OHIO OFF TO BUMPY START

Sports betting’s launch in one U.S. state underscores some inherent pitfalls.

Sports betting hadn’t even been incepted in Ohio when there was trouble.

Penn Entertainment subsidiary Barstool Sports, a company with the reputation for pushing the envelope, had the poor judgment to broadcast its Barstool College Football Show (which promotes betting) from the University of Toledo. That was in contravention of a state law that forbids marketing sports betting to college students.

By David McKee

ABOVE: Governor of Ohio, Mike DeWine

You can’t gamble in Ohio if you’re under 21. “During the show, the [state gaming] commission said Barstool advertised its sportsbook by promoting pre-registration with its own cash bonuses and with ‘mycash’ which could be used at Penn’s casinos,” reported the Akron BeaconJournal

This miscalculation will cost Penn $250,000 in fines, and the company will have to give all its employees a crash course in the do’s and don’ts of

Ohio sports betting and the promotion thereof. Penn intends to comply.

Penn got off light compared to PartyUp, an online sports betting provider (OSB) that applied for licensure in the Buckeye State. Instead, it got a kick in the rump. It was rejected, with the commission citing past, unlawful marketing to U.S. customers. This left Jack Cleveland casino without a sports-betting partner, having failed to properly vet its provider of choice. By contrast, European OSB providers bet365 and Tipico had kept their noses clean, and were rewarded with Ohio licenses ($1 million upfront and $250,000 to renew).

DraftKings tests patience

Then there was in-your-face operator DraftKings, which hadn’t taken its first bet before it was dinged by regulators to the tune of $350,000, two days before the January 1, 2023 launch date. What hath DraftKings wrought? It had sent promotional mailers to 2,500 underage Ohioans back in November.

By this point the Ohio Casino Control Commission was clearly losing its patience. “The Commission has been very clear about the rules and standards for sports gaming advertising with industry, and are disappointed with the lack of compliance we have seen despite reminders,” fumed OCCC Executive Director Matthew Schuler. “While we do not take administrative action lightly, DraftKings’ conduct in this case warrants the Commission’s intervention to ensure the integrity of sports gaming.”

Scarcely had betting gone live than the Jan. 2 game between the Cincinnati Bengals and Buffalo Bills, rife with playoff implications, was postponed indefinitely due to the on-field collapse and near-death of Bills safety Damar Hamlin. Since this tilt was supposed to be “an absolute massive game here in southern Ohio,” according to one OSB provider, books are liable to take a shellacking.

Not all the news was bad. “I think I can say it was probably our most successful launch to date,” Betfred USA COO Bryan Bennett told the Cincinnati Enquirer. Betfred is the Bengals’ OSB partner. Official estimates for the Ohio market are for it to engender almost $3.4 billion in revenues per year, on $8 billion in annual handle (per PlayOhio.com) with taxes to the state reaching $24 million in a year and half.

However, as casino tax hauls have been just a fraction of what was projected ($2.7 billion actual revenues across 10 years against a forecast of $7.1 billion, tops) there are skeptics. But if the numbers prove true, Ohio would become the United States’ secondlargest market for sports betting, behind New York State.

Boffo opening day

Punters were repeatedly queuing up at Hard Rock Cincinnati’s sports book, where disgraced baseball great Pete Rose placed the state’s first wager, picking the Cincinnati Reds to win the World Series. FanDuel executive Karol Corcoran told a newspaper that “We expect Ohio to be one of our biggest states and the early indicators suggest that that’s going to be the case.” Although legalized sports betting has been in the works for over a year, only 16 operators cleared the regulatory bar in time to take New Year’s bets.

There is no shortage of Buckeye State betting options, with a few exceptions, such as “statistical actions of coaches, officials, or referees.” Also forbidden are wagers on “inherently objectionable outcomes,” such as the Hamlin injury—or even the duration of the national anthem at the Super Bowl. Sports below the collegiate level are also off-limits.

Even though the vast majority of wagering is going to take place online, if recent history is any guide, Ohio is providing one of the largest number of retail sports-book licenses: 40, including in sports stadiums themselves. In addition, the provision of sports-betting kiosks means that at least 311 retailers (such as AJ’s Franklin Tavern, Zeppe’s Tavern & Pizzeria and even the neighborhood grocery store or bowling alley) will soon be taking your action, if they’re not already.

The downside of kiosk-based wagering is that it is restricted to point spreads, over/unders, four-leg (or fewer) parlays and money lines. The revenue generated will be taxed at 10 percent. Most of that will go to supporting school sports, with a tiny fraction (two percent of the total) dedicated to problem-gambling programs. (“One in four sports bettors were considered problem gamblers or at risk of developing a gambling disorder as recently as 2017, according to a survey by the Ohio Department of Mental Health and Addiction Services,” reported LimaOhio.com).

In comparison to Ohio’s problematic start, Maryland came out of the chute just before Thanksgiving like gangbusters. Outdoing neighboring Virginia’s launch, the Free State logged $26 million in eight days. Handle was $186 million. FanDuel bested DraftKings, $11 million to $9.5 million, while BetMGM nabbed $4 million, and Caesars Sportsbook and Barstool both failed to crack the $1 million threshold in revenue.

However books threw all that away and more, flinging $64 million worth of promotions at players. Promo expenditures were $29.5 million for FanDuel, $26.5 million for DraftKings, $6 million for BetMGM, and (again) less than a million apiece for the two alsorans, although they still spent more than they made. Even if it is ostensibly successful, the business model for OSB in the U.S. remains open to debate.