Ohio Legal Sports Betting Unlikely in 2018

With a population approaching 12 million and an existing land-based casino industry dating back to 2009, Ohio may appear to be a natural match for the introduction of legalized sports betting. However, information coming out of Columbus indicates that the Buckeye State is very unlikely to pass the necessary legislation before the end of 2018.

Sports Betting Bills Introduced

On July 12 of this year, state senators John Eklund (R) and Sean O’Brien (D) introduced Senate Bill 316 to legalize sports betting. A similar bill, House Bill 714, was introduced in the state’s House of Representatives on July 17 by David Greenspan (R). Both bills are extremely brief, and they were intended as placeholders until more fleshed-out proposals could be added into the language of each bill. Yet, in more than a month, no work has been done on amending either bill. The entire text of Senate Bill 316 as of Aug. 28 reads the same as it was when first introduced to the chamber:

A B I L L

To express the intent of the General Assembly to develop and enact legislation legalizing sports wagering.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. It is the intent of the General Assembly to develop and enact legislation legalizing sports wagering.

The corresponding bill in the House of Representatives is similarly lacking in details. Before there would be any point in passing one of these bills, the following would have to be addressed and inserted into the bills as appropriate:

– The eligibility requirements for applying for a sports betting license
– Any upfront or annual license fees that would have to be paid
– Any restrictions on the types of bets permitted
– Whether or not online sportsbooks would be possible in addition to brick-and-mortar facilities
– The rules surrounding mobile betting if such activity is authorized

Expected Timeline

At the time the Senate bill was introduced, Senator O’Brien signaled his interest in having all the provisions of the legislation ready by August or September. This hasn’t happened yet, and Senate President Larry Obhof (R) has stated that it will probably take until November, after the next elections, for the bill to proceed to a committee. Assuming it passes the committee with no problems, it might then come up for a floor vote sometime in 2019.

Actually, Obhof has expressed his doubts as to whether the General Assembly even has the authority to pass any law authorizing sports betting. The May 2018 Murphy v. NCAA ruling by the U.S. Supreme Court merely removed the federal restrictions on sports betting. It did not give the state legislatures power to legalize it if there are valid prohibitions expressly forbidding it in certain areas. Obhof raised the idea that sports betting may be against the Ohio Constitution, which would have to be amended before any sportsbook licensing law could be passed. State Senator Obhof elaborated in an interview with Cleveland.com:

“I think there is a pretty serious legal question of – irrespective of the federal court decision this year – whether or not we could even have sports gaming here, if that’s something the legislature could even authorize, even if they wanted to.”

If alterations to the Ohio Constitution are in order, then it would likely be several years before the topic of state-supervised sports betting could even be taken up by the legislature.

What Does the Constitution Say?

Ohio is governed by its constitution of 1851 although this charter has been amended numerous times in the intervening years. For decades, Ohioans had to be content with pari-mutuel racetrack wagering as the only constitutionally permitted betting outlet available. In later years, the constitution was amended several times to allow lotteries, charitable gaming, casino gaming and video betting terminals at racetracks. Licensed sports betting, if it fits into any of these categories, would probably be a form of casino gaming. The definition of “casino gaming,” as outlined in the Ohio Constitution, is:

“Casino gaming means any type of slot machine or table game wagering, using money, casino credit, or any representative of value, authorized in any of the states of Indiana, Michigan, Pennsylvania and West Virginia as of January 1, 2009, and shall include slot machine and table game wagering subsequently authorized by, but shall not be limited by subsequent restrictions placed on such wagering in, such states.”

It clear that this definition was drafted in such a way as to incorporate the prevalent types of gaming conducted by casinos in neighboring states when the relevant amendment was added to the Ohio Constitution. It would be a big stretch to envision traditional sports betting as falling into this category.

Taxes May Spell Trouble

Even if betting on sports were deemed to be a subset of casino gaming, then it would be subject to Ohio’s 33 percent tax on gross gaming revenue. This high figure would threaten to stifle the betting market before it got off the ground as 33 percent is well above the tax rates in competing jurisdictions that already have legalized sportsbooks. It would still be a bit less than the 36 percent rate established in the newly created Pennsylvania sports betting market, though.

Potential Earnings

In 2017, Ohio’s 4 casinos and 7 racinos generated a combined $1.78 billion in revenue, higher by 5% compared to the previous year, and resulting in $594 million in taxes for state coffers. Nevertheless, the year-over-year growth was mostly attributable to the state’s racino sector, as can be seen from the static casino revenue results since the first venue opened in 2012:

2017: $819 million
2016: $798 million
2015: $812 million
2014: $809 million
2013: $821 million

The Ohio Casino Control Commission subsequently collected $265.5 million in tax revenue from its four casinos last year, or 33% of all wagers. Legalized sports betting could therefore help inject a spark back into the state’s gambling market, with some estimates suggesting its contribution could be as much as $1 billion in its first year alone, representing around $13.4 million per annum in state revenue. Past experience, however, tells us that optimistic gambling forecasts are often furnished by those seeking to have legal wagering introduced to a state. One of the lawmakers not buying the figures is Obhof, who has described them as being “probably exaggerated”. Irrespective of the numbers, the Senate President said that it was first important to decide whether “it’s legal or not, if it’s constitutional or not.”