Ohio legalized sports wagering is unlikely to come soon

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s many states are rushing to offer legal sports gambling, it’s unclear what authority exists in Ohio to carry out betting on sports. It may be a valid extension of the current authority of the Ohio Lottery Commission, the Ohio Casino Control Commission or both, to oversee — and tax — sports gambling, but it would first take the Ohio General Assembly to pass legislation to clarify the matter.

Or it may end up legalized by a vote on a state constitutional amendment, like the one that created casino gambling in 2009, Crain’s Cleveland reports.

In any event, it’s looking like it will take until at least 2020 before Ohioans can place sports bets in the state. By that time residents in many, and perhaps a majority, of the states around Ohio will be placing legal sports bets.

That prospect disappoints Jay Masurekar, head of gaming and travel investment banking at KeyBanc Capital Markets in Cleveland.

“We always seem to do something at the end, after everybody else did it,” he said. “(Sports betting) is happening, it’s a given that it’s happening across the country.”

He would have preferred that Ohio lead, which he believes would have maximized the tax revenue for the state, “instead of waiting for everybody else to play it out and then try to get a small piece of whatever remains.”

Masurekar said that’s the scenario that played out with casino gambling. By the time Ohio’s casinos started opening in 2012, many bettors, particularly those who live near the state borders, already were in the habit of crossing the state line to gamble and thus weren’t inclined to switch their allegiance to an Ohio casino that was as far, or even farther, away. As a result, their heavily taxed gambling losses benefited the budgets of Pennsylvania or Michigan, not Ohio.

On May 14, the Supreme Court agreed with the state of New Jersey and overturned the 1992 Professional and Amateur Sports Protection Act (PASPA), which prevented the spread of sports betting in the United States. That returned authority over sports betting to the states.

“When you look at sports betting, nearly 20 states introduced or passed legislation this year,” said Casey Clark, vice president of strategic communications for the American Gaming Association (AGA). “A lot of those happened even before the court ruled, so there were a lot of states anticipating a positive result from the court.”

Already, casinos and racetracks in two states, New Jersey and Delaware, have started to accept bets on sporting events.

Four other states — Mississippi, Pennsylvania, Rhode Island and West Virginia — are expected to join the club before the end of the year. Other states, including every other state bordering Ohio, have legislation in the works.

In Ohio, legislators in both houses have introduced one-sentence, placeholding legislation, that expresses the intent to enact a sports wagering bill.

State Sen. John Eklund, a Munson Township Republican, who is co-sponsoring legislation with state Sen. Sean O’Brien, a Trumbull County Democrat, said he doesn’t think legislators yet understand what legalization means and how it might work best in Ohio. He hopes to gather information over the summer to flesh out a bill that can pass before the session ends in December.

“I think the outlook is ‘guarded optimism,'” he said. “I think we can get it right.”

Others are not so certain.

“I don’t think we’ll be an early adopter,” said David Robinson, a former legislator now an economic development attorney and consultant with the Montrose Group. “Unless they can figure out a revenue model that produces a lot of money.”

He said the Legislature could tax sports bets like a sales tax on each bet, or it could use the casino taxing mode. The state of Ohio levies a 33% tax on a casino’s gross revenue, and after winners are paid.

A study by the AGA of the potential of sports betting estimates Ohio would gain $13.4 million a year in state revenue from a tax on sports betting. By comparison, the Ohio Casino Control Commission collected $265.5 million in tax revenue in 2017, or 33% of the total amount wagered.

Complicating the situation, though, is both the history of sports wagering and the impact of technology on the future.

Betting on sports has a long, if illegal, history of transactions through independent businessmen, bookmakers, by phone. In addition, New York has had neighborhood, off-track-betting parlors for horse racing since the 1970s.

That has Rick Lertzman, who was involved with several of the attempts to amend the constitution to bring casino gambling to Ohio a decade ago, thinking about a constitutional amendment in 2019. Lertzman plans a November 2019 ballot issue that would bring sports betting to bars and bowling alleys, in the same way that the Ohio Lottery Commission brought keno to those establishments.

“The Legislature is a do-nothing Legislature,” he said. “The only way to do it is to amend the constitution. It should not be left to the monopolies (the casino and racino operators) that now run the state.”

His proposal wouldn’t preclude the casinos from running sports betting operations, he said, “but we would open it up to a lot of establishments that already have liquor licenses or do Keno statewide.”

Technology, though, is likely over the long term to have a greater impact on placing bets.

Although it has been illegal to run online or mobile phone betting operations in the United States and for bettors to use their U.S. credit cards to place bets, the rest of the sporting world has moved its wagering online. And online sports books like FanDuel, which is owned by an Irish firm, are moving in.

FanDuel already operates legal fantasy sports operations in the United States. Now it is teaming up with New Jersey’s Meadowlands Racetrack to operate its sports betting parlor and online operation.

That may be the future of sports betting in Ohio and elsewhere, said Jake Williams, head of legal for Sportradar US, which is a subsidiary of a Swiss sports data and technology firm. Sportrader provides sports data to many sports leagues and also offers bookmakers information services including oddsmaking.

“The main issue in the U.S. is that all sports betting will be attached to current casino operations where everything is done inside the gaming facility,” Williams said. “If you want to play craps you go to the casino. Around the world, generally, you don’t need a physical gaming facility” for sports betting.

So, he said, adding sports betting would involve subcontract to an existing online sports book with the state-licensed casino operator responsible for tracking the dollars wagered and collecting the taxes for the state.

AGA’s Clark also envisions casino-based betting with heavily regulated mobile access.

“Our concern would be opening this up in a way that doesn’t have the same level of scrutiny (as current casinos)”, he said. “So you have to be kind of careful how you expand into this type of gaming. And how you provide the right kind of protections for consumers.”

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