The tax on Ohio’s sports betting revenue could be getting an increase. That is, if Governor Mike DeWine gets his way.
Just six weeks into the legal Ohio sports betting market, DeWine included a tax rate increase from 10% to 20% in his recently released budget proposal for the 2024-2025 fiscal years.
The tax is levied on the online sportsbooks operating in Ohio, along with the casinos, sports teams and other businesses that open retail sportsbooks in the state.
Ohio’s sports betting tax rate is relatively low
Ohio’s 10% tax on sports betting is on the lower end of the spectrum compared to other states that allow sports betting.
Northeastern states levy the highest tax rates on mobile and retail sportsbooks, with New York having the highest rates at 50% on retail and 51% on online sportsbooks.
DeWine’s proposed rate would match Tennessee’s current rate. Tennessee’s 20% tax rate is the highest rate outside of the Northeast, according to a report by Bloomberg Tax.
Ohio tax reforms motivated by first month incidents
Dewine’s proposal also reiterates the regulations that apply to sportsbook advertising, prohibiting the companies from using the terms “free” or “risk-free” when describing promotional bet credits. Several companies have already been fined for breaking the rules.
The proposal also addresses bettors who harass or threaten athletes. An incident last month involving University of Dayton basketball players prompted the Ohio Casino Control Commission and the Lottery Commission to make statements against the behavior. The proposal instructs the OCCC to exclude bettors “who threaten violence or harm against persons who are involved in sporting events, where the threat is related to sports gaming.”
In the first month of legal sports betting, the OCCC sought to levy fines to three major sportsbooks for failing to adhere to advertising rules. DraftKings was cited for advertising to Ohioans under the age of 21. Additionally, the OCCC fined Barstool Sportsbook’s parent company, PENN Entertainment, for holding a promotional event near the University of Toledo.
The proposal seems to respond to those early issues that have cropped up around sports betting. Dan Tierney, the governor’s press secretary, told PlayUSA senior lead writer Matthew Kredell:
“It is part of the package designed to encourage better compliance with the rules. Ohio is serious about enforcing the regulations passed by the Ohio General Assembly.”
Governor must persuade lawmakers to pass sports betting tax increase
DeWine’s 4,000-plus page budget and proposed tax increase will face a months-long process before it could be signed into law.
The Ohio House Finance Committee received the proposal last week. Lawmakers have until June to finalize and pass a budget. Both chambers would have to accept the tax increase in order for it to become law.
At least one Ohio lawmaker, State Rep. Bill Seitz, does not support the new tax, telling PlayUSA:
“I do not agree with this idea. A low tax rate encourages legal play through regulated entities, which we prefer compared to illegal bookmaking outfits. Moreover, the betting has only been legal for a little over a month. So we don’t even know what kind of money the regulated entities are making.”
Where Ohio sports betting tax revenue goes
Tax revenue from sports betting in Ohio is earmarked for specific uses. Ohio created the Sports Gaming Revenue Fund to support education and local youth sports programs. However, some of the money goes to cover administrative costs. Another 2% of the total goes to fund problem gambling programs and resources.
Administrative costs include the cost of monitoring the sportsbook companies and their advertising. The fund also covers the cost of a new nine-member panel charged with investigating the mental health impact of legalized sports betting in the state.
Ohio brought in at least $10 million in initial license fees, starting off the state’s sports betting revenue for the 2023 fiscal year. The OCCC will release a revenue report for the state’s first month of sports betting operations later in February.