Ohio implements nation’s first increase in sports betting tax
Lawmakers double tax to 10%; state’s May handle dips to under $450m
Lawmakers in Ohio have officially signed off an increase in the tax rate sports betting operators must pay to the state, with the new 20% rate effective as of July 1.
That figure is double the 10% rate operators had been paying since regulated sports betting launched in the Buckeye State on January 1.
The initiative, which is projected to generate at least $100m in additional annual tax revenue back to the state, was originally introduced by Governor Mike DeWine in February as part of his executive budget proposal.
While the forecasted bump in revenue stands to be a boon for the state, the market as a whole could ultimately contract if smaller operators are unable to pay the higher rate, a potential eventuality noted by Representative Bill Seitz.
“The original concept, which I worked on, was that we wanted to keep the tax rate low to convince people to leave their illegal books and go with the legal, regulated entities,” Seitz told Legal Sports Report. “That was the whole idea. So, when you double the tax rate, that’s maybe not the smartest thing to do.”
Seitz added the legislature would conduct a more thorough analysis of the tax rate implications in a future gaming commission study, which was mandated as part of the initiative to increase the tax rate.
There are currently 18 sports betting operators live in Ohio – from US market leaders FanDuel and DraftKings to smaller challenger brands like Betway and Betr – that have combined to generate over $500m in total taxable revenue since the market went live in January.
May marked the month with the least overall betting activity during that span, as state handle totaled $446.2m, a 14.3% month-over-month (MOM) decrease from $520.6m in April.
Gross gaming revenue (GGR) was accordingly down as well, as operators generated $57.8m in GGR, which equated to a 9.2% MOM decline. The discrepancy between monthly handle and GGR was attributable to a statewide hold of nearly 13%.
The revenue figure included $23.2m in promotional credits, which operators are not permitted to deduct from taxable revenue.
January remains Ohio’s biggest month since launching sports betting, with the state handling $1.1bn in bets before the steady decline that has coincided with a slower period on the sports calendar.