Potential Financial Impacts of Proposed Sports Betting Legislation in Ohio for Betting Operators
**Ohio Approves Statewide Mobile and Retail Sports Betting, Introducing Daily Tax Payments**
In a historic move, Ohio lawmakers have approved HB 29, legalizing statewide mobile and retail sports betting [1]. The new legislation, awaiting Governor Mike DeWine's signature, introduces a unique tax payment system that sets Ohio apart from many other states.
Under the Ohio law, sportsbooks must remit a 4% state tax on any sports betting win immediately, with tax withheld at the time of payout daily [1]. This daily tax collection means operators pay taxes on winnings in real-time, affecting cash flow and potentially increasing administrative costs.
In contrast, states like Illinois impose taxes differently—often monthly or through per-wager fees. For example, Illinois has a flat tax plus a per-wager fee which operators pay monthly, leading to an effective tax rate around 31% to over 40% of gross revenue, depending on the operator and tax structure [2][4].
The difference in timing (daily vs. monthly payments) primarily affects the cash flow and operational complexity for sportsbooks:
- Daily payments in Ohio require operators to remit taxes on a daily basis, which can increase accounting and liquidity burdens since taxes are paid continuously as bets are settled. This can make the effective tax burden feel more immediate and demand precise daily revenue tracking. - Monthly payments in other states allow sportsbooks to aggregate bets over a period and remit taxes less frequently, easing cash flow management and administrative overhead.
However, the actual effective tax rate depends mainly on the percentage levied on betting revenue or winnings, not just payment frequency. Ohio’s 4% on winnings is relatively low compared to Illinois’s higher combined tax rates, but the daily remittance requirement can increase operational costs and complexity, potentially making the effective cost higher in practice.
The new law opens the opportunity for betting on "special events," such as awards shows like the Academy Awards. A total of 21 existing casinos and pro sports franchises or venues in Ohio can apply for sports betting licenses, with four digital licenses potentially connected to companies with a footprint in Ohio, but not necessarily a gaming footprint.
Notably, the bill does not allow for negative carryover, meaning losses on one day cannot be used to balance out winnings on other days. Additionally, promotional credits may not be a useful tool for sportsbook operators in Ohio due to the bill's current wording.
Operators could potentially pay more taxes on a large wager in Ohio than if the winnings were calculated over a month and treated as a single event, especially during major event weekends. The bill also mandates that official league data will be required to settle Tier 2 (or prop) bets in Ohio, ensuring the integrity of the betting market.
In summary, Ohio's sports betting law introduces a unique tax payment system that could increase the effective burden on operators through cash flow and administrative difficulties, even though its nominal tax rate is lower compared to states that allow monthly payments but impose higher rates.
- The new Ohio sports betting law, HB 29, mandates daily tax payments on sports betting winnings, differentiating it from states like Illinois that commonly employ monthly tax collection methods.
- Daily tax payments in Ohio require sportsbook operators to remit taxes on a continuous basis, potentially increasing their accounting and liquidity burdens due to the immediate nature of tax obligations.
- In contrast, Illinois promulgates taxes through a combination of a flat tax and per-wager fees, which operators pay monthly, resulting in a more manageable cash flow and reduced administrative overhead.
- The Ohio law could potentially increase the effective cost for sportsbook operators, despite its lower 4% tax rate on winnings, due to the operational complexities and cash flow constraints posed by daily remittance requirements.
- The unique features of Ohio's sports betting legislation, such as the daily tax payment system and the requirement for official league data for settling Tier 2 bets, differentiate it from other states' sports betting business models.
