Ohio Legislation Would Tax Sports Betting Handle and Revenue

Senate Bill 199 is the latest legislative measure to increase the amount sportsbooks pay to the state of Ohio in taxes each year. However, this legislation takes a novel approach by taxing the betting handle rather than increasing the rate the operators are currently paying on their revenues.

Double Dipping

Governor Mike DeWine doubled the tax rate on sportsbooks’ revenues from 10% to 20% only months after the mobile sports betting industry launched in the Buckeye State in January 2023. He tried to double it again this year to 40% but was rebuffed by his colleagues in the legislature.

Senator Introduces New Handle Tax Proposal

However, a new attempt at wringing more money out of the state’s sportsbooks has been initiated by Senator Louis Blessing, the primary sponsor behind Senate Bill 199 (SB 199), which would add a 2% tax on the handle (the total amount wagered each month regardless of wins or losses) that would be added to the 20% on revenues the sportsbooks are already paying.

To put it in context, DeWine’s increase of an extra 20% would have yielded double the $170 million in taxes the books paid in 2024, or $340 million. However, should the tax rate on revenue remain at 20%, the additional 2% on a net handle of $7.7 billion (after the $170 million was paid) last year would have reaped an additional $154 million. That is only slightly less than the $170 million called for by DeWine’s 20% increase on revenues.

Industry Pushback Expected

Number crunching is what sportsbooks do for a living, and there is little doubt that the backlash will be immediate from the operators and their trade organizations. Even though the bill would allow sportsbooks to deduct the 0.25% federal excise tax from their taxable amount, it would not allow them to deduct promotions or free plays.

Tennessee is the only state to tax the handle (1.85%), but it does not tax the revenue. Ohio would be the first state to do both, and it is unclear whether Senator Blessing’s fellow lawmakers will welcome the unique tax after shutting down the governor’s most recent efforts to increase the rate on revenues.

iGaming Coming to Ohio?

In another effort to raise tax dollars, Senator Nathan Manning has introduced Senate Bill 197, which would allow online casino gambling and an online lottery. Although iGaming generates far more tax revenue than mobile sports betting, states have been reluctant to adopt it because of problem gambling concerns revolving around a 24-hour casino available on any mobile device or PC by simply downloading the app.

Critics have also voiced concern that it would cannibalize business from land-based casinos due to its convenience. This is why only seven states, including New Jersey, Delaware, West Virginia, Pennsylvania, Michigan, Connecticut, and Rhode Island, have legalized iGaming, compared to the 39 states that have passed mobile sports betting legislation.

Changing Attitudes Toward Gambling Options

“I think there’s a different tone and tenor about some of these things than maybe there was ten years ago,” Ohio Senate President Rob McColley (R-Napoleon) said. “I think a lot of times, Ohioans want to have a little bit more choice as to how they spend their money and spend their recreational time.”

Senate Bill 197 directs that 99% of the revenue generated from iGaming would go into the state general revenue fund, which means legislators would determine how the money is spent. Although some legislators are leery of online casino gambling, like Ohio House Speaker Matt Huffman, he is willing to listen.

“I think it ought to go into the general revenue fund; maybe we can do that to reduce income tax or some other tax in the future, but I, at the moment, until I see some other proposal, that’s where I think it would be,” Huffman said.