Ohio Governor Mike DeWine has put forth a new budget proposal that could significantly alter the landscape of sports betting in Ohio, including a major tax hike on gambling operators. The proposed budget, totaling $218 billion, includes a plan to raise the state’s tax rate on sports betting from 20% to 40%, aiming to generate additional funds for initiatives like the construction of professional sports facilities and youth sports programs across the state. This marks a substantial increase from the current rate, which DeWine had already doubled from 10% to 20% in 2023.

Boosting stadiums and youth sports with gambling revenue:

The latest proposal is in its early stages and requires approval from the state legislature before it can take effect. Should the legislature agree, this tax increase would make Ohio one of the most expensive markets for sports betting in the U.S., second only to New York, which currently imposes a 51% tax rate. This move is a part of DeWine’s broader effort to address funding needs for sports infrastructure, including a new stadium for the Cleveland Browns, which has been the subject of legal battles between the team and the city of Cleveland.

Under DeWine’s proposal, the funds raised from the increased tax on sports betting would be directed toward two main priorities: constructing and renovating professional sports stadiums and supporting youth sports programs throughout Ohio. The revenue from this tax increase is expected to generate between $130 million and $180 million annually. A significant portion of the funds would be allocated for the Browns’ proposed new stadium in Brook Park, a suburb of Cleveland, as the team seeks to relocate from its current downtown location.

However, this plan has not come without controversy. The Cleveland Browns are currently engaged in a lawsuit with the city of Cleveland, seeking to bypass the “Modell Law,” a state law designed to make it more difficult for sports teams to leave taxpayer-funded venues. This law has long been seen as a safeguard against teams relocating to other cities. The Browns have argued that the law is unconstitutional and that it does not apply to their plan to build a new stadium in Brook Park.

A new tax rate: supporters and critics weigh in:

In addition to targeting the Browns’ stadium funding, DeWine’s tax hike would apply to all sports betting operators in Ohio, including major platforms like BetMGM, DraftKings, FanDuel, and Fanatics Sportsbook. The tax rate increase would mark a 400% surge in just two years, from 10% to 40%. Industry representatives have raised concerns that such a dramatic increase could undermine the business environment for legal sports betting companies in Ohio.

Scott Ward, vice president of the Sports Betting Alliance (SBA), expressed his concern that the tax hike would force sportsbooks to reduce investments in areas like marketing and sponsorships. Ward warned that this could ultimately result in worse products for consumers and could encourage a shift toward unregulated, offshore betting platforms that are not subject to Ohio’s tax laws. These offshore platforms often offer better odds and products, making them more attractive to bettors despite their lack of consumer protection measures.

Jeremy Kudon, president of the SBA, also highlighted the financial strain the tax increase could place on legal operators. He argued that such tax rates could force sportsbooks to adjust their business models by cutting back on various operational aspects, including promotions and customer engagement efforts. “Once a legal operator pays in excess of 20% of GGR in taxes… it has no choice but to cut other costs,” Kudon noted, referencing how operators might need to reduce their marketing budgets to remain profitable.

Governor DeWine, however, has defended the tax increase, stating that it is only fair that sports betting operators contribute more to the funding of professional sports infrastructure, especially when their advertising efforts target Ohioans and lead to significant financial losses for local bettors. “These sports gaming [groups] are extremely aggressive… They’re in your face all the time,” DeWine commented, as reported by Ohio Capital Journal. “They’re getting Ohioans to lose massive amounts of money every year, and it seems to me only just and fair that some of the stadiums be paid for by them or a portion of it.”

The Governor’s plan aims to ensure that professional teams like the Cleveland Browns do not entirely rely on public funds to finance their stadium projects, offering a mix of state tax revenue and private funding for these large-scale projects.