Ohio Governor Doubles Sports Betting Tax Rate to 20% of Gaming Revenue

Ohio Gov. Mike DeWine increased the tax on sports betting revenue to 20% in the fiscal year 2024-25 state budget plan, doubling the payments legal sportsbooks will have to pay.

The idea was proposed last week and agreed to on June 30. DeWine himself was responsible for the initiative that proposed the idea in February, which left it as little surprise that he signed the plan into action and it took effect on July 1. 

There are varying concerns about the ripples that the newly-doubled rate will create.

According to lawmakers’ estimates, the 20% tax rate could raise as much as an additional $100 million in annual funding for the state.

DeWine’s idea of an increased tax rate was part of a package sent to the Ohio General Assembly. Policymakers there adjusted various parts of DeWine’s fiscal plan and sent back a $190 million outline for 2024-25, which he signed after a conference call Friday.

According to the Ohio Casino Control Commission, 18 licensed sports betting operators—including giants such as FanDuel, DraftKings, and BetMGM—produced roughly half a billion dollars in taxable revenue. The market, which launched on the first of the year, spurred by the Cincinnati Bengals’ endeavors in the NFL playoffs, produced a handle over one billion dollars during its first month of operation. 

While the tax hike may result in the immediate goal of increasing the tax pool, Rep. Bill Seitz (R-Cincinnati) is not convinced that it is the best long-term approach. He believes that smaller operators may not be able to meet the tax payments and could be forced to shutter their operations in a state that only recently became a home for legal sports betting.

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 said. “So, when you double the tax rate, that’s maybe not the smartest thing to do.” 

According to Seitz, lawmakers will conduct a deeper analysis of what is to come from the increased tax rate as part of a requirement of the new fiscal plan.

May was the slowest month for sports betting in Ohio, with sportsbooks combining to produce a $446.2m handle, a 14.3% month-to-month decrease in April. That is to be expected with the dwindling availability of sports to bet on and also the loss of the initial excitement of market launch, but is also important given that sports are in a “dead” period and the tax rate has now increased 10%.

Industry analysts are predicting that Ohio bettors could feel the effects of the new tax hike via a decline in promotions, or the value associated with them.

For example, DraftKings frequently offers a three-part $1,200 welcome bonus to customers that create a new account. That includes a $1,000 deposit match, $50 guaranteed bonus bet, and opportunity to win $150 in bonus bets with a $5 bet.

DraftKings and other companies—hypothetically speaking—may look at lowering the number of prizes they are giving out to preserve their bottom line. FanDuel revealed that it could be in line for such a move in a January announcement. 

 Ohio sportsbooks are also not allowed to deduct promotional credits from their taxable revenue, which is another reason that changes could be on the horizon.

DraftKings CEO Jason Robins previously told New York regulators that it would create worse odds for bettors if the state did not cut the 51% tax rate. This remains another possibility for the future of Ohio sportsbooks.