After a turbulent ten-month journey, Ohio is finally poised to legalize sports betting. HB 29, first proposed in April, has now passed in both houses of the Ohio General Assembly and is awaiting signature by Governor Mike DeWine. The governor has previously expressed strong support for legalizing sports betting in Ohio, and has indicated that he plans to sign the bill into law. With the governor’s signature being the last remaining hurdle, legal sports betting in Ohio appears to be inevitable.
Similar to Ohio’s alcoholic beverage and medical marijuana industries, “sports gaming” in Ohio will be heavily regulated by the state. Businesses seeking to participate in what will surely be a bustling and profitable industry must obtain one of a limited number of highly coveted operating licenses. Because the number of licenses is extremely limited and licenses will likely be awarded “first come, first served,” interested applicants will need to move fast in order to secure a slot in the new regulated market. The Ohio Casino Control Commission (the “Commission”) is expected to begin issuing licenses in early 2022, with legal sports betting activities beginning no later than January 1, 2023.
The Commission will issue several different license types based on the nature of the sports gaming activities to be conducted, including:
- Type A Sports Gaming Proprietor for online/mobile wagering;
- Type B Sports Gaming Proprietor for wagering at brick-and-mortar locations;
- Type C Sports Gaming Proprietor for operators of self-service and clerk-operated gaming terminals located in certain D-class liquor permit establishments;
- Type C Sports Gaming Host licenses for D-class liquor permit holders desiring to host sports gaming on their premises; and,
- Mobile and non-mobile Management Services Provider licenses for businesses to perform sports gaming activities on behalf of a Type A or B proprietor licensee. These are also sometimes referred to as “skins,” and would include popular platforms such as DraftKings and FanDuel.
HB 29 limits the number of available Proprietor licenses to 25 Type A, 40 Type B, and at least 2 but no more than 20 Type C. There is no hard limit on the number of Mobile or non-mobile Management Services Provider licenses, however, each Type A/B Proprietor may initially contract with only one services provider. Type C Proprietors are prohibited from contracting with any services provider. Notably, there is no limit on the number of available licenses for Type C Hosts.
Importantly, merely submitting an application does not guarantee that a business will receive a license. Each applicant must establish its suitability for licensure by clear and convincing evidence, and will need to demonstrate why they are more suitable to receive a license than other competing applicants. The Commission will examine a wide variety of factors when selecting licensees, including an applicant’s reputation, experience, and financial integrity. Further, the Commission is required to give preference to applicants that are a professional sports organization, casino, or video lottery sales agent.
All individuals with a financial interest in a license applicant (except for a Type C Host) will be required to complete a criminal history background check. The Commission will analyze the results of these background checks, as well as the regulatory compliance history of the applicant and its principals. The Commission will also assess the business experience of the applicant, including the nature of its current physical presence and economic involvement in Ohio, length of time in business, total amount of taxable income expected to be paid to employees, and intended economic contributions to the state of Ohio, such as promotion of tourism.
Ability to sufficiently finance the planned sports gaming business will be a major component of any winning license application. As part of the application process, applicants will need to submit audited financial transactions for the previous year, prepared by a CPA in accordance with GAAP and state and federal laws. Following review of the financial statements, the Commission may deny any application if the Commission determines that the applicant has “not demonstrated to the commission’s satisfaction financial responsibility sufficient to adequately meet the requirements of the business enterprise.” This extremely broad discretion means that applicants will need to show access to considerably more capital than the bare minimum necessary in order to receive a license.
In addition to demonstrating sufficient capital to start and operate the business, applicants will need to pay a license fee to the Commission upon being selected to receive a sports gaming license:
- Type A Sports Gaming Proprietor: $500,000.00
- Type B Sports Gaming Proprietor: $100,000.00 or $50,000.00 (depending on whether the licensee also holds a Type A license)
- Type C Sports Gaming Proprietor: $100,000.00
- Type C Sports Gaming Host: Amount to be determined by the Commission
- Mobile Management Services Provider: $750,000.00
- Management Services Provider: $100,000.00 or $50,000.00 (depending on the type of licensee served)
Being one of the first players in this new industry comes with many strategic advantages, and interested parties would do well to begin planning their sports gaming business and associated applications well in advance.
At Walter | Haverfield, we possess considerable expertise in licensing and compliance, developed through years of experience working with Ohio’s tightly regulated medical marijuana and alcoholic beverage businesses. We highly encourage you to contact us below to learn more about Ohio sports gaming and to discuss how you can secure a lucrative position in this emerging industry.
John N. Neal is head of the Walter | Haverfield Hospitality and Liquor Control team. He can be reached at email@example.com or at 216-619-7866.