What Does Legalized Sports Gambling Mean for Central Ohio?
Published: October 8, 2018
The brave new world of legalized sports gambling could be a jackpot for Columbus. Or a bust. It all may depend on how Ohio lawmakers play their cards in the next few months—and Ohio State, the Columbus Blue Jackets, Hollywood Casino Columbus and even your neighborhood sports bar has a stake in this complicated game.
As the Buckeyes kick coverage team lines up to start the big game, some fans in Ohio Stadium begin jumping up and down in nervous anticipation. Others huddle over their phones furiously pecking away in a last-second burst of betting.
Will the kick go out of bounds? Will it be returned past the 30-yard line? Punch yes or no. Gamblers in the bleachers play their hunches as the odds fluctuate until the moment when toe meets leather.
Big money is riding on this kickoff—and just about anything else you can take a side on all afternoon in the horseshoe-shaped stadium along the banks of the Olentangy River. It’s the brave new world of legalized sports betting, and, with Ohio lawmakers firing up the discussion over legalizing state betting this fall, this imaginary scenario may be coming sooner than you think.
“If the lawmakers in Columbus play their cards well, we should be able to do it probably sometime in the next three years,” says Jay Masurekar, a Cleveland-based KeyBanc investment banker who heads the company’s gaming, internet and travel services division. “I believe that kind of market will be operating.”
Even Gene Smith—Ohio State’s athletics director and a foe of gambling expansion—seems to acknowledge this as the coming reality. “Why not?” he says. “We’re going to have Wi-Fi in the stadium. I’m sure one day that people will be betting like that on their apps. It’ll be legal, and it won’t just be football; it’ll be all the sports. I’m not alarmed by it, but we do have to be aware.”
Perhaps it’s a foregone conclusion that sports gambling is coming to Ohio, but work the phones long enough and you get the creeping sense there are few safe bets right now. With the U.S. Supreme Court throwing open the door to states legalizing sports betting in a historic May 14 decision, a handful of states rushed to join Las Vegas bookmakers in offering single-game betting on sports.
Already taking legal sports bets are casinos and horse tracks in New Jersey, Delaware and Mississippi, as well as a single sportsbook at a casino in West Virginia’s eastern panhandle. Four more West Virginia sportsbooks are slated to open by mid-October including a pair—Wheeling Island Casino and Moutaineer Race Book and Casino—on Ohio’s eastern border, a two-hour drive from central Ohio. Meanwhile, Pennsylvania has legalized sports betting, but a higher tax rate and costly licensing fee structure have kept gambling interests from anteing up.
In Michigan, lawmakers have passed a bill through the House allowing for a mobile sports betting option, as well as gambling at casinos. This September, the Michigan Senate is expected to consider the legislation while Indiana General Assembly has a detailed proposal in committee.
Taking a more leisurely approach are Ohio lawmakers, who introduced bipartisan placeholder bills in each chamber in late July. The legislation is 16 words long and is a blank slate, stating only, “It is the intent of the General Assembly to develop and enact legislation legalizing sports wagering.”
A fundamental problem facing Ohio lawmakers is no clear consensus has jelled over how best to proceed legally in Ohio. Some lawmakers and lobbyists for gambling interests are taking the position that the state legislature has the power to regulate sports betting through passing a new law. “There is absolutely no question in my mind it can be done statutorily,” says state Sen. John Eklund, the lead GOP sponsor for the gambling legislation. “Nobody has offered me a real legal analysis to counter mine.”
But others in power aren’t so sure, including Senate President Larry Obhof, a Yale Law School graduate. While he declined an interview for this story, he told Gongwer News Service in late July that he thinks sports gambling can only be done through a constitutional amendment.
“For me it’s a pretty easy question. I’m sure plenty of people disagree, but I think the constitution generally forbids gambling, that it has specific narrow exceptions that have been adopted by the voters. I don’t see sports betting in there,” he told Gongwer.
Nonetheless, Obhof says he was open to holding Statehouse hearings this fall. “Now, once we start to have hearings and air that subject out, we’ll give people who disagree with that perspective the opportunity to share it.”
A third camp thinks that sports betting could be allowed under a provision enacted in the 2009 law allowing casino gambling at four land-based casino locations across Ohio. That loophole states that casinos in Ohio can offer any table game that states bordering Ohio offer. Therefore, as soon as West Virginia starts taking sports bets, so could Ohio.
Anti-gambling advocate Rob Walgate, vice-president of the American Policy Roundtable, says he’s against gambling but thinks the sloppily written casino amendment does permit it. “Casinos can start up with sports betting right now, and there’s not a thing anyone can do about it,” he says.
For their part, Ohio’s gambling interests seem more focused on legislation than any potential theoretical loophole. “We were very encouraged by the legislature’s willingness to deal with this issue, and we certainly hope to be involved in the process and making our views known,” says Bob Tenenbaum, a spokesman for Penn National Gaming, the company that operates four casinos and racinos in Ohio, including the Hollywood Casino in Columbus.
As sports betting issues are batted around at the Statehouse, lawmakers must wade through a number of prickly issues as well as the constitutional quicksand. If lawmakers decide to move forward, insiders see the biggest fight will be over who gets to be the state-sanctioned bookie. Do you restrict bookmaking to Ohio’s casinos and racinos where Ohioans primarily gamble or do you operate it like the state lottery game of Keno placing terminals in corner bars and restaurants? Also sure to be key issues: Do you include a mobile option? And what tax rate do you charge on profits?
At the end of the day, a Republican-led legislature must decide a bevy of structural issues with this bottom line: How easy do they really want to make sports betting in Ohio?
Run to the Border
Rick Lertzman, a Beachwood businessman and gambling advocate, had a big role in a losing statewide ballot initiative in 2008 and a smaller role in the successful casino push in 2009. Lertzman predicts Ohio lawmakers will fail to act and will open the door for him to bring a constitutional amendment next November, throwing open sports betting to bars, taverns and bowling alleys.
“In the do-nothing state of Ohio, we are always last in line,” he says. “Money is going to be leaving this state at 65 miles an hour.” If that argument has a familiar ring, it’s because that was the 2009 pitch from pro-gambling forces that secured their casino monopoly in Ohio.
Making the strongest play to grab an early slice of Ohio’s legal sports gambling business this fall is West Virginia, where the sportsbooks bordering Ohio plan to have betting windows open by mid-October.
At Wheeling Island casino, a two-hour jaunt east on I-70 from Columbus, casino operators were installing the necessary equipment and held job fairs in August to hire extra workers to man the sports books. Construction also is finishing in the center of the casino around a revamped Waves Lounge bar as workers converted it to a sportsbar and betting parlor.
“It’s right in the middle of the gaming floor, so it’s really easy to find. It’s got a lot of access to food and beverage options … and we’re really excited about what it’s going to look like,” said Kim Florence, general manager of Wheeling Island, to the Wheeling News-Register. It’s going to be transformed into a place where people can actually watch sports and bet on sports at the same time,“she added.
Florence—who didn’t return several calls for this story—told the West Virginia outlet that no official kickoff date had been set yet, but that an announcement was imminent. Meanwhile, Charles Town racetrack officials in eastern West Virginia began taking bets over Labor Day weekend. West Virginia will also be soon rolling out mobile sports betting, however gamblers will have to be within the state’s borders to place action.
By failing to act quickly, Ohio could find itself losing out in the race to develop sports betting and find gamblers drifting away to other options, according to one analyst. “Whoever goes first and starts making revenue right away can make investments in their properties,” says Masurekar, the KeyBanc gaming expert. “It’s very tough to match that level of investment if you come in late.”
Masurekar says he expects Michigan and Indiana, border states where detailed sports gambling has been introduced, to have betting windows open for business in time for the 2019 football season.
For the Fans
Tucked among the sports betting talk is this dirty little secret: Legal sportsbooks aren’t big moneymakers. The profit margin on sports betting is usually about five percent, and legal operators have to pay employees and operating costs out of that revenue. When the dust clears, “out of $100 bet in Nevada, the profit is usually works to be a little more than one dollar,” Tenenbaum says.
So why do casino operators bother with offering sports betting? Because the gambling public loves it, fans flock in for big games and stay all day eating and drinking and wandering the casino floor during breaks in the action. As anyone who has set foot in a Las Vegas sportsbook during March Madness can tell you, a big sports event can have patrons packed in wall-to-wall at the sportsbook.
“It’s a great amenity to have for our customers,” Tenenbaum says. “We think it’s a really good offering and that it could potentially attract new customers.”
With most of the sports betting market happening in the shadows with illegal bookmakers and off-shore with dozens of foreign regulated websites, it’s tough to pin down exactly how big of a sports betting market would be in football-crazy Ohio.
Americans illegally wager roughly $150 billion-per-year, according to an estimate from the American Gaming Association. A 2017 report prepared by Oxford Economics for the gambling group estimated that Ohio would see sports gambling revenues of $35.4 million a year, assuming a tax rate of 10 percent and the “moderate availability” of sports betting. However, once mobile betting was added to the mix in a “convenient availability” scenario, the report’s revenue estimate for Ohio ballooned to $61.1 million a year.
Masurekar says he thinks state tax revenue of about $40-50 million a year on sports gambling in Ohio is very realistic. He pegs revenue estimates in a range from $20-70 million a year, depending on how high the state makes its tax rate and how widely available gambling would be.
Meanwhile, lobbyists for Ohio’s casinos and racinos are being cautious, putting together an estimate for lawmakers of about $24 million a year in first-year revenue assuming a tax rate of nine percent is adopted, according to one gambling lobbyist. When estimating Ohio revenue, a key factor is whether there is a mobile option, experts say.
David Schwartz, director of the center for Gambling Research at University of Nevada Las Vegas, says that about half of the sports betting in Las Vegas is done on apps. And gambling expert Masurekar says mobile betting will only increase in the future.
“This is going towards online gaming whether we allow it at first or not,” he says. In Masurekar’s world, the best possible scenario for sports gambling in Ohio would be allowing casinos and racinos to operate the bookmaking operation but with a convenient online option so fans could bet from home or their favorite bar. “Then you have the gambling structure in place of the casinos and racinos, but the smaller retail establishments like bars and restaurants can benefit by fans coming in to watch the games,” he says.
Anti-gambling advocate Walgate says he takes all projections with a pillar of salt. “When has the gambling lobby ever made their numbers? They sure haven’t compared to what they said would happen with casino gambling in 2009.”
Early numbers from New Jersey and Delaware show legal sports betting has a strong appeal. New Jersey bookmakers made about $3.5 million in the first month while Delaware state-run bookies made $2 million over the first 90 days despite only having two places to bet.
Masurekar says that’s partly because those states are getting away with offering worse odds on sports bets—“higher juice,” in gambler parlance—pushing the normal five percent profit margin up to about 10 percent.
A Gambler Speaks
Jimmy, a longtime Columbus sports gambler whose bet football and college basketball with illegal bookies for the last two decades, says he won’t bet legally with the state unless there’s a mobile option. “Mobile could be a game changer, but there would still have to be a reason for me to break from what I’m doing now,” says the gambler. “What are they going to be offering me? Will there be ways to bet, or things to bet on, that I can’t do right now?”
With a long-term relationship with his bookie, Jimmy says he isn’t concerned about getting paid out. He predicts that the causal gambler will be the market for state-run bookies.
“I think you’re going to get the occasional big-game bettor. … The casual guy is going to do it, and he’s going to end up betting more games,” Jimmy says. “Every football weekend, there are a couple guys who call me to put in a bet for them, and it’s a hassle. Those guys now are going to have somewhere to go.”
Jimmy predicts that state-run bookmakers will probably offer the worst betting lines on the local sports teams as fans pour money onto their favorite teams. “I can only imagine the Columbus casino would have the absolute worst [least favorable] line in the world on Buckeye games,” he says. “So if I want to bet against Ohio State, I might look at going there.”
At every Buckeye game—home and away—Ohio State AD Gene Smith hears the moans and groans of gamblers like Jimmy and his buddies in the crowd. ” ‘Oh, I hope he misses this field goal’ and things like that,” Smith says. “So I know there’s betting going on.”
Still, the legal sports betting does raise new issues for Smith as he considers how best to protect his young charges. One suggestion already made by Smith and other Big Ten officials is for the NCAA to adopt a uniform injury report such as the one released weekly in the NFL. Similarly, Smith says a uniform system for reporting suspensions would also be a good idea.
The biggest change, though, will come from a need to “double down” on the compliance education given to student-athletes and staff, Smith says. “We will probably go deeper and more nuanced into the kinds of things that people bet on,” he says.
As an example, Smith offered the prop bets available currently in some offshore markets that allow gamblers to wager on specific plays—like whether the first play of an Ohio State offensive series is a run or a pass. “On Fridays, offensive players know what the script is, and they need to be careful about who they are talking to and what they are saying,” Smith says.
But while Smith says he sees increased pitfalls, he also acknowledges that legal sport gambling will be good for ratings. “It probably will bring more attention. I think we are going to see more people watching a lot of games. They are going to be betting these games across the board.”
Nonetheless, Smith says he would prefer not to deal with the hassles that it brings. “Don’t get me wrong—I’m still against it,” he says with a laugh.
Columbus Blue Jackets spokeswoman Karen Davis declined to answer any questions about sports gambling. In the wake of the May 14 ruling, NHL Commissioner Gary Bettman told CNBC that there was a “fair amount of opportunity” in the new legalized betting world saying that in-game prop betting such as whether a team would score on a power play could be popular. Sports betting experts say NHL hockey is the most lightly bet major sport, accounting for about one percent of the action at a sportsbook.
Meanwhile, Dave Ridpath, an Ohio University professor and former compliance official with Marshall University and Weber State, says the benefits of legal sport gambling outweigh the negatives. He thinks the sunshine will be a great disinfectant. “It’s easier to gain control of something once it is out in the open,” he says. “I would hope some of the revenue stream finds its way back to athletes and not to raise coach salaries even higher and build shiny new facilities. This is something coming out of the shadows that can benefit athletes.”
But Lawrence Funderburke, a star Buckeye basketball player in the early 1990, says he thinks legal sports betting can do nothing but cause more problems for the poor, black athletes that star in the revenue sports of football and college basketball.
“We aren’t thinking about how this will affect the most vulnerable athletes downstream,” says Funderburke, who grew up in generational poverty without a father. “We are only thinking about how this will affect state coffers.”
Funderburke—who serves as a mentor for young athletes and has written several books, including Sociopsychonomics: How Social Classes Think, Act and Behave Financially in the 21st Century—says he worries that more shady characters will prey upon athletes from unstable homes. “There are often no guardians at the gate, so to speak,” he says.
During his time as an Ohio State athlete, Funderburke says he was sometimes pumped for information by young gamblers at OSU frat parties. “They would ask questions that were very odd like, ‘Who is hurt right now?’ ” says Funderburke. “Why would you be asking that at a party?”
Funderburke says his latest book delves into the mentality that draws poor people to gambling. “I think it all comes back to the psychology of people. That’s why poor people gravitate to home-run options.”
Interestingly, investment banker Masurekar says sports gambling typically attracts a well-educated, high-income and predominantly male group of bettors. ?It’s a relatively progressive tax; it’s not a tax on low-income people,” he says.
Nonetheless, anti-gambling advocate Rob Walgate says that he worries that sports gambling will be another drain on society. “Sports gambling isn’t going to help Ohio grow and prosper,” he says. “It’s just going to give people more opportunities to throw their money away.”
As West Virginia casinos and horsetracks begin taking bets this fall, Ohio’s gambling bill sponsor says he’s committed to a careful process that won’t be rushed by what other states are doing.
“I’m very keen on having some hearings and hearing from voters and the interested parties,” says state Sen. Eklund. “It’s time we started getting the lay of the land in terms of what everybody’s ideas are.”