A lot of agencies have had their hands in the Ohio sports betting trough in the months since its October launch. Sports wagers have generated millions in revenue, but the Ohio Lottery pulled out a handful so small it didn’t cover its expenses. And little is left for the state.
That’s because the lottery share only comes from the kiosks located in small businesses such as bars, restaurants and grocery stores, which pales in comparison to mobile betting and retail sportsbooks in casinos, neither of which comes under the lottery.
The kiosks brought in little more than $3.2 million in bets through March, with $350,000 in revenue, according to monthly reports from the lottery. This money is split between the lottery and the vendors that run the machines, according to Cleveland.com.
The Ohio Lottery’s share totaled $75,473 this year. But it also incurred costs of at least $54,200 a month to operate and regulate the kiosks.
Almost all of the expenses go to lottery staffing, Ohio Lottery Commission spokesperson Danielle Frizzi-Babb said. Startup costs of $335,000 included $50,000 on software updates.
“While we were tasked by the legislature with starting the lottery sports gaming program, we knew that it was not going to be as lucrative as traditional lottery products,” Frizzi-Babb said in an email to Cleveland.com.
“Unlike traditional lottery games that have fixed payouts and prize structures, sports gaming’s odds are volatile and change quickly, and sometimes proprietors take a loss,” she added.
Of the $1.75 billion bettors waged In January and February, mobile apps accounted for 97.5 percent and 2.3 percent came from in-person betting lounges. Kiosks brought in a tenth of one percent.
940 locations featured kiosks in March, which should increase to 1,100 by the end of the year, Frizzi-Babb said. The Ohio Casino Control Commission (OCCC) has approved 1,153 Type-C hosts for sports betting kiosks.
Tax revenue on sports betting goes directly to the state and doesn’t help the lottery with its expenses.
At a 10 percent tax rate, Ohio received $34,981 in three months to go along with $75,473 the lottery collected but even the total of $110,454 falls short of the $162,500 in staffing the lottery spent at the same time to administer sports gambling.
The state—not the lottery—also collected $700,000 in one-time startup fees from sports gambling companies that work with the lottery.
The OCCC also collects fees, but it uses them to fund its regulation of sports gambling in Ohio. None of that money heads to the lottery.The lottery ends up with as much as 25 percent of all revenue each month.
Last year the lottery reported $1.4 billion in profit, which went to the Lottery Profits Education Fund. Given the strength of lottery sales and racino revenue, a record profit should be brought In for 2023.
Eilers & Krejcik Gaming, a leading research firm in the gambling industry, predicts that at maturity Ohio’s sports betting industry will bring in about $845 million in revenue each year. Some $744 million would be from betting apps, and the other $111 million would be from casino-style sportsbooks and kiosks.
Chris Grove, partner emeritus for Eilers & Krejcik Gaming, kiosk players can only bet $700 each week, a restriction other forms of sports gambling don’t have.
“It’s not impossible, or even implausible, that kiosks will generate the revenue necessary for the Lottery to show a profit, but it won’t be an easy hill to climb,” Grove told Cleveland.com.
The OCCC pays its operating expenses through fees. The fees have been high enough to cover its bills. Commission spokesperson Jessica Franks said application fees generally go to the OCCC and licensing fees go to the sports gaming revenue fund.
A sports betting app license like the one the Cleveland Browns received costs $150,000 for the initial application and $1 million for a license fee. The company that runs the app also has to pay a $150,000 application fee and a $2 million in licensing fee. That adds up to $3.3 million.
The OCCC keeps the two $150,000 application fees, but the rest goes to the sports gaming revenue fund.The commission estimated that regulating sports gambling would cost about $9 million over five years. Licensing fees renew every five years.
Because of how sports betting is set up in Ohio, the lottery doesn’t keep any of the revenue from licensing the seven sports-gambling vendors it’s currently working with.
For the state’s 11 casinos and racinos, the funding model is very different.
About one-third of all casino revenue goes to the state in the form of taxes, and it’s distributed to a variety of places. The OCCC gets 3 percent of those taxes to help pay for operating expenses, along with application and license fees.
None of the taxes on sports gambling, however, go to the commission.
The lottery runs the slot machines at the state’s seven racinos, and in a similar fashion to sports betting, it contracts with vendors to run the machines. The lottery gets one-third of the revenue each month.
In the lottery’s last fiscal year, July to June, the racinos brought in $1.33 billion of revenue, and the Lottery kept $446 million.
Still progress is encouraging, according to Saturday Down South, which hosted the lottery and several kiosk owners on April 29. Five total proprietors received licenses to distribute sports betting kiosks to retail business Type-C license holders.
“We have successfully integrated five different proprietors into the program and look to continue to grow in the coming months,” Frizzi-Babb told SDS.
Sports Bet Ohio has 753 kiosk host locations and reported nearly $1.86 million in total handle and $121,476 in revenue since the beginning of the year. It’s the largest of the five licensed sports betting kiosk proprietors in Ohio.
“Our goal is to continue to expand our footprint in Ohio, further enhance our user experience for the retail punter, promote in-venue play and specialized local betting options with our Sports Bet Ohio native mobile companion app, Ohio Lottery’s over the counter terminals and Kiosks. We are focused on the future of Sports Bet Ohio and are dedicated to making our product and our host partners a sought after betting destination for Ohio players,” a representative told SDS.
Andrew Westmeyer, CEO of UBetOhio, told SDS he expects April to be slower than the first three months of operations for his locations. Performance of the kiosks has been “about what we’ve expected so far” in terms of revenue and handle, Westmeyer said.
“Look, we’re not making hundreds of thousands of dollars off of this, but it’s giving us the ability to make your local watering hole into a Las Vegas style sportsbook,” he added.
UBetOhio has reported $694,054 in total handle and $61,277 in revenue. The lottery has taken in $6,809 in tax revenue from the proprietor.
The company has 38 active host locations, the majority being bars and restaurants, Westmeyer said, but bowling alleys have also been a popular host location. Westmeyer said he hopes the proprietor has upwards of 100 host locations by the start of the football season.
Local mom and pop locations and individual owned businesses have been top-host performers for UBetOhio, Westmeyer said, usually reporting better results than nationwide chain locations with kiosks.
“Some of the larger known chains that we thought may be great locations, some of them have been a lot slower than expected. Whereas, the smaller mom and pop bars, local watering holes that are just small, community placed, those have been going much better than we expected,” he said.
