A recent Ohio bill dubbed House Bill 33 proposes some drastic changes to how the state’s sports betting industry should be taxed. Under the measure, sportsbooks will have to pay 20% of their revenue in taxes starting 2024. Needless to say, not everyone is happy.

A Summary of the Events

Currently, sports betting operators need to provide 10% of their revenue to taxes, meaning that the new bill would double the taxation rate. Originally proposed in February this year, the increased tax was signed off on the budget earlier this month.

Prior to that, the House of Representatives tried to promote a version of the 2024-25 budget that did not include the increased tax. However, the State Senate eventually amended the budget and brought the tax increase back.

The problem is that the high taxes may have an adverse effect on the industry, sports betting proponents argue. According to some, high taxes will make the Buckeye State much less appealing to gambling companies.

High Taxes May Alienate Operators

Ohio is the seventh-largest state in terms of population. With a fair tax rate of 10%, it is currently very appealing to wagering companies. Because of that, there are currently 18 sports betting brands offering betting on sports in the state, with another four waiting to launch.

Unfortunately, drastic changes risk alienating companies. While the state would theoretically receive twice the money it gets through taxes, companies may opt to quit Ohio if the conditions aren’t suitable for running a sustainable business.

In addition, critics pointed out that Ohio would become less appealing to new companies entering the state. This means that the Buckeye State would miss out on millions in licensing fees.

Dann Dodd Is Very Pessimistic about the Changes

Former State Rep. Dann Dodd addressed the doubled tax, slamming the state for introducing a measure that may strengthen the “oligopoly” that casinos and racinos have. He pointed out that the original license framework was designed to inhibit the influence of these properties, not bolster them.

In addition, Dodd pessimistically believes that as many as half of the brands currently offering products in Ohio may exit the market within 12-18 months. He also noted that the state will lose money in licensing fees.

Dodd’s words were echoed by Americans for Tax Reform, which scrutinized the efforts to increase taxes in Ohio. The organization lambasted the Buckeye State for its decision to become one of the less welcoming states to sportsbooks.

The organization pointed out that the measure “would take Ohio from having one of the lowest tax rates to the third highest in the US – higher even than Illinois.”

Critics are conclusive that Ohio doesn’t even necessarily need the extra money and that the tax hike is an unnecessary risk that can only hurt the economy.

Despite the criticism and warnings, Ohio predicts that the measure will increase the state revenue.

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The 11 casinos and racinos that are licensed to operate under a permit from the Ohio Casino Control and Lottery Commission managed to bring in $196 million in May 2023, down from $202 million in May 2022. These figures exclude tax but factor in winnings paid out to gamblers.

Casinos and Racinos in Ohio Contract A Little

Nevertheless, Ohio has been enjoying a stronger gambling year all things considered. When the May results are factored in, the total gambling revenue stands at $1 billion, which is ahead of the $984 million posted through the first five months of 2022. The revenue cited by the regulator is the amount kept by the casinos after winnings have been paid out.

However, the state also applies fees and taxes. Statewide revenue for May for the seven racinos was in fact $115 million before applying these taxes. The amount collected by the state’s four casinos was $80.5 million. Among the properties to see a jump in their overall performance was Miami Valley Gaming which posted $20.2 million in May 2023 compared to $18.99 million in May 2022.

MGM Northfield Park also pulled ahead with $25.62 million in My 2023 compared to $24.37 million in May 2022. Overall, however, most of the properties reported a slight loss in momentum and revenue which is to be expected with the summer lull kicking in.

Challenges That Go Beyond Casino Operations

Ohio has also faced some challenges in fully harnessing its potential. For example, some betting brands have been hit over violations of the “free” and “risk-free” promotions they promoted, a language that is increasingly disappearing from regulated markets across the United States.

But some of the disruptions have also come from external factors –Alabama college baseball games, for example, have been tied to match-fixing, giving casinos and racinos even further trouble.

There have been several big changes in college sports across the country since with coaches fired and the NCAA updating its rules on how athletes ought to be punished if they are ever caught betting in breach of the organization’s rules. Ohio is trying to also patch up some of this declining tax revenue by pitching the idea of increasing the tax on sports gambling.

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