Lawmakers will Consider Increasing Ohio Sports Betting Tax Rate

Dan Favale
By , Updated on: Jun 23, 2023 12:00 AM
Lawmakers are currently discussing an increase to the Ohio sports betting tax.

Ohio sports betting isn't even six months old, and yet, the state may already be prepared to increase the tax that gambling operators are charged.

Heck, calling it an "increase" doesn't even do the latest proposal justice. The rights to offer sports betting in Ohio would actually double from their current number under the new terms.

This is a surprising move in a vacuum. States don't normally adjust their sports betting tax rates so early into the process. Any changes usually come years down the line. At the very least, you would have expected Ohio to give it a full 12 months before making any tweaks, let alone proposing a 100 percent hike.

More importantly, you have to wonder what this says about the status of Ohio sports betting. Is the state worried about cash flow? Did they simply underestimate their first tax rate? Is sports betting such a success that officials are trying to capitalize on a mushrooming amount of leverage? And most critically, how much additional revenue does The Buckeye State stand to earn by doubling the sports betting tax? 

Why is the Ohio Sports Betting Tax Rate Already Under Review?

While this seems like a potentially serious matter, there's nothing to worry about. Ohio sports betting has exceeded expectations during its first few months of operations. Legal gambling has been so successful, in fact, that the state is attempting to perfect it through increased regulation.

More than most other states, Ohio is scrutinizing the sports betting industry to no end. They have already handed out multiple fines for (inadvertent) infractions, and they are also among those leading the charge to implement stricter guidelines for sports betting advertisements.

Increasing the tax rate falls under this same umbrella. It not only weeds out any operators who aren't up to the higher and more expensive regulatory standards, but the state also believes they simply deserve more money. Promotional credits have limited the amount of taxes that operators have paid so far.

Beyond that, Ohio governor Mike DeWine has repeatedly noted the current tax rate was negotiated all the way back in 2021. So, really, this proposed hike is coming after a couple of years rather than right out of the gate.

Will the Proposed Sports Betting Tax Increase be Successful?

Jacking up the taxes on corporations can be a dicey proposition. Certain lawmakers are reluctant to drive businesses outside the state. Their first inclination is to offer tax breaks rather than increases, let alone steep upticks.

Sports betting is a different beast, though. Especially when it comes to mobile wagering.

None of the best online sports betting sites in the USA are actually working directly out of Ohio. Their headquarters are elsewhere. Some are even abroad. As a result, they cannot threaten to move the bulk of their jobs out of state, because they're already located out of state. And while online sports bettors could fight the tax hike by still threatening to leave, they'd be doing more harm to themselves than anyone else.

Ohio is currently one of the five largest betting markets in the United States. If one sportsbook flinches at the proposed tax hike, there will be numerous other applicants itching to take their place.

This is why the proposed tax increase passed through the Ohio Senate with flying colors. However, lawmakers were unable to ratify it before the end of this year's legislative sessions. That could suggest there was some opposition, or that it wasn't a priority. Neither appears to be the case. The Senate is holding a special conference to further deliberate the matter. That alone implies they'll eventually approve.

How High will the New Ohio Sports Betting Tax Climb?

Under House Bill 33, the Ohio sports betting tax would increase from 10 percent all the way up to 20 percent. That is a relatively high mark compared to the national average. While some states charge 20 percent or more tax rates to online operators, only Delaware (50 percent), Rhode Island (51 percent), Pennsylvania (36 percent) and Nebraska (20 percent) tax in-person sportsbooks at a 20 percent or higher clip.

Ohio has the market leverage to join this fold. As Matthew Waters noted for Legal Sports Report: "Ohio sportsbooks have taken more than $3 billion in bets since the state launched legal betting on Jan. 1, through April. That has translated to $451 million in sports betting revenue with $45.2 million in taxes paid so far."

Doubling those taxes would have meant Ohio generated more than $90 million in revenue since January 1. And that's on the low end of projections. The first year of legal sports betting will see operators pay less in taxes because they're allowed to deduct promotional bets, which they hand out in droves as part of the gambling launch. Fast forward to next year, and a 20 percent tax rate could mean Ohio collects close to $400-plus million in sports betting revenue.

Granted, the state still needs to approve and implement these changes. And while the measure has loads of support, circumstances can change. One way or another, though, we'll have a resolution soon. Ohio must approve the new sports betting tax by June 30. Otherwise, the issue will be tabled.

We won't be the only ones awaiting the results, either. You better believe other states will be monitoring what Ohio does—and the subsequent response from operators. After all, if Ohio can double their retail sports betting tax rate, other flagship markets like New York (10 percent tax on in-person bets) could plausibly decide it's time to do the same.

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Meet the author

Dan Favale

Dan first began writing about sports back in 2011. At the time, his expertise lied in the NBA and NFL. More than one decade, that remains the case. But he's also expanded his catalog to include extensive knowledge and analysis on the NHL, MLB, tennis, NASCAR, college ba...

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