Ohio approved a 2023 increase on its sports betting tax. At least one lawmaker wants to return it to its original rate.
State Sen. Niraj Antani, the lead sponsor of the 2021 legislation that legalized Ohio sports betting, introduced a bill earlier this week that would cut the tax rate from 20% of operator gross gaming revenue to 10%. Filed in his final days before leaving office, Antani wrote in testimony supporting the tax decrease that the current rate makes it “significantly difficult” for many smaller operators to be “financially feasible.”
“Ten percent was a reasonable tax rate that put us in the middle of the pack,” Antani wrote in a letter to the state Senate’s finance committee. “While I’d love for us to be at the 6.75% rate to tie the lowest in the country, going back to 10% is reasonable.”
Ohio sports betting
Ohio’s 2021 sports betting legalization bill included one of the most expansive licensing caps in the country. More than two-dozen operators expressed interest in the market, the nation’s seventh-largest by population.
As part of the state’s most recent budget, Gov. Mike DeWine pushed to double the rate. The 10% rate was near the median average; the 20% puts Ohio at the sixth-highest mark of the 39 states that have approved legal sports betting.
The 10% tax rate was also a foundational element that encouraged operators to enter the market said John Pappas, state advocacy director for gaming industry support group iDEA, in an email to Covers.
These businesses made substantial investments, established market access agreements, and secured supplier contracts based on this rate, Pappas wrote. The midstream increase to 20% disrupted their business models, creating more challenges for operators and forcing several to leave Ohio while deterring other books from seeking available licenses.
Nineteen mobile sportsbooks accepted bets in Ohio in August. Three of those – Betfred, Superbook, and Betway – have since left the state. Six of the remaining 16 books have less than 1% market share apiece.
Larger books by handle such as DraftKings and FanDuel, which each have around one third of the Ohio market, will be able to withstand the higher rate. But it hurts competition for the smaller books, Pappas said, damaging the Ohio sports betting market overall.
“Returning to the original 10% rate would restore stability, enabling operators to thrive and deliver value to Ohio consumers, while fostering a healthy, competitive market that benefits the state in the long term,” he said.
Ohio lawmakers are nearing the end of a lame-duck legislative session following the 2024 elections. The sports betting tax rate likely won’t be considered until the new legislature convenes next year.
National implications
Ohio’s potential tax decrease comes ahead of a critical 2025 legislative season for gambling industry stakeholders in statehouses nationwide.
Several established sports betting states have considered tax increase bills ahead of the 2025 session, which begins in January in most states. Illinois, one of the nation’s highest-grossing sports betting markets, has already passed legislation that creates a tiered tax structure, pushing high earners such as DraftKings and FanDuel to near some of the nation’s highest levels.
DraftKings introduced and quickly rescinded a proposal to pass the tax on to bettors in Illinois, New York, and Pennsylvania. Operators are still dealing with how to take on a potential higher tax burden in the face of sagging growth opportunities.
Missouri was the only state to approve sports betting in calendar year 2024. Minnesota and Georgia seem like leading contenders in 2025, but there seems to be little chance for legalization in California and Texas, the nation’s two largest states by population.
Louisana lawmakers won't increase sports betting taxes on sportsbooks today but interest remains in the legislature; state Rep. Michael Johnson indicated today the proposed 51% rate in a new bill- which would be the nation's highest - is too low.
— Ryan Butler (@ButlerBets) November 13, 2024
The limited future growth opportunities for sports betting come as online casino legalization has been even slower. Though multiple states are expected to introduce online slot and table game legalization measures in 2025, there is no sure bet any such legislation passes.
These games, which have significantly higher profit margins than sportsbooks, are only legal in seven states.
Sportsbooks have increased their margins in the past two years largely due to the proliferation of single-game parlays. But without new state markets, and potential future tax increases, there is a lowered profit ceiling for the largest operators – and a potential existential threat for smaller companies.
