Ohio will provide three types of gaming licenses:

Each type of license will be limited though there is the possibility the Casino Control Commission could issue more than the initial limit of type A licenses. Initially, there will be no more than 25 type A licenses, 40 type B licenses, and 20 type C licenses.

Type C licenses will authorize type C sports gaming proprietors to offer lottery sports gaming. Lottery sports gaming means sports gaming conducted by a Type C sports gaming proprietor on behalf of the state lottery commission and offered through type C licenses hosts. Any D-1, D-2, or D-5 liquor permit holder may apply to be a type C license host. A type C license host will be allowed to have, initially, up to two sports betting kiosks or clerk operated sports gaming terminals where limited bets will be allowed. Type C sports gaming proprietors will only be allowed to offer the following types of bets:

Type C self-service terminals or clerks will not be allowed to accept wagers aggregating more than $700 in a calendar week from any one participant.

The law sets out initial and renewal license fees for each license type but have left the application fee to be set by the Casino Control Commission. License fees vary not only by license type but also within certain license types depending on whether or not the applicant is a professional sports organization or how many skins the applicant may have or how many license types the applicant may have.

The law also sets out various criteria each applicant must meet at a minimum but also leaves some room for the Casino Control Commission to establish rules and criteria for the application process.

Casino Control Representatives have stated that though sports gaming is finally coming to Ohio it will be later rather than sooner. The Commission will have to craft rules, offer them for public comment, and then get them approved. This process is expected to take at least five to six months. Realistically, this means hopeful market participants will not be able to even apply for a license until summer or fall of 2022.

The Ohio Casino Control Commission has already issued its first set of proposed rules which can be found here.

Feel free to contact us if you have any questions.

The Lottery is Out, but Bars and Restaurants are In

The sports gaming lottery pool has been removed from the bill. Instead, there will now be an unlimited number of Type C host licenses available to D liquor permit holders that wish to be licensed to host sports betting kiosks in their establishments. D liquor permit holders wishing to host sports betting kiosks must be licensed by the Casino Control Commission and pay a $6,000 license fee, which will be good for three years with a $6,000 fee due upon each renewal. Sports betting kiosks will be limited in the bets they can offer to moneyline, spread, and over/under bets, and no patron can bet more than $200 per day on a sports betting kiosk. There can also be no more than two kiosks in each licensed establishment. The kiosks must accept only credit and debit cards and payouts must be made back to the card.

Sports betting kiosks will be provided by Type C sports gaming proprietors (a nomenclature change from “gaming agent” made throughout the bill). No fewer than 3 and no more than 20 Type C proprietor licenses will be granted. Type C proprietor licenses will have an initial fee of $100,000 and a renewal fee of $25,000 every three years. Type C proprietors will be held to the same standards in respect to suitability, background checks, and financial proof as A and B licenses.

More Licenses, but Geographic Limits on Type B

The amount of available Type A licenses (online gaming) increases from 20 to 25. The amount of Type B licenses (brick and mortar) increases from 20 to 33. However, Type B licenses shall be allowed only in counties with populations greater than 100,000, per the 2010 census. The volume of licenses available in the county will be:

Type B licenses will be available only to entities that can demonstrate significant economic activity in the county in which the license is to be operated. Type B licenses will be subject to an initial application fee of $100,000 with $25,000 renewal fees due every three years. Type A licenses will have an initial fee of $1,000,000 and the same is due upon renewal every three years.

Ohio Professional Teams Get Preference

Ohio professional teams (NBA/NFL/MLB/NHL/MLS) and facilities that host annual PGA Tour tournaments (i.e. Muirfield) and the promotor of a NASCAR race in the state (Mid-Ohio Sports Car Course) will all have preference for Type A and B Licenses. However, if a team leaves Ohio it automatically loses its licenses.

Additional Changes and Items of Note

Other changes include the creation of a definition for Mobile Management Service Provider for Type A licenses, the express inclusion of Esports as included in the definition of sporting events, and the elimination of the prohibition on wagering on events with participants younger than 18. With respect to the age prohibition, the logic is that some tennis matches and Olympic competitors may be younger than 18, so the Casino Control Commission will have discretion on whether to authorize wagering on those events. This also harmonizes the reporting threshold for back taxes and child support with the threshold found in the IRS code.

Timing

Ohio Senator Kirk Schuring, chair of the Senate Select Committee on Gaming, stated that the goal would be to pass the legislation no later than June 30. One of the changes to the bill was to eliminate the prohibition on wagering before January 1, 2022. However, that doesn’t mean wagering on sports will necessarily be allowed before then as the omnibus amendment instituted new requirements that the Casino Control Commission accept sports gaming proprietor licenses beginning on January 1, 2022, and begin issuing licenses no later than April 1, 2022. It would be safe to assume there will be no wagering before the first licenses are issued, so sports wagering may not be available in Ohio until April or May of 2022.

Now that the bill has passed the Senate, it’s onto the Ohio House and we will see what, if any, changes await it there.

This article was co-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.

An update will be provided once the substitute bill is released and as further changes are proposed.

This article was co-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.

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.

Penn National will make an initial investment of $163 million for a 36% interest in the Barstool Sports media company. The initial $163 million investment consists of approximately $135 million in cash and approximately $28 million in shares of non-voting convertible preferred Penn stock.

Additionally, under the terms of the deal, Penn will increase its stake in Barstool to 50% in three years for an additional investment of approximately $62 million. The deal also contains an option for Penn to eventually purchase the remaining interest in Barstool.

Penn National is hoping that the deal will drive some of Barstool’s 66 million monthly consumers to one of Penn National’s 41 casinos in 19 states. Penn secured exclusive rights to Barstool’s brand for use at Penn’s properties and for its online gaming operation. The deal has a 40 year term and will enable Penn to capitalize on Barstool’s already established sports betting presence.
Sports Betting Opportunities
Sports betting is currently occurring in 14 states with 14 more considering sports betting legislation. Six states have passed legislation and will roll out sports betting within this year. Mobile betting has proven to be responsible for the lion’s share of legal sports betting, accounting for about 80% of wagering in New Jersey in 2019. Penn is banking on that percentage applying nationwide as more and more states legalize.

Barstool, established in 2003, has always had a focus on sports betting and offered tips since its inception as a Boston based print publication.  In 2019, Barstool had a soft launch for its site Barstool Bets, which, according to Penn National, has already had about 100,000 people sign up since September. Sports bettering attracts a generally affluent, male customer base and Barstool’s primary audience is male. Sixty-five percent of Barstool’s audience falls between the ages of 21 and 44 and 62% of them gamble on sports. Of that 62%, 44% claim to bet weekly with an average bet of $51. The strength of the Barstool brand and its cohesiveness with sports betting is what Penn wants to capitalize upon and monetize.

Under the terms of the deal, Barstool will maintain editorial control over its websites but will incorporate Penn National advertisements. Similarly, Penn National will brand its brick and mortar sportsbooks and its mobile app, debuting in August, as Barstool.

Penn National has agreements with other sports betting companies DraftKings, PointsBet, theScore, and The Stars Group to operate online betting in its casinos. But Penn has not captured the massive increase in online sports wagering that other properties have who have partnered with other sports media companies like FanDuel. Penn seeks to change that with this new deal.
Additional Benefits
Penn hopes to see additional benefits beyond sports betting through this deal in the form of a younger customer base. Penn’s CEO Jay Snowden noted that their average customer is in their mid-50s but both Barstool’s audience and sports bettors are a younger demographic. Snowden stated, “Sports betting is a great nexus for us to attract and convert younger sports bettors.” Since 65% of Barstool’s audience is between the ages of 21 and 44 this provides the opportunity for Penn to reach its target market while also lowering the average age of its customers.

“We needed to find a sports media partner that had a great brand, had a loyal audience, that wanted to fully integrate and align with Penn National Gaming and that wanted skin in the game with us,” Snowden stated. “And Barstool is that partner.”

While the process has slowed down in Ohio it is highly unlikely that it has ended. Especially, considering that in December Michigan became the fourth of Ohio’s neighboring states to legalize sports betting. The only neighbor left to legalize, Kentucky, advanced for a full House vote earlier this month. Ohio does not want to be left behind or abdicate the money its citizens will inevitably spend sports betting to neighboring states. So what is the hold up in Ohio?

The key difference between the House and Senate sports betting bills is who will be the agency in charge of overseeing sports betting. The Senate version places sports betting under the purview of the Ohio Casino Control Commission. This is the preferred regulating agency for both the Governor and the Senate President. The House version places this responsibility with the Ohio Lottery Commission. The House Speaker prefers the Lottery Commission regulate sports betting.

Other differences between the two bills are the tax on the betting and the use of the proceeds. The House Bill contains a 10% tax rate and earmarks the funds for education and problem gambling programs. The Senate version contains a 6.25% tax rate and has no earmarks on the proceeds and instead directs them into the general fund. Additionally, the House version, with regulation falling to the Lottery Commission would open the door to businesses other than casinos, such as bars and restaurants.

That difference is mitigated by the fact both proposals would legalize mobile betting. Given the ubiquity of smart phones, from a consumer perspective, the benefits of placing sports betting terminals in bars or restaurants would seem slim. Instead, those establishments may be better served investing in and advertising strong wireless internet services. This is the tact taken by many bars and restaurants in other states with legal mobile gaming to entice customers into their facility and keep them there.

It is likely the two bills meet in conference committee and some agreement is hammered out between the House and Senate. Undoubtedly, neither chamber wants to see money flow to neighboring states that could be used in Ohio. The question is, how quickly an agreement can be reached.

Hollywood Casino Columbus had the best January of Ohio’s Casinos bringing in $20.4 million from slot machines and table games, though Jack Cincinnati saw the greatest gambling revenue increase from the prior January with a 22% jump. The top performing slots-only racino was MGM Northfield Park with $22.9 million but Miami Valley Gaming saw the greatest increase from the prior January with a 24% jump in gambling revenue. The increases may be partially attributed to the extra Friday in January this year.

The full breakdown of increases among the casino is Hollywood Columbus ($20.4 million) up 18%, Jack Cincinnati ($18.7 million) up 22%, Hollywood Toledo ($15.7 million) up 11%, Jack Cleveland ($18.3 million) up 17%. Among the racinos, Jack Thistledown ($11.8 million) was up 22%, MGM Northfield Park ($22.9 Million) was up 17%, Hollywood Mahoning Valley ($11.1 million) was up 18%, Scioto Downs ($15.6 million) was up 22%, Miami Valley Gaming ($15.6 million) was up 24%, Belterra Park ($7.3 million) was up 20%, and Hollywood Dayton ($10 Million) was up 23%. All percentages were rounded up.

Rhode Island projected monthly revenues of $1 million. The reality – about $50,000 a month. Rhode Island is the only New England state that offers sports betting. Who’s going to bet against Tom Brady and the Pats who, as expected, covered the spread in a lackluster Super Bowl. Also, Rhode Island didn’t offer online betting until this month.

West Virginia projected annual revenue of $5.5 million. Through the first eight months of their fiscal year, actual revenue amounted to $862,000. A contract dispute led to a shutdown of two sports books and the only sports betting app at the outset of the NCAA basketball tournament.

Mississippi and Pennsylvania have generated revenues about half of what was projected. Mississippi faces competition from a gambling complex in Arkansas and Pennsylvania doesn’t allow online sports betting. Although Pennsylvania hopes to offer online betting sometime this summer.

New Jersey and Delaware are the only states to meet projections. For New Jersey, the availability of online betting is significant. State tax revenues of $1.8 million monthly is nearly the same as Nevada, which has had sports betting for decades. In Delaware, football betting is established, having been around since 2009.

Pennsylvania and West Virginia have already legalized sports betting.

In Kentucky, a House panel has passed a bill that would allow sports betting at approved locations such as a licensed horse racing track or the Kentucky Speedway. In person and via an app would be permitted. The bill still has to make its way through the rest of the legislature.

In Indiana, the Senate has approved a comprehensive gambling bill that would allow sports betting. The House is now considering the bill. Indiana would also allow in person and online betting.

Michigan was on the fast track to legalize sports betting. A bill quickly passed through the House and Senate. But the lame duck Governor vetoed the bill in December, 2018. Legislators plan to reintroduce the bill sometime in 2019.

The Senate bill calls for the Ohio Casino Control Commission (OCCC) to regulate sports betting, where revenues would go to the state’s General Revenue Fund. The House bill would put control under the Ohio Lottery Commission, which would direct revenues towards K-12 education;
The Senate bill imposes a 6.25% tax on revenues while the House bill calls for a 10% tax;
The Senate bill would allow online betting. The House bill doesn’t address the issue;
The Senate bill calls for each operator to pay a nonrefundable $100,000 application fee and an additional $100,000 every five years to continue operations. Additionally, each operator would have to apply for a management services provider license from the OCCC for a nonrefundable $10,000 fee and an annual nonrefundable renewal fee of $1,000. The House bill would require each operator to obtain a sports gaming agent license for a nonrefundable $100,000 application fee plus an annual renewal fee which would be the lesser of $100,000 or 1% of the licensee’s handle over the previous one year license term. Fraternal and veterans organizations would contract with a sports gaming agent to offer sports betting on a single terminal at the organization’s establishment. Each organization would pay a nonrefundable $1,000 application fee and an additional nonrefundable $1,000 fee annually to renew its contract.

Both bills would prohibit sports betting by anyone under 21. Betting on professional and college sporting events would take place in Ohio’s casinos and racinos. The House bill would also allow betting in any place with an approved sports gaming terminal.

Legislative researchers estimate annual revenue of $30 million.