O-Hi-Oh! What Will Sports Betting Amount To In The Buckeye State?

How high can the sports betting Buckeye fly? Ohio could be a major mover and shaker
Ohio Market Potential Analysis
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It’s never great being last to the party, but at the same time, it’s always good being at the party.

That might be the best way to sum up Wednesday’s announcement that sports betting is finally coming to Ohio after years — plural — of legislative fits and starts. Both chambers passed HB 29 overwhelmingly, and Gov. Mike DeWine has stated intent to sign whatever he receives as a finished bill.

The Buckeye State’s entrance completes a Rust Belt trifecta of sports wagering with Indiana and Michigan in the still-expanding U.S. market. It also has the potential to siphon off some Kentucky bettors from the south, but more importantly, to keep Ohio residents and their dollars from crossing over to the Hoosier State to the west, Michigan to the north, or Pennsylvania to the east.

There are many things to like about Ohio’s approach in terms of its potential for the operator, bettor, and the state. The question is how long it will take to create the optimal market that bettors can enjoy.

A robust and diverse sports market

With the nation’s seventh-largest population, Ohio is well-represented in both professional and collegiate sports. It has two National Football League teams (Cincinnati Bengals and Cleveland Browns); two Major League Baseball teams (Cincinnati Reds and Cleveland Guardians); two Major League Soccer teams (Columbus Crew and FC Cincinnati); the NBA’s Cleveland Cavaliers; and the NHL’s Columbus Blue Jackets.

The NFL is the primary driver of sports betting in the United States, and the Browns and the Bengals are distinctive as one of just two pairs of intrastate rivals who play in the same division. Those two annual AFC North contests could prove potential windfalls for operators in Ohio, who can be expected to come up with as many promotional offers as the day is long for those showdowns. Additionally, their fans’ notable scorn for their other division rivals — the Pittsburgh Steelers and Baltimore Ravens — will most assuredly fuel some emotion-driven wagers in addition to the statistically savvy ones.

The Reds and Guardians also have longstanding fan bases as teams that have been playing for more than a century, and the Reds already have a sponsorship deal in place with WynnBET. The Cavaliers have deals with Betway and Fubo, both of which are already in a handful of states. While some Ohio teams may not have deals with sportsbooks, their leagues have them as official partners. Beyond professional team sports, Ohio is home to one of the PGA Tour’s top non-majors, The Memorial, played on the Jack Nicklaus-designed course at Muirfield Village in Dublin.

There is also plenty of big-time college sports in Ohio, and bettors will be able to wager on in-state teams as HB 29 does not contain any carve-outs. Any discussion about college sports begins with “the” Ohio State University for college football. A perennial power both nationally and in the Big Ten, the Buckeyes are the biggest calling card in the state — even more than the Bengals and Browns when they endure their down years.

But Ohio State is no longer the only college football act in town, as Cincinnati’s program has elevated its national profile over the past decade-plus. The Bearcats are riding an enormous wave of publicity after being the first Group of 5 school to crash the College Football Playoff this season, and their reward for going 13-0 is a semifinal date with Alabama on New Year’s Eve.

Both schools also have storied college basketball programs that have won NCAA Tournament titles and made multiple Final Four appearances. Ohio has 13 schools playing Division I basketball and 10 playing Division I football, including eight at the FBS level.

Simply put, there is no lack of in-state options for Ohio bettors when legalized wagering starts.

A favorable regulatory path and simultaneous launch

The process to Ohio’s legalization was interesting in that the biggest issue to overcome was not wooing a group of legislators who were against sports wagering, but rather, settling the power struggle to determine the regulatory body in charge. In the end, the Ohio Casino Control Commission was tapped to run the industry, a favorable outcome versus having it conducted by the state lottery.

Ohio being a populous state, there is no upside in shutting out multiple operators who want to conduct business. With an industry-friendly 10% tax rate on revenue — somewhat out of necessity considering Indiana’s rate is 9.5% and Michigan’s is 8.4% — operators will be lining up to obtain the 25 Class A and 40 Class B licenses that will be made available.

In addition to traditional operators being licensed for sportsbooks, Ohio legislators took their cue from counterparts in Virginia and Arizona who made it possible for professional sports teams to engage in retail and mobile wagering. Ohio’s more unusual wild card comes from the Class C licenses available to widespread establishments that hold liquor licenses, which would be permitted to have self-serve kiosks. Those kiosks would be restricted to mainstream bets — spread, moneyline, over/unders, and parlays up to four legs — and also limit users to $700 in wagers per week.

The pace of proliferation for the Class C licenses will be interesting to watch, given HB 29 allows for awarding a minimum of three and a maximum of 20 “at any one time.” The law as written does not specify what constitutes “any one time,” so conceivably, the time frame for these approvals could be spread out at every public regulatory meeting or as compressed as a weekly basis. Regardless, if rolled out correctly, Ohio could have sports betting at bars and other establishments similar to how Illinois has video gaming terminals — though these kiosks will not generate anywhere near the VGT level of revenue.

The decision to establish a deadline to launch of Jan. 1, 2023, is a wise one. While most states have taken less than a year to launch sports wagering from the time of a governor’s signature to when bets are first accepted, pandemic-related matters could create a pecking order of priority for rule-making approval from state government agencies.

Therefore, it is likely the administrative process will move at a deliberate pace. Given the Ohio Legislative Budget Office did not offer a projected market for Fiscal Year 2022, which covers the first six months of 2022, it stands to reason the rule-making and licensing processes will take the process into the summer.

Being operational by Labor Day to ensure wagering at the start of the NFL season is a worthy goal, one that may even be expressed by legislators and regulators publicly after DeWine’s signature. Sports betting does not exist in a vacuum, however, and only begins after carefully crafting rules and regulations.

So how big could the market be?

One key decision that should be helpful in the state is a simultaneous launch for operators. Michigan did this for its online sports wagering and it served two purposes: It made operators happy they were starting on equal footing, and it also provided a sense of anticipation that stoked interest and participation.

Michigan bettors had 10 mobile sportsbooks at their fingertips upon launch in late January. There is every reason to believe Ohio can approve an equal amount, if not more, considering the multiple best practices it can model from other states and how increasingly experienced operators can adjust for any state-specific regulatory wrinkles in Ohio.

Michigan’s simultaneous launch allowed for the quick establishment of online wagering as the dominant method of betting, which accelerates a path to maturation. The quicker to maturation, the higher the likelihood of a consistent handle, which offers the potential for more operator revenue and higher state tax receipts. In the past nine full months of mobile and retail wagering, monthly online handle in Michigan has averaged $287 million and accounted for at least 90% of total handle.

The Legislative Budget Office projected $1.1 billion in Ohio handle for Fiscal Year 2023 and $3.1 billion for FY 2024, using a formula where the launch does not occur until Jan. 1, 2023. While state government financial forecasts typically allow for potential gloom and doom, that launch date is also the worst-case scenario giving Ohio sportsbooks just half the fiscal year to generate that $1.1 billion in handle, amounting to a monthly average of slightly less than $185 million.

Assuming a 90% mobile share, that means online wagering would average $166.5 million monthly. Given that the 10 Michigan sportsbooks that launched in January combined for a daily average of more than $11 million in the first 10 days of wagering, it stands to reason Ohio should be able to burst out of the gate in similar fashion.

Even before bets on any games are placed, operators will present relentless waves of bonuses and promotional offers to bettors in terms of sign-up bonuses, whether they be “risk-free” bets, matching deposits, or other daily specials available for wagering. Once bettors claim those offers, then the types of wagers will come into focus, with the expectation the raging popularity of single-game parlays as well as regular ones will continue to boost both handle and potential operator revenue.

The projected $3.1 billion handle for Fiscal Year 2024 implies an average monthly handle of slightly more than $250 million. Again, this has the feel of a low-end estimate, perhaps to temper expectations since operator revenue, and not handle, is what drives tax revenue to the state. Even with the expected summertime lull that comes when baseball is the only game in town, it would be a disappointment if Ohio averages just $250 million in handle, given how the NFL helped fuel the first $5 billion nationwide handle in September and was a key component of the current $7 billion in October.

It is difficult to offer any one state as comparison for Ohio’s path to becoming a fully mature market, as different states’ laws and characteristics vary greatly. An ideal scenario would have its simultaneous launch include at least 10 mobile operators, as was the case in Michigan. That could put it on a maturation path similar to Pennsylvania, based on its population size, and offer the potential of punching above its weight like Indiana.

If those things happen, Ohio could enter Fiscal Year 2024 with the ability to generate handle at the current level of Illinois — another state with comparable population numbers that retains notable upside after producing $840 million in handle in October with only six mobile operators and with in-person registration in place until March 2022.

Should that path materialize, it would be viable for the Buckeye State to eventually reach a $1 billion monthly handle as a fully mature market.

Photo: Shutterstock

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