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Ohio may provide the last chance to see online casino expansion in the US this year, after other states have tried and failed. Sen. Nathan Manning introduced SB 197 this week, which weighs in at 701 pages and makes multiple changes to the state’s gaming laws, including authorization for iGaming and an online lottery.
The Buckeye State’s legislative session runs year-round, so there’s plenty of time for the bill to advance. Historically, states with longer sessions have shown a greater likelihood of success with online gambling expansion, because it is a complex topic.
Although we’re nearly at the midpoint of the year, Sen. Manning has given the bill more time to build momentum than his predecessor. Sen. Niraj Antani spearheaded Ohio’s 2024 online casino bill, which was the first in the state. However, he waited until September to do so, and it took until November to advance to the Finance Committee, where it stalled out.
Aggressive tax rate and protectionist policies
More runway isn’t the only thing Sen. Manning’s bill has going for it. Its specifics seem geared to appeal not to the online gambling industry—which is likely to almost any proposal—but to neutral legislators and to existing retail gambling interests. Opposition from casinos, racetracks, the state lottery, etc. is one of the most common reasons such bills fail.
SB 197’s tax rate and licensing fees can’t be called business-friendly. They’re most comparable Pennsylvania’s, which is the most aggressive of the existing online casino markets in that regard. Pennsylvania also proves that such a structure can work, at least in a state so big that operators can’t afford to sit the opportunity out. With 12 million residents, Ohio is also very close to Pennsylvania in size.
Each land-based operator and racetrack would need to pay $50 million up front for a license, and $5 million to renew, once every five years. They would then be subject to a 36% privilege tax on gross revenue. Pennsylvania charges a different rate on slots than on table games, but the effective aggregate rate works out to slightly more than that most months.
What makes Ohio’s proposed policies unique is that they impose additional burdens on out-of-state or online-only operators. The basic licensing and tax rules apply only to casinos running their own online sites. Those that contract to offer market access to a third-party brand see the tax rate go up to 40%. Moreover, that third party and its partner must each pay $50 million plus $5 million renewal for a license.
Is there any hope of consensus?
Squeezing the most possible state money out of the proposed online casinos will make the bill appealing to legislators whose primary concern is the budget. Meanwhile, the added barriers for out-of-state operators might do a bit to appease those who don’t like the idea of online competition. And the inclusion of an online lottery should appease anyone concerned about the impact on state-operated gambling.
Specifically, JACK Entertaintment is likely to be the main antagonist in this story. Its Senior VP of Government Affairs Daniel Reinhard had harsh words about last year’s bill and what it might do to the retail industry. Providing more favorable to local operators using their own brand might do a little bit to ease those concerns, but it’s unlikely to provoke an about-face.
Probably, what JACK is most worried about is that it hasn’t ventured into the online space yet, while other gambling companies with an Ohio presence include the likes of MGM and Caesars, which are dominant forces there.
The added barriers to out-of-state operators do raise one other possibility, however. Illinois was another state to try to protect its retail operators by imposing special conditions on third-party brands. The outcome of that was that DraftKings actually bought one of the retail properties—the Casino Queen in East St. Louis—to circumvent that so-called “penalty box.”
So, there’s another way to look at the of Sen. Manning’s bill. Any out-of-state operator looking to enter the market could, effectively, get a $50 million discount on buying out an in-state retail property, and secure a significant tax break in the process. By the same token, that means any local operator interested in selling might be able to secure a . There’s been no outward indication that anyone is considering such a deal, but it’s something that could weigh into the calculus of or opposition.
