After the U.S. Supreme Court overturned a federal ban on online sports betting in 2018, Ohio is on the verge of joining over two dozen states that have already entered this flourishing industry.
On May 6, 2021, the Ohio legislature introduced SB 176, a bill to legalize and regulate sports betting. On June 16, 2021, the legislation was approved by a unanimous vote of the Senate Select Committee on Gaming, as well as by a 30-2 vote in the full Senate. The next step for the bill will be a vote in the Ohio House of Representatives, where it must also obtain a simple majority before advancing to Governor Mike DeWine for signing.
SB 176 seeks to create a regulated system for “sports gaming,” similar to Ohio’s legal structures for medical marijuana and alcoholic beverages. The bill would allow the use of any system or method of wagering approved by the Ohio Casino Control Commission (the “Commission”) for betting on both professional and collegiate sports, including Esports. Only thoroughly vetted businesses that have been issued a special license by the state may engage in the business of accepting wagers on sporting events.
The current version of SB 176 authorizes the Commission to license and regulate so-called “sports gaming agents” by issuing three types of “sports gaming proprietor licenses”: Type A for online/mobile wagering; Type B for wagering at brick-and-mortar locations; and Type C for self-service gaming terminals located in Commission-licensed, D-class liquor permit locations. SB 176 limits the number of each type of license that the Commission may issue, with no language in the current draft providing for any additional licenses in the future. As such, competition to obtain these first-come, first-serve sports gaming licenses will no doubt be intense, and the license quota will fill up rapidly. As was the case with the medical marijuana license application process, the earliest and best prepared have the best chance of securing a license.
Type A licenses will allow online betting through a website or mobile application. These sports gaming agents may also sub-contract with no more than two mobile management services providers, such as DraftKings or FanDuel. Websites and mobile apps used to accept bets must use location-tracking technology to confirm that participants are physically located in Ohio at the time of placing a bet—accepting online bets from individuals located outside of Ohio is not allowed, even if the individual is an Ohio resident. Further, SB 176 requires that the servers responsible for accepting wagers must be physically located in Ohio. SB 176 authorizes the Commission to issue only 25 Type A licenses.
Type B licenses will allow “sports gaming facilities” to engage in the business of sports betting. Type B sports gaming agents must maintain a physical premise in Ohio, or must contract with a management services provider who will operate a physical premise in Ohio on their behalf. All wagers must be placed in-person by participants at the physical premises, and no person is allowed to place wagers on behalf of another person who is not physically present. The area where wagers will be accepted must be off-limits to all persons under age 21, except for certain exempted employees. These licenses appear to be particularly targeted toward traditional sporting venues, such as sports stadiums and arenas. SB 176 authorizes the Commission to issue only 33 Type B licenses, and also limits the number of licenses that may be issued within each county (based on population).
Type C licensees may offer sports gaming through self-service terminals located at licensed “Type C Sports Gaming Hosts’” facilities. Type C hosts must be holders of a D-category Ohio liquor permit and must also obtain a host license from the Commission. Unlike Type A and B licensees, Type C sports gaming proprietors may not sub-contract with any management services providers, and are limited to only two sports gaming terminals per host location. SB 176 does not limit the number of Type C host licenses that the Commission may make available, but does limit the number of Type C proprietors to between 3 and 20, at the Commission’s discretion.
The process to obtain a Type A, B, or C sports gaming proprietor license will be strenuous, with extensive application regulations from the Commission likely to be forthcoming. Currently, applicants must be able to show they have access to a substantial amount of capital, and they must provide the state with at least one year of audited financial statements associated with that money. The initial fee for each license will be: $1 million (A), $100,000 (B), and $25,000 (C). Applicants must also give to the state a surety bond in a to-be-determined (likely large) amount.
In addition to the Type A, B, and C sports gaming proprietor licenses, SB 176 will also require licenses for mobile and non-mobile “management services providers.” As mentioned above, these licensees may contract with Type A and Type B license holders to manage sports betting on their behalf, either through a mobile application or a physical premise, depending on the respective license type. The initial license fee for a mobile management services provider will be $500,000, while the fee for the non-mobile license will be $1,000,000.
Another provision of SB 176 authorizes a “sports gaming lottery,” where the Ohio Lottery Commission will offer a sports pool in lottery format. Participants may wager on which side will win or lose. Each participant will pay a fixed fee of $20, and the winning side will split the losing side’s money. Sports gaming lottery tickets will be offered through traditional lottery retail agents approved by the Lottery Commission.
SB 176 is the second major attempt to legalize sports betting in Ohio. A similar bill passed the House in 2020, but lawmakers were unable to reconcile differences between the House and Senate versions of the bill. Nonetheless, Governor DeWine has continuously voiced support for the creation of a legal sports gaming market in Ohio, having stated earlier this year that legalization is “inevitable.” With the passage of SB 176 in the Senate, it appears that the Governor’s statement was indeed accurate. Interested parties are already gearing up to pursue one of the coveted few licenses as SB 176 appears increasingly likely to become law.
At Walter | Haverfield, we are keeping a close eye on new developments in Ohio’s sports betting laws, as we have played instrumental roles in other tightly controlled sectors, such as Ohio’s medical marijuana program and the complex world of liquor control. We highly encourage you to contact us here to learn more about Ohio sports gaming and to discuss how you can secure a lucrative position in this exciting growth industry.
John N. Neal is head of the Walter | Haverfield Hospitality and Liquor Control team. He can be reached at firstname.lastname@example.org or at 216-619-7866.