Ever since the U.S. Congress passed the law allowing states to ban non-residents from casino gambling, Ohio has made noises to join the other states in the union. On November 3rd, 2021 Ohioans voted to approve an amendment to the constitution known as Issue 3 which allows for state-approved casino gambling. Since then only eleven gambling establishments have been licensed in the state. One of the reasons for the slow adoption of the issue by the citizens of Ohio may be the fact that many citizens are afraid to invest large sums of money in a new venture, particularly one that is not based on the previous successes of the state’s already well established gambling facilities, like the casinos at the Gambling Capital, Paradise County, and the Cleveland Metropark.
Issues concerning gaming in Ohio are dealt with at the local level through the Ohio Department of Gaming and Sports Commission (OGCS). Recently the OGCS proposed making some minor changes to its licensing process, such as eliminating the requirement that gaming establishments are operated by the resident owner or any direct family member. The changes were accepted by the legislature in February, but recently the General Accounting Office presented a report to the board indicating the potential costs and risks of the new legislation. In particular the report cited many concerns about Ohio’s lack of experience in the industry and said that if the changes go as planned it could cost the state up to $500 million. Those costs could be lost income from tourists who choose to stay away from Ohio resorts because of fears of poor service, increasing crime rates, and loss of goods and services such as food at state-approved casinos.
The General Accounting Office also suggested that Ohio casinos should be required to meet certain standards of competence before they can be licensed. These standards would include staffing, management, and oversight of the gambling establishments. In addition to those suggestions to the General Accounting Office noted that the casinos currently being managed by the Ohio Department of Gaming and Sports Commission have not complied with the required standards. In a related matter the Gaming Commission failed to ensure that the qualifications of management companies hired were being met and therefore will now have to conduct an in depth review of the companies that are in operation right now in order to ensure that those companies meet standard qualifications.
If these concerns are not addressed soon the impact on the casino revenue in Ohio could be severe. One issue that is being looked at right now is whether the Gaming Commission has jurisdiction over the casinos. The General Accounting Office report raises this concern. If the General Accounting Office finds that the Gaming Commission lacks jurisdiction over the casinos then it could issue a recommendation to the U.S. Congress requesting that the House pass a constitutional amendment to allow the General Accounting Office to regulate the casinos. If the House passes that amendment, the Gaming Commission would lose its ability to collect the casino license fees.
Those fees are collected from slot machines that are financed by the state of Ohio. The loss of the revenue that is obtained from those fees would seriously affect the operations of the various casinos all throughout the state of Ohio. According to the March revenue report for the state of Ohio ninety-six percent of the gambling revenue was collected from the five thousand slot machines in the five hundred and forty-two locations across the state. Of those five thousand machines ninety-three were in casinos.
It is troubling to consider but a recent investigation found that seventy-three percent of the five hundred and sixty casinos in the state of Ohio did not report their full payout percentages to the Department of Revenue. This means that nearly one hundred and twenty-four percent of the casino income reported as income in the past year was not taxable. Casinos are not held to a public accounting accountability standard like traditional businesses. Casinos and gaming stand-alone resort facilities are not subject to reporting OSI statistics to the Ohio Department of Revenue.
Casinos in Ohio are subject to state law and regulations. However, they are also subject to guidelines and directives issued by the Internal Revenue Service. Those same guidelines and directives outline what constitutes a win, loss, or profit for the casino. Therefore, the lack of compliance with the Internal Revenue Service regarding the reporting of OSI statistics to the Ohio State Board of Gaming Licenses and the Department of Revenue constitutes a substantial hindrance to the effective administration and management of the many different Ohio slot machine casinos and stand-alone resort establishments scattered throughout the state of Ohio.
In short, there are many Ohio land-based casinos and Ohio Lottery Systems that are licensed by the state of Ohio. Yet, because many of them do not meet the standard requirements that are outlined in the regulatory frameworks of the state of Ohio and the federal government, many Ohio gambling establishments and Ohio slot machine casinos do not meet the minimum standards that are necessary to ensure that they are operation in an effective and profitable manner. The lack of compliance with reporting regulations and the lack of accounting and reporting means that some of these Ohio gambling establishments may be operating in a less than optimal manner that compromises the interests of the Ohio residents and the interests of the state of Ohio as a whole. That is why the Ohio State Board of Gaming Licensing and the Department of Revenue are seeking to address this issue by creating a licensing monitoring program for Ohio casinos and Ohio Lottery System operators.