It has been rumored for a few weeks now, but the Ohio state legislature has officially doubled the sports betting tax rate. What was a very reasonable 10% tax rate for sports betting operators has now been doubled all the way up to 20%.
Governor Mike DeWine was the first to suggest this change, as he included the increased tax rate in his budget for the next fiscal year. The lawmakers in the state have to approve that budget, and they recently voted to accept the tax rate hike.
The budget is actually for two years, so sportsbook operators will have to pay the 20% for at least the next 24 months. This change also came without little warning as the tax rate is changed as of July 1.
It’s unclear if this will be a permanent change in the state of Ohio as it’s a pretty drastic measure to take. The state legislature is expected to launch a study that will look at the sports betting tax rate, and an official proposal will come at some point.
Governor DeWine believed that an increase in the tax rate was needed because the sportsbook operators were spending too much money on advertisements. This change also came after the state was dealing with a pretty significant decrease in the total amount of handle.
A Potential to Backfire
While most of the lawmakers backed the decision from Governor DeWine, others worry about the potential ramifications. No state sports betting has ever doubled the tax rate at one time, especially not when the market is just six months old.
There is no doubt that there is a level of greed involved in this decision, and it’s going to create a major issue for the state. Even with a decrease in betting, sportsbooks were already ahead of the pace that was originally projected.
If sportsbooks are forced to pay a higher tax rate, then they are unlikely to offer big bonuses and promotions to sports betting customers. That could, in turn, lead to some sports bettors leaving the industry, and it will have a negative impact.
Ohio is also going to find it harder to attract new online sportsbook operators as those companies won’t want to pay that tax. There are still plenty of licenses available, and those will likely remain open now that this new law has taken effect.
Rapid Decline in Wagering
The decline in sports betting in the state of Ohio has been shocking, but it falls in line with what has taken place throughout the entire country. Ohio put up huge numbers when it launched sports betting back in January, as the total sports betting handle was more than $1.1 billion.
It looked as if Ohio was going to become one of the biggest online sports betting markets in the United States, but bettors have stopped betting in a big way. The total sports betting handle in May was less than half of what it was during the first month, and the state is concerned about those numbers.
There were 16 different online operators that launched back on January 1, and that is another big reason for the huge opening month. No other state with legal sports betting had that many options all launched at the same time, and bettors were getting signed up on multiple sportsbooks.
Now that the new tax rate has taken effect in Ohio, it will be interesting to see what the overall numbers look like for the rest of the year.
