Two years ago, Ohio sports betting tax increased from 10% to 20%. Now, the rate could rise to 40% if Governor Mike DeWine’s proposal is accepted. His aim is to increase the state’s betting revenue to around $180 million annually.
The move has raised many eyebrows, primarily because it could result in a decline in Ohio’s sports betting sector. There are also fears that a surge in betting costs could see sportsbook operators leaving the state and encourage bettors towards using illegal offshore sites.
Until fairly recently, betting on sports was illegal in Ohio. The legalization process began on December 8, 2021, when the General Assembly signed off on House Bill 29. As of January 1, 2023, OH residents aged 21 and over were given the green light to place bets at state-licensed sportsbooks.
The betting tax was originally set at 10%, but lawmakers decided that generating additional state revenue was critical, and the tax rate rose to 20% in July 2023. If Governor Mike DeWine’s most recent proposal is accepted, the figure could hit 40%. Raising the tax rate to 40% would see Ohio implementing the second highest betting tax rate in the US.
Governor DeWine is the main proponent here. He argues that increasing Ohio sports betting tax to 40% would generate up to $180 million annually, which he claims will raise funds to develop public facilities, such as sports academies, and improve the infrastructure of existing sports stadiums.
In the Governor’s view, sportsbooks have been reaping enormous profits since sports betting was legalized in Ohio on January 1, 2023. On that basis he believes that a more significant portion of sports betting revenue should go towards state development.
On the one hand, the idea of increasing state revenue from betting tax to somewhere between $130 million and $180 million per annum sounds like a solid strategy, but let’s not forget that the tax increase could discourage potential investors from infusing cash into Ohio’s regulated sports betting sector.
It comes as no surprise that the proposed 50% tax hike has sparked concerns within the sports betting industry. Here are some possible concerns put forward by SBA Vice-President, Scott Ward
“This would amount to a 400% tax increase over a two-year period, upstanding American businesses, who work closely with state regulators, shouldn’t have to fear government arbitrarily raising their taxes by exorbitant amounts. But that’s exactly what Ohio sports betting consumers are facing.”
Ward also commented that a massive tax increase would “give a huge boost to unregulated and offshore apps”.
There are currently 16 Ohio sportsbooks in operation, including big-name brands like FanDuel, DraftKings, BetMGM, and Fanatics, all of which are likely to review their position in the state should Governor DeWine’s proposal get the green light.
To help you understand why the potential increment of Ohio sports betting tax rates is garnering a lot of concerns, here’s a comparison with other states:
New York has the highest tax rate in the US. However, the state has a dense population and a significantly high number of bettors, so the sports betting industry remains stable. On the other hand, Ohio might have a problem with a betting tax only 10% lower than New York. It does not have the same population density, or the same level of interest in sports betting.
Governor Mike DeWine’s proposal to double the Ohio sports betting tax aims to serve other state needs, such as building youth sports facilities and stadiums. However, the drawbacks may also be significant. The state’s sports betting sector may decline, and bettors could lose out as sportsbooks tighten their belts to compensate for the increase.
The biggest concern is that bettors may shun Ohio-licensed sportsbooks and turn to offshore betting sites if they think they are getting a better deal. It is no wonder the proposal has aroused many concerns in the sports betting industry.
