Ohio’s newest omnibus gaming bill was introduced on Thursday, May 6. Senate Bill 176 (“SB 176”) covers a range of topics, including the authorization of sports betting, the creation of a sports betting pool within the lottery, online sports gaming, authorization of electronic instant bingo, and also established a committee to study the potential effects of online lottery ticket sales (known as iLottery) on retail ticket sales in Ohio. Upon analyzing the wide breadth of topics (SB 176 is more than 250 pages), this article will provide a breakdown of several key provisions related to the proposed authorization of sports gaming.

The Authorization of Sports Betting

SB 176 proposes to legalize and regulate sports betting in Ohio through a sports gaming lottery offered by the Ohio Lottery Commission and sports gaming agents licenses with regulation by the Ohio Casino Control Commission (the “Commission”). The proposed law expressly prohibits any bets from being placed prior to January 1, 2022.

Permitted Sporting Events for Betting

Predictably, “sports gaming” is not defined under the bill to include already-authorized gaming activity, such as casino gaming, fantasy contests, lottery games (other than the sports gaming lottery), or pari-mutuel horse race wagering. A “sporting event” may be any professional sport or athletic event, any collegiate sport or athletic event, any motor race event, any Olympic or international sports competition, the individual performance statistics of athletes or participants in any of the aforementioned event or events, or any other special event authorized by the Commission.

Even though the Commission may authorize betting on any of the above-approved events, it is not required. The Commission can restrict betting on approved event types, independently or at the request of any person or sports governing body. Further, specific bet types may also be restricted or requested to be restricted. Betting will not be allowed on primary or secondary school events or athletes.

Sports Gaming Lottery

The bill would authorize the Lottery Commission to offer a sports gaming lottery in the form of a sports pool. Entrants, who must be at least 21 years old, will pay $20 for a ticket where they select an outcome of a sporting event or events, the Lottery Commission will retain a fixed portion of each entry fee and the remainder will be split equally among the winning entrants. All other forms of sports betting will fall under the purview of the Ohio Casino Control Commission.

Sports Gaming Agents

Under the bill, the Ohio Casino Control Commission will be able to issue 20 “Type A” licenses and 20 “Type B” licenses to qualified applicants who will then become “sports gaming agents.”

An applicant must do each of the following:

• Submit a written application to the Commission;
• Pay a nonrefundable fee in an amount to be determined by the Commission;
• Pass a criminal background check;
• Provide a surety bond to the state in an amount approved by the Commission, and submit to an audit of the applicant’s financial transactions and condition of the applicant’s total operations for the previous fiscal year; and
• Satisfy any other requirements under the bill or established by Commission rules.

If approved for a Type A or B license, a sports gaming agent must pay a nonrefundable license fee of $1 million and their license is valid for 3 years. A licensee may submit for a renewal license every three years, fulfilling all the same requirements, unless their license was previously revoked.

Type A Licenses (Online/Mobile Gaming)

Type A licenses authorize a sports gaming agent to offer sports gaming through an online sports pool under one brand name. An “online sports pool” means an application whereby a bettor can place a sports bet through an online or mobile device. The bill currently limits the availability of Type A licenses to 20, which will be awarded to eligible applicants on a first-come, first-served basis. A sports gaming agent that fails to offer sports gaming under a Type A license for a continuous period of one year or more can have its license revoked. No one individual (person or corporation) may hold more than five Type A licenses at a time.

Type A sports gaming agents must utilize geofencing to ensure bettors are physically located in the state. The servers accepting the wagers must also be located in Ohio. Bettors must set up sports gaming accounts in their full legal name and may establish the account either in person or online, so long as the registration is done in a manner that complies with the sports gaming agent’s internal controls.

Type B Licenses (Brick and Mortar Gaming)

A Type B license authorizes a sports gaming agent to offer sports gaming at a single sports gaming facility. Like the Type A license, these will be limited to 20 licenses awarded on a first-come, first-served basis. “Sports gaming facility” means a designated area of a building, that is specifically not a casino or racino, in which bettors may place wagers on sporting events with a Type B sports gaming agent. A casino or racino may hold a Type B license, but the facility must be located on a separate premise from the casino or racino.

Type B sports gaming agents may offer wagers from individuals who are at least 21 and who are physically present in the sports gaming facility, either in person or through self-service machines. Bettors will be required to provide their full names and any other information the Commission requires.

Additional Sports Gaming Related Licenses

The bill also creates a variety of licenses and licensing processes for sports gaming support services. This includes Commission-granted sports gaming occupation licenses for those employees of a sports gaming agent who will provide security, accept wagers, handle money in any way, or perform other duties that have the ability to alter material aspects of sports gaming conducted by their employers. Anyone who provides a sports gaming agent with sports gaming equipment or related services must be licensed through the Commission as a sports gaming supplier. The bill allows for reciprocity for either license type among jurisdictions that the Commission deems to impose substantially similar requirements for licensure.

Integrity Monitoring

The bill requires the Commission to monitor all sports gaming conduct in the state with an independent integrity monitoring provider to identify unusual betting activity or patterns. Every sports gaming agent must also participate in the system as part of its minimum internal control standards. The system and its information is not a public record, though anonymized data can be provided at the request of a sports governing body that believes the integrity of its games may have been compromised.

There is no language in the proposed bill mandating the use of official league data or integrity fees to be paid to governing leagues.

Taxes and Revenue

Sports gaming agents must pay a 10% tax on their net revenue from sports gaming regulated by the Commission. This tax is imposed on the “sports gaming receipts,” which means the total amount received as wagers minus any winnings paid and voided wagers. Sports gaming agents must file daily tax returns showing their gaming receipts and pay the tax due. Negative receipts may be allowed to be carried over against the next day’s receipts. Sports gaming agents who are not casinos will be subject to Ohio’s commercial activity tax, as well. Casinos are taxed on their gross casino revenue.

Revenue from the sports gaming lottery in excess of operation costs for the State Lottery Commission will be deposited into the Lottery Profits Education Fund for the benefit of elementary, secondary, vocational, and special education programs.

Further, revenue from all other forms of sports gaming will be deposited into a newly created Sports Gaming Revenue Fund, which, after deducting any amounts needed to pay tax refunds or to cover the Department of Taxation’s administrative expenses, will be used as follows:

• 98% must go to the Sports Gaming Profits Education Fund to support K-12 education programs as determined in appropriations by the General Assembly; and
• 2% must go to the Problem Sports Gaming Fund.

This article was authored by Robert Dove, a gaming law attorney with Kegler Brown, and Mike Zatezalo, chair of the firm’s Gaming Law practice. Robert and Mike will continue to provide updates on this evolving legislation and are already partnering with established operators and emerging businesses on potential licensure, lobbying assistance and supply chain strategy as those businesses prepare to maximize their opportunities in anticipation of new sports betting opportunities in Ohio.