The excitement around Ohio sports betting keeps building as the state progresses towards its New Years Day launch. There are still quite a few regulatory hurdles to clear before the end of the year though. Odds on Compliance Director of Regulatory Affairs John Wellendorf takes a deep dive into how the state’s regulatory body is mobilizing one of the largest sports betting launches in US history.
The Ohio Casino Control Commission has been tasked with overseeing the largest single-day expansion of gaming in recent memory. On Jan. 1, 2023, both retail and mobile sports wagering will be authorized in Ohio less than six full months after applications were due for companies interested in, and with access to, the regulated market. Since that time, the Ohio Casino Control Commission has innovated the “go live” process developed by states who have launched sports wagering previously. Let’s take a look at the challenge Ohio is tasked with, the way the Ohio Casino Control Commission has taken on the monumental challenge, and how success of the launch process will be measured by the industry.
We’ll start by setting the scene for the task the Ohio Casino Control Commission was assigned: HB29 was passed in Ohio on Dec. 8, 2021 and signed into law shortly after. That gave the Ohio Casino Control Commission just over a year to launch sports wagering in the state by the Jan. 1, 2023 deadline required by statute. The rule making process in Ohio started almost immediately, with the first round of draft regulations released to the public before the end of 2021. In total, there were five batches of sports wagering regulations released, with Batch 4 and Batch 5 expected to be formally approved via Ohio’s rulemaking process by mid-December of this year.
The legislation allows existing casinos, racinos, and professional sports teams in the state (including events such as the Memorial Golf Tournament and locations including the Pro Football Hall of Fame) the ability to apply for a Type A license. Each Type A license is entitled to one mobile skin (an individually branded online wagering platform), with a second skin allowed only if the Type A licensee can prove it is in the economic benefit of the state for a second operator to be authorized. Additionally, HB29 set the state’s tax rate at 10%, along with reasonable application fees compared to other large population states that have previously launched mobile sports betting. Separately, Type B and C licensees can apply for retail wagering in the state at approved locations (though Type C licenses are managed by the Ohio Lottery, not the Casino Control Commission).
The high number of potential mobile skins in Ohio, and attractive economic operating environment, have led to a rush of applications to the Ohio Casino Control Commission during the summer open application periods (June 15-July 15 for first skins, with second skins having an application deadline of August 15). There is an expectation in the industry that most of the current 25 Mobile Management Services Provider applications are attempting to launch on the Jan. 1, 2023 universal start date. If the intake task of 25 applications for operators, along with holding company and key person applications for each was not enough; HB 29 only grants the Ohio Casino Control Commission with the ability to grant a Provisional License for three months, with one three-month renewal. As a result, the Ohio Casino Control Commission will be forced to make full licensing determinations on all applications in under one year from the time applications were due.
So how then will the Ohio Casino Control Commission meet these statutory challenges? Their answer so far has been technology, hyper-specialization during the review process, constant communication regarding regulatory guidance to applicants, and removing unnecessary bureaucracy.
From a technology standpoint, Ohio has developed an online compliance portal through which operators can submit required procedures, controls, network diagrams, and responsible gaming plans. In most states where online wagering is legal, an operator will submit a Word/PDF document listing controls the operator has in place to meet each individual regulation. That internal control document is then passed around to specialists within regulatory agencies to provide feedback, and the feedback is collated/returned to the operator for changes by the primary sports wagering contact within the regulatory department. The cycle then repeats itself until all internal controls are approved.
Ohio’s online compliance portal has streamlined the process entirely. Rather than submitting a single internal control document, tasks are created for each requirement automatically by the system and operators submit controls one by one as they’re ready. And for requirements where the operator simply agrees to abide by the regulation, Ohio has developed a consent tick box that the operator is aware of, and will meet, the requirement. This process allows operators to submit controls as they finish them, and has improved the efficiency of the writing and review process by not requiring the regurgitation of regulations in affirmative statements throughout a verbose, single internal control document.
The online portal has also improved efficiency on the Ohio Casino Control Commission’s side, which was undoubtedly necessary to launch 25 mobile sportsbooks within six months of applications being due. Each control and document submitted by an operator is assigned to an individual at the Ohio Casino Control Commission responsible for confirming the operator meets that precise requirement. Through this process, time is saved by the regulators by having the requirement being reviewed, and the direct answer by the operator to the regulation, in front of the reviewer without having to sort through potentially hundreds of pages of a standard statewide internal control document. As such, approvals and feedback are received faster, and directly from the individual reviewing the control.
Another area where the Ohio Casino Control Commission improved the “go live” process is through their FAQ page. Any time a new state launches, the regulator is bombarded with questions from operators attempting to launch as quickly as possible, with the questions asked being overwhelmingly similar among applicants. Instead of attempting to answer the same question individually for all 25 operators that have applied, the Ohio Casino Control Commission has provided detailed and frequent updates to common questions available for any applicant or the public to view. This guidance has dramatically increased efficiency on the operator’s side as there is less of a need to wait for responses to questions as they arise, and potentially even answers questions some operators didn’t think to ask. The expectations that the regulator has placed on operators relating to the regulations is clear, which we believe will increase compliance at launch.
Regulations regarding change management in Ohio also deviate slightly from industry standard, resulting in what is expected to be a more efficient process. Typically, U.S. markets will have changes categorized into three levels, with one level requiring approval before making the change, one level requiring regulatory notification prior to the change but not approval, and the lowest level where the operator simply documents the change internally. Ohio classifies changes into only Low Impact and High Impact. High Impact changes are defined as “any change to, or addition of, components which impact the operational integrity of the system. Components include, but are not limited to, any component deemed to be critical by the certified independent test lab.” Low Impact changes are any changes not fitting within the High Impact classification. High Impact changes must be sent for approval to the Commission five business days in advance, similar to other states. However, Low Impact changes in Ohio require no advance notification to the regulator, only internal documentation of the change. We expect this slight tweak to the industry standard change management process will result in more and quicker innovation within Ohio’s licensed sports wagering products, as well as more efficient review of submitted High Impact changes by the regulator.
As can be seen from the above, Ohio has an enormous task on its hands, launching 25 mobile sportsbooks along with retail wagering on the same day in a populous and geographically large state. So far, the Ohio Casino Control Commission has been up for the task. Through innovation of normal regulatory bureaucratic processes, the state is set up for a smooth launch under challenging circumstances. If the Ohio Casino Control Commission continues with the efficiency we have seen in the process to date, it will become the standard for new states that want to come online.