A long-awaited, full-fledged Ohio sports betting bill hit the table earlier this month, the first of its kind for the Buckeye State.
The Ohio Legislature has all of 2019 to consider the issue, but in the wake of the introduction by two state Senators from Northeast Ohio — John Eklund, a Republican, and Sean O’Brien, a Democrat — it has become clear that there’s a substantial debate ahead among Ohio policymakers and the stakeholders and constituents they represent. With that said, there’s no such thing as smooth sailing for state-level sports betting legislation.
The Ohio legislation, Senate Bill 111, was filed a day ahead of Republican Gov. Mike DeWine’s budget address. DeWine, who last year said that Ohio should pursue sports betting regulation, didn’t include any sports betting revenue in his budget. There was some speculation that he might.
“Let’s see where the legislature wants to go and how they want to do it [sports betting],” DeWine said in response to a reporter’s question at a press conference on Mar. 15. The legislation currently calls for a 6.25% tax rate on sports betting revenues, which is lower than Nevada’s take. It’s likely that the low tax rate will be the subject of significant debate in the coming months.
DeWine realizes the bill is still in its infancy, and the potential windfall for Ohio depends on what’s in the bill.
A hearing on the proposal has not been scheduled yet.
Mobile faces some resistance
Senate President Larry Obhof, a Republican from Northeast Ohio, told the Toledo Blade that he’s skeptical of having state-sanctioned sports wagering “in every tavern across the state” (i.e. on cell phones).
Ohio Sen. Bill Coley, a Republican hailing from just north of Cincinnati, told the Blade that the recent Department of Justice opinion on the 1961 Wire Act means that Ohio needs to be cautious with mobile betting.
“You’d have to make it so it would be highly unlikely that a mobile application does not ping off a tower that is not located in your state, so that all of the communications stay in your state,” said Coley, who is sympathetic to the sports leagues in the battle over how data should be regulated. The bill is currently silent on that issue.
Despite the concerns, the state would make a significant public policy mistake by not including Ohio mobile sports betting as part of its industry. In addition to the fact that mobile wagering is now accounting for more than 80% of the handle in New Jersey and the technology has fueled Nevada’s sports betting to record levels in recent years, Ohio would be at a massive competitive disadvantage to its neighbors.
The states that border Ohio are: Pennsylvania, West Virginia, Kentucky, Indiana, and Michigan. All either have explicitly legalized mobile sports betting (Pennsylvania and West Virginia) or have/are seriously considering it. If Ohio made the error of approving only brick-and-mortar sportsbooks, in just a few years it could find itself surrounded by states with sports betting markets that are structurally far sounder.
Folks in Ohio who are located closer to a bordering state than the nearest casino or racino could decide to drive across state lines to place their bet and then cross back into the Buckeye State.
A 2017 study commission by the American Gaming Association projected that Ohio and Michigan have nearly the same market potential, but that would not be the case if the former punted on mobile. Michigan is also considering online casino games, which already positions it for an advantage over its neighbor.
Ohio’s constitution
There’s effectively a consensus that the state would not need to amend its constitution to legalize and launch sports betting. Ohio voters signed off on casinos in 2009.
There’s also been some suggestion that Ohio’s constitution could theoretically already authorize the casinos and racinos to have kiosks for sports wagering, in the absence of a new law. That’s not going to happen given the interest in passing new legislation by the governor and many in the legislature, but here’s how the Buckeye State defines legal casino gambling:
“Casino gaming” means any type of slot machine or table game wagering, using money, casino credit, or any representative of value, authorized in any of the states of Indiana, Michigan, Pennsylvania and West Virginia as of January 1, 2009, and shall include slot machine and table game wagering subsequently authorized by, but shall not be limited by subsequent restrictions placed on such wagering in, such states. Notwithstanding the aforementioned definition, “casino gaming” does not include bingo, as authorized in article XV, section 6 of the Ohio Constitution and conducted as of January 1, 2009, or horse racing where the pari-mutuel system of wagering is conducted, as authorized under the laws of Ohio as of January 1, 2009.
As mentioned, both Pennsylvania and West Virginia have legal sports wagering, while Indiana and Michigan have both made progress toward regulation. Notably, the section of the Ohio Constitution didn’t mention Kentucky to the south, which has a robust market for wagering on horse races and considered sports betting earlier this year (and the year before that).
The referendum established Ohio’s casino gambling tax rate at 33%, significant highly than what is currently being discussed for sports wagering. Even if the proposed sports betting tax rate was significantly raised, it would still be a progressive provision given the lower margins in the sports betting business.
