Ohio throws a few more curveballs into sports betting process

Ohio throws a few more curveballs into sports betting process

The Ohio sports betting bill has changed again.

Only this time the proposals are part of House Bill 29, a measure to create veteran identification cards. The amended HB 29, which passed the Ohio Senate on June 24, also would allow college athletes in the state to profit from their name, image and likeness.

Confused? Join the club.

State lawmakers are scrambling to pass a myriad of bills before the start of summer recess later this week. That led to some late-night changes by the Ohio Senate on June 24 that were bizarre even by government standards.

As the Cincinnati Enquirer’s Jessie Balmert detailed, a bipartisan NIL bill was derailed when Republicans in the Ohio House of Representatives amended Senate Bill 187 to ban transgender athletes from competing in girls and women’s sports. When Democrats objected, HB 29 became the new vehicle for the NIL legislation, along with a Senate-passed sports betting bill that was very likely to gain significant opposition in the House.

The result: a new HB 29, which passed the Ohio Senate by a 31-0 margin on June 24, but still must be approved by the House and Gov. Mike DeWine. And House Speaker Bob Cupp, as he did before the last-minute scramble, continued to stress after the new HB 29 was approved that the latest round of changes to sports betting won’t pass before lawmakers take an extended summer break.

The Ohio Senate did make some important changes on June 24 that would seem to make sports betting more likely to pass the House. The most notable is allowing counties with a population of 800,000 or more a maximum of five Type B licenses. Previously, the largest counties in the state were limited to three brick-and-mortar sportsbooks.

The population limits were significant issues in Cuyahoga and Hamilton counties, and could have been problematic in Franklin County. Cuyahoga County is home to three major professional sports teams in the Browns, Cavs and Indians, plus a casino (JACK Cleveland) and racino (JACK Thistledown). Hamilton County, which would have been limited to two retail licenses by Senate Bill 176, has a casino and racino, as well as the Cincinnati Bengals, Cincinnati Reds and FC Cincinnati.

With the sports teams getting first dibs at a Type B license, the casinos and racinos could have been left out of the action.

Of the 21 states, along with Washington, D.C., that have a fully operational sports betting industry, none base eligibility on county population and none have precluded brick-and-mortar casinos from getting a retail license.

“This is unlike any bill that we’ve seen,” Dan Reinhard, JACK’s senior vice president of governmental affairs, told Crain’s on June 24 — 12-plus hours before the Ohio Senate scrapped some of what it had done with SB 176 and rolled the changes into HB 29.

The latest version of sports betting legislation in the state seems sure to appease the concerns of Ohio’s 11 casinos and racinos. The new county limits should mean the casinos and racinos would have retail sportsbooks, and the betting houses, unlike the sports teams, could have as many as two Type A licenses. The pro sports clubs in the state would be limited to one mobile and online betting license. (The teams, as they would for a brick-and-mortar sportsbook, would partner with an outside company to run the mobile sports betting operation.)

Jay Masurekar, the head of gaming and travel investment banking at KeyBanc Capital Markets in Cleveland, told Crain’s last week that he believes additional casino traffic from sports betting customers could produce a 25% increase in gaming revenue for casinos and racinos. That revenue would be taxed at the state’s 33% rate for gambling, generating a $146 million tax spike, according to Masurekar’s calculations.

Asked if it made sense for Cleveland’s three major pro sports teams, plus the downtown casino, to all have a retail sportsbook, the Key executive said, “Why not?”

The typical sports bettor, Masurekar said, is male, well-educated and younger — a demographic that might tend to live in or frequent downtown Cleveland.

There’s no guarantee all of the clubs will choose to build a retail sportsbook, but the teams all want at least an opportunity to pursue one. Last week, we checked in with the Browns, Cavs and Indians prior to the Ohio Senate’s wild, last-minute changes on June 24. The teams didn’t want to comment on SB 176 since so much had changed in the last couple months, and quite a bit more could this summer.

Curt Steiner, the Columbus-based CEO of Steiner Public Relations, is serving as the spokesman for the Ohio Professional Sports Coalition. The coalition consists of the eight major professional sports teams in the state, plus the Memorial Tournament.

“What’s really important to the sports franchises is that these are locally based operations that are very ingrained in the communities of Ohio,” Steiner told Crain’s last week. “Our members produce the games upon which sports betting is based. That’s why it’s very important for these local businesses to participate directly in the process.”

Regardless of how the state proceeds with sports betting this week, the teams seem guaranteed to be a big part of the industry going forward.

Also likely to stay is the proposed 10% tax on Ohio’s sports betting profits.

Four states that border Ohio — Indiana, Michigan, Pennsylvania and West Virginia — have legal sports betting markets. The quartet has had average holds of 7.5% to 8.1% since legalizing the industry.

After SB 176 passed by a 30-2 vote on June 16, an Ohio Legislative Service Commission analysis projected that the state could have a $2.8 billion sports betting industry by 2023. By 2024, the market was projected to pass $3 billion. That, according to the legislative budget office’s estimates, could mean $19 million to $24 million in tax revenue for the state.

The 10% tax rate, which could encourage more businesses to get involved and should produce a “more open framework,” was one of the few things Masurekar, KeyBanc Capital Markets’ top gaming analyst, liked about SB 176.

But now we’re on to HB 29, and sports betting still doesn’t seem headed to an approval this week.

At the very least, all of the maneuvering in the past few months seems to indicate that Ohio should get a sports betting law passed this year.

We wouldn’t be willing to wager, however, on what changes will be coming and which groups will be the latest to push for more rewrites.

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