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Three Republican House members on an 11-person study commission have come out in support of legalizing online gaming and interactive lottery operations in Ohio but criticized the state’s sports-betting tax hike, saying it has hampered the industry’s growth.
Representatives Jay Edwards, Jeff LaRe and Cindy Adams released a joint letter as part of a gaming study commission's final report that acknowledged pushback from land-based casino and lottery retailers worried about the effect that legalization of iGaming or iLottery would have on their annual revenue with decreased in-person participation.
“While we understand their hesitation to expand due to an uncertain impact, we believe that iLottery and iGaming could be a net benefit to the state of Ohio,” the letter signed by the three lawmakers states. “Looking at other states who have implemented either or both iLottery and iGaming, we see significant increases to tax revenues generated with greater participation but also that in-person sales continued to increase.”
That, the lawmakers argue, can largely be attributed to more people participating in the market on their phones and becoming more comfortable and knowledgeable about doing it at a physical location.
For example, neighboring Pennsylvania, which launched iLottery in 2018, saw an increase of almost 20 percent of sales in traditional retail stores, while Kentucky, which launched iLottery in 2017, saw an increase of 56 percent of in-store lottery sales since the launch.
Similarly, iGaming states have all seen big increases in overall gaming revenue.
Edwards and his two House colleagues noted that total gaming revenues continue to increase in Ohio, and the “regulatory backbone remains strong”. In 2023, online sports betting in Ohio generated $143.3m in tax revenue.
“Should iGaming move forward, tethering licenses to brick-and-mortar casinos in order to offer virtual poker, slots, and table games would be a balanced approach,” wrote Representative Bride Rose Sweeney, a Democrat and another member of the study commission.
Sweeney noted that the Ohio Legislative Service Commission projected iGaming would generate $500m to $650m in annual tax revenue when taxed at 33 percent, the same rate as land-based casinos.
“Proponents claim that iGaming supplements existing revenue with new consumers, while opponents argue it cannibalizes casino revenue by diverting existing consumers away from brick-and-mortar facilities and onto smartphone apps operated by large out-of-state companies,” Sweeney wrote.
“The truth may lie somewhere in the middle as there are recent studies on both sides of the issue,” she wrote.
The letters were part of a 354-page report released Friday (July 12) on the future of gaming in Ohio.
After being established as part of Ohio's annual budget law of 2023, the Study Commission on the Future of Gaming met four times between February and April and comprised Republicans and Democrats from the Senate and House, along with the chairs of the state racing commission and the Ohio Casino Control Commission, along with the director of the Ohio Lottery.
The letters and report consolidating testimony submitted by various interest groups could lead to online gaming and lottery legislation or even a bill to rescind the sports-betting tax increase being introduced in the Ohio legislature.
The three House Republicans also cautioned that any future expansion of a gaming platform is done safely and with the current system in mind.
“With ongoing domestic and foreign threats to everyday Ohioans’ data, these platforms provide another avenue for hackers to gain access to someone’s personal records. Further, any expansion of gaming must be done so with caution to the current framework in mind.”
“Any implementation of iGaming must not come at a cost to these entities,” the letter states.
Ohio Sports-Betting Taxes
In its 2023 budget law, Ohio doubled its tax rate on sports betting from 10 percent to 20 percent of gross revenue. Republican Governor Mike DeWine first proposed the increase barely two months after the launch of wagering on January 1, 2023.
Edwards, who was co-chairman of the study commission alongside Republican Senator Nathan Manning, and his colleagues stressed that the doubling of the sports-betting tax “hampered the growth that was occurring and made other companies think twice about coming to Ohio to invest”.
“As future General Assemblies look at making changes to the sports gaming platform or implement new forms of gaming, they must keep those who are going to be making the investments in mind,” they wrote. “At a minimum, the companies who look to make future investments in Ohio should know what they are buying into.”
Sweeney noted that many witnesses who testified before the study commission were especially critical of lawmakers approving a doubling of the tax rate on sports betting.
“Many proprietors cited frustration with such a significant change to the program halfway through the first year of legalization and the instability that caused their businesses,” Sweeney wrote. “The legislature should continue to monitor how this new tax rate affects the gaming industry.”
Manning also wrote that he supports lowering the tax rate for retail but not mobile sportsbooks back down to 10 percent, hoping it would “allow existing sportsbooks to be more successful and attract other companies to open new ones”.
“Additionally, iLottery and iGaming was a noteworthy topic of conversation,” wrote Manning, who in 2022 introduced Senate Bill 269 to legalize online lottery games in Ohio. Although that bill passed the Senate, it stalled in the House.
“In the short term, I do believe we should move forward with a portion of SB 269 and allow [the Ohio] Lottery to offer draw games and multi-state games online,” Manning wrote, referring to tickets for traditional lottery draw games. “These products are already available online through third-party vendors, and it is common sense to allow lottery to offer them directly to consumers.”
Senators Al Landis, a Republican, and William DeMora, a Democrat, both expressed their opposition to legalizing iGaming and iLottery in Ohio.
DeMora admitted that opening a new source of revenue would benefit the state but worried that allowing residents to gamble on their phones would damage brick-and-mortar businesses.
“I also have concerns about creating too easy access to gambling,” DeMora said.
