Long Wait for Ohio Sports Betting Launch Could Prevent Potential Pitfalls

By the time the Ohio sports betting industry launches, Ohio regulators will have had just over a year to write industry rules. That’s a generous timeline compared to other major sports betting markets. Colorado had five months between sports betting legalization and the industry’s launch. That makes the Colorado Division of Gaming’s recent excoriation make more sense. 

Colorado’s State Auditor released a report on the Colorado Division of Gaming’s performance since sports betting legalization. The report found issues that question the licenses that Colorado has awarded. Some of the findings include: 

  • Most of Colorado’s sportsbooks are operating with temporary licenses. 
  • The Division of Gaming was improperly staffed to conduct criminal and financial investigations into applicants. 
  • Investigations were limited to what could be completed in three weeks to launch Colorado sports betting by May 1, 2020. 

The Colorado Division of Gaming’s audit is a warning to states that may want to rush regulators. Colorado igaming regulators had to write industry rules and issue licenses in less than half the time that Ohio has to launch its igaming industry. One way that Ohio can avoid Colorado’s mistakes is to avoid over-reliance on temporary sports betting licenses. 

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Colorado Sports Betting Mistakes    

Some of the most serious issues with Colorado’s sports betting regulators stem from the over-reliance on temporary sports betting licenses. Temporary sports betting licenses are valid for two years. Investigators can redeem those licenses after an investigation similar to the one that awarded the license initially. 

However, temporary licenses also require less detail. For example, Division investigators postponed investigations into pending lawsuits until the process of awarding permanent licenses. 

Unfortunately, Colorado has more than 30 operators with temporary licenses. That means investigators have incomplete criminal and financial histories for more than 30 online and retail sportsbooks. Investigators don’t know which sportsbooks have “funding from legitimate sources” or “have a history of operating in a legal and ethical manner.” 

Colorado investigators also gave themselves more work. Before doing the detailed permanent license investigations, investigators must do partial investigations to renew temporary licenses. So, the Division delayed proper due diligence further.

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Ohio Sports Betting Launch Timeline

The Ohio sports betting launch will take a long time compared to some other major markets, but that timeline gives Ohio regulators time to prepare for due diligence. Ohio’s regulatory body can ensure that it’s properly staffed. Before May 2020, Colorado had 13 criminal and financial investigators. After its launch, Colorado had three investigators. In March 2022, Colorado had seven. Properly staffing the regulator’s office will help Ohio avoid delaying investigations of proper depth.

Ohio can also standardize the information required for each investigation. Colorado’s audit sampled the background investigations into sportsbook applicants and their executives. One sample investigation stated that a company had no “current or pending lawsuits” even though the sportsbook had disclosed one in its application. The investigation report missed the information the sportsbook sent in the application. 

The Division also had no procedures for examining international sportsbook activity. So, Colorado investigators have no idea whether a Colorado sportsbook struggles to identify money laundering tied to soccer in Europe or horse racing in East Asia.

Investigators were also “not expected” to examine the international criminal histories of key sportsbook executives. So, histories of violations in other markets have gone unreported in Colorado.  

Reducing variation across sportsbook application requirements seems like a low bar. However, Colorado’s audit shows how time pressures, pandemic challenges, and poor leadership can snowball into a lack of oversight.  

A Better Regulatory State 

Tennessee regulators have suspended and revoked licenses for legal violations. They suspended Action 24/7’s license after it failed to take action on an account that had deposits from 127 credit cards, a red flag for money laundering.

In a Legal Sports Report article, Penn National Gaming VP of Public Affairs mentioned a fly-by-night company in Tenessee that had laundered “tens of thousands of dollars before anyone noticed.” However, that company was still caught and shut down. 

Part of Tennessee’s ability to crack down on bad sportsbooks partially stems from the length of time regulators had to work regulations out. Tennessee passed sports betting into law in May 2019. Sports betting went live in November 2020. That gave the Tennessee Lottery Corporation over a year to decide on application and investigation requirements.  

A generous timeline doesn’t guarantee a robust regulatory environment. But it can keep gambling regulators from cutting corners to meet deadlines. Ohio’s sports betting launch may seem far away, but it’s better for the industry to regulate correctly than to bury itself in its own mistakes.

About the Author

Christopher Gerlacher

Christopher Gerlacher is a freelance writer tucked into the foothills in Colorado Springs. He works as a content writer, professional resume writer, and SEO professional articles in multiple industries that can be viewed from his portfolio. He's a contributor to both Michigan Sharp and Colorado Sharp.