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Ohio won’t initially allow sports betting companies to deduct promo bets

sports betting apps on smartphone
Adrian Ma

Ohioans have been inundated with ads for new online sports betting services that will begin Sunday on the first day of the new year.

Many of the ads offer users promotional bet credits for signing up, which can greatly increase the sports gaming receipts a company files.

In Ohio, the companies will be taxed at 10 percent of the sports gaming proprietor’s net revenue from sports gaming. The tax is imposed on the proprietor’s “sports gaming receipts,” which include the total amount received as wagers.

While some states like Maryland and Virginia rolled out their legal sports betting programs without taxing these types of promotional wagers, Ohio is doing something different.

The Ohio Casino Control Commission reports the state’s law is structured to prevent the companies from deducting promotional credits in the first four years of operation. Then, the state will limit the deductions of promotional credit wagers to 10 percent from 2027 through 2031, and to 20 percent in 2032 and beyond.

This structuring is expected to limit the adverse effect of these promotions on tax collections from proprietors in Ohio.

In Maryland, online sports betting rolled out on Nov. 23. Before the end of that month, bettors placed $186.1 million in wagers and about a third of those bets were promotional, “free” bets, according to Play Maryland. So, the state collected only $4,262 in taxes from online sports betting.

“They gave out so many of these credits, that it just completely whittled away what the state could actually tax,” said sports betting regulatory reporter Robert Linnehan.

In Virginia, after initially allowing companies to deduct the promotional bets, lawmakers changed their law to end the deduction after reports the state was losing out on revenue.

Linnehan says sports betting companies are inundating the state with ads and promotional offers now because they’re fighting for a share of the brand-new market. But, he expects the promotions to dial back as people inclined to place bets find the service they prefer.

Renee Fox is a reporter for 89.7 NPR News.