiosks.
Unless overall revenue from the sports kiosks increases significantly, the Lottery will continue to operate the sports betting kiosks at a loss. The agency doesn’t get any of the license or application fees.
The kiosks’ handle for the first five months of operation topped $5.5 million, producing less than $600,000 in revenue. By contrast, the handle for online and retail sportsbooks for May alone, was $446 million. Sportsbooks made almost $58 million in April.
The Ohio market has seen around $3.5 billion in betting volume since January 1.
The Ohio Lottery’s income for operating the kiosks comes from its split of the revenue with the kiosk proprietors, the companies that provide and maintain the kiosks’ hardware and software.
Meanwhile, the bulk of tax revenue from the kiosks, as well as the $100,000 license fee for five years end up with the Sports Gaming Revenue Fund.
Through May, the Lottery’s share of the $600,000 in overall revenue from the sports betting kiosks has been $135,217.
It didn’t help that the kiosks had a bumpy opening. Issues with the equipment like the ID scanners. Staff had to learn on their own. Software issues. Operators like Intralot which oversees 700 kiosks. But software updates led to many of the Intralot kiosks turning out inoperable. The majority were running by early February.
From January through the end of March, the number of kiosk host locations went from 772 to 940; and that dropped to 926 the next month.
Danielle Frizzi-Babb, director of communications at the Ohio Lottery, says the active host number is continually fluctuating as new retailers are brought on and existing retailers drop off. She says that as the market has matured, the number of new locations has leveled off.
“The most common reasons for host locations to drop off are they are undergoing a sale of business where the new owners must reapply for a Type-C license as the original sports gaming license from the OCCC is non-transferable,” Frizzi-Babb told PlayOHIO. “There are host locations that decide to switch proprietor partners which makes them inactive during the transition to the new partner which can take a couple weeks. Also, retailers that go inactive on the traditional lottery side which in turn causes them to be inactive locations on the Sports Gaming side.”
But, while the sportsbooks’ handle dropped 30 percent from March to April in Ohio, the handle decrease for sports betting kiosks was only 18 percent in the same time period. You find good news where you can.
Even more promising for the kiosk market, though revenue dipped slightly, handle increased 10 percent in May.
Despite the leveling off of host locations in recent months, Frizzi-Babb says the Lottery is hopeful that more businesses will be adding kiosks as the year goes on.
“We do anticipate additional locations coming on board as we move forward into the fall,” she told PlayOHIO.
Lawmakers included a clause expanding the types of businesses allowed to host sports betting kiosks to include breweries, distilleries and wineries.
Another big expansion could come from two of Ohio’s biggest supermarket chains: Kroger and Giant Eagle.
The kiosk faces limitations like a minimum of $700 a week, and they only accept certain bets. But Frizzi-Babb believes the kiosks will attract more locations and types and other innovations.
