The Buckeye State’s sports betting market became one of the nation’s strongest in less than a year. However, one state lawmaker sees room for improvement.
Sen. Niraj Antani introduced legislation proposing that would halve the current tax rate for Ohio online sportsbooks. His proposed bill seeks to cut the gross receipts tax rate from its current 20% mark to a more industry-friendly 10%.
Proposed bill would return Ohio sports betting tax rate to original mark
When Ohio sports betting first launched in January, the tax rate was 10%. However, state lawmakers voted to double the tax rate to 20% through the state budget this past summer.
Ohio Governor Mike DeWine, who advocated for the tax hike, expressed concerns over what he thought was excessive advertising by sports betting operators.
He highlighted situations where major players like DraftKings Ohio and the former Barstool Sportsbook were fined for regulatory violations. Those including mailing advertisements to people below the legal betting age and hosting events that didn’t align with the state’s sports betting advertising rules.
Senator Antani’s proposed SB 190 would return the tax rate to its original mark of 10%. Antani feels an increased tax rate could hurt the Ohio sports betting market.
Bettors could be hurt by higher operator taxes
For example, increased taxes could result in less favorable odds for bettors and fewer promotions and incentives for customers. There are also fears that sports betting operators may exit the state due to lower profit margins.
Furthermore, it could prevent smaller operators from coming to the state. Especially when FanDuel and DraftKings currently dominate the market.
It’s hard to determine what the exact financial impact of Senate Bill 190 would be if it becomes law. Senator Antani has not given a revenue estimate and it’s possible that Gov. DeWine doesn’t even sign it into law even if it passes. What we can do is tell you how revenue was generated before the tax hike to 20% and what the revenue has been since the tax hike.
Here’s what revenue would look like with lower rate
From January 1 through June 30, Ohio’s sports betting tax rate was 10%. During that time frame, Ohio online and retail sportsbooks took over $3.8 billion in bets, which generated more than $539.4 million in taxable revenue for the state.
Starting July 1, the tax rate increased to 20%. In the four months since, Ohio sportsbooks took over $2.1 billion in bets, which generated more than $240.2 million in taxable revenue for the state.
There is a big gap in money there. The first section of numbers compiles six months’ worth of data. However, the second section only compiles four months’ worth of data. So, let’s take the averages. At the time, the 10% rate generated an average of $89.9 million in monthly taxable revenue. Meanwhile, the 20% tax rate has generated $60 million in monthly revenue since being implemented on July 1.
So, on the surface, it looks like Ohio was doing just fine with the 10% tax rate. However, there are a ton of factors that go into how we got these totals. January was a historical first month of betting and was not indicative of what the market would look like in the long term. We have also seen several new operators launch in the state, which will make things fluctuate.
There is no perfect science. However, if there is a belief that the increased tax rate will hurt the market in the long run, bringing it back to the original 10% rate should at least be considered.