Extras on Excise: Ohio Took Some of the ‘Madness’ Out of Fantasy Sports Betting Last Month

As states anxiously await a decision from the U.S. Supreme Court in Murphy v. NCAA, other developments in the regulation of betting on athletic contests have been taking the lead. If your attention was focused exclusively on your college basketball bracket last month, you may have missed that Ohio H. B. 132 became law on March 23, legalizing certain kinds of fantasy sports betting in Ohio.

H.B. 132 Changes the Field of Play for Fantasy Sports Contests in Ohio

H. B. 132 removes fantasy sports from the coverage of Ohio’s gambling laws and instead adds fantasy sports gambling to the list of industries regulated by the Ohio Casino Control Commission. The commission will now be charged with regulating “fantasy contests.” The new law defines these as simulated games or contests with an entry fee where players know the value of prizes and awards before they sign up and winning is based on “managing rosters of athletes whose performance directly corresponds with the actual performance of athletes in professional sports competitions.”

This means the new law will presumably affect companies that operate online fantasy sports leagues, such as FanDuel and DraftKings, as well as many smaller businesses. Because the law covers contests where an entry fee is charged to participate, Ohio participants in a fantasy sports league with friends on a free site won’t have to worry about registering first with the Casino Control Commission.

One of the bill’s sponsors, Jonathan Dever (R-Madeira), told Crain’s that fantasy sports previously fell within a “‘gray’ area.” The new law, he says, will make sure there are protections for consumers. Although the largest fantasy sports organizations operating in Ohio are anticipated to have registration fees as high as $10,000 per year or $30,000 for three years, Dever does not think the new law will be a “money-maker”, as Crain’s notes, but that it will cover the state’s costs to “‘implement the statute.’”

What else does H.B. 132 change? Perhaps some bad news for NCAA sports fans: the new law specifically prohibits fantasy contests involving college/university sports (as well as high school and youth sports, for that matter).

The new law does, however, provide some protections for Ohioans participating in fantasy sports:

  • Contest providers must take measures to protect the privacy of players and their accounts;
  • Contest operators are required to keep player entry fees in accounts separate from their operational funds;
  • Contest operators’ employees cannot participate in a fantasy contest or share private information if they or their relatives live with athletes or referees involved in any of the featured sports competitions;
  • Contest providers are prohibited from putting out false advertising or from targeting anyone under 18 in their ads; and
  • Contest operators are subject to periodic audits of their records and advertising
Fantasy Sports Advocates Have Scored Points in Other States

In jurisdictions that haven’t addressed fantasy sports specifically, it’s not always clear whether operators may offer fantasy sports contests without running afoul of state gambling laws. In fact, in some states, including Texas, there is litigation about the legality of fantasy contests.

Instead of waiting years for suits to move through the courts, state legislatures like Ohio’s have proactively moved on the issue.

Ohio’s legislature isn’t the first jurisdiction to legalize fantasy sports contests. Although a 2006 federal law legalized fantasy contests at the national level, it took about a decade before state legislatures became active in this area. In 2016, Virginia was the first state to legalize fantasy contests, requiring a controversially steep $50,000 annual fee for contest operators. Ohio is just the latest on a growing list of states that have legalized fantasy sports contests in one form or another.

With the Fantasy Sports Trade Association reporting that fantasy sports is a $7.22 billion industry with 59.3 million participants in the United States and Canada, it is likely that we will see more states weigh in on fantasy sports in the future to protect consumers and attract revenue.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: How should states regulate and tax fantasy sports contests?

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