Ohio’s sports betting bill will allow small businesses to have sports betting kiosks in their establishments. So, Ohioans could find betting kiosks in local bars and restaurants. But those small businesses would need the money on hand to pay winnings immediately. The Ohio Lottery has released guidance about how to overcome this small business challenge. Its proprietor rules state:
“A prize resulting from a type C sports gaming wager must be able to be validated immediately upon completion of the sports wagering event, by the type C sports gaming proprietor with which the wager was placed. The type C sports gaming proprietor will create a credit voucher for the prize, which can be redeemed by the player for cash or the monetary equivalent of cash.”
The rules also state that small businesses will be able to offer payouts of $600 or less. So, even though small businesses with sports betting kiosks will have to pay winnings out immediately, they have some room to manage their liabilities.
Why Small Businesses Die Without Cash
The cliche goes that cash is the lifeblood of any business. However, it’s especially precious for small businesses. Having cash on hand pays bills for retail space, employee salaries, and other essentials that cannot afford to go unpaid. Losing any one of these can spell death for a small business.
Every business function is vital for a small business. Every organ is a vital organ.
Further, small businesses lack the cash reserves of large corporations. Small businesses can only go through so many rounds of funding from investors. Investors want to see a small business make its own money through its own business model rather than large cash infusions.
So, a small business must not only pay attention to how much money it brings in. It must also pay attention to when that money arrives. If a company owes its employees paychecks on the 15th, employees won’t stay if that money arrives on the 30th. Utility companies won’t wait a month to keep the lights on. Landlords won’t want to renew the lease of a tenant that pays bills late.
Sports betting kiosks complicate the “when” issue of revenue for small businesses. If a bettor wins at a betting kiosk, the business that hosts the kiosk must have cash ready for the bettor’s winnings. That means small businesses have to put extra cash aside to host sports betting kiosks.
Sports betting kiosks may be profitable for bars and restaurants, but they could drain cash reserves that a Super Bowl’s worth of liquor can’t cover.
How the Ohio Lottery Solves the “When” Problem
Even though small businesses with kiosks will need extra cash on hand, the Ohio Lottery will allow those businesses to set even lower caps on sportsbook winnings. So, a bar could set its payout limit at $300 instead of $600. That allows small businesses to manage how much money they’re on the hook for.
Some critics have argued that the extra cash that small businesses will need on-site will present security risks. That may be true, but it’s far from insurmountable. Shortly after Colorado legalized marijuana, dispensaries had to pay their taxes in cash. That security risk led to a push toward allowing banking for marijuana companies despite being illegal at the federal level. If Colorado’s dispensaries could overcome the cash-on-hand hurdle, Ohio’s small businesses will manage.
The greater challenge will be overcoming the chance involved with sports betting. Over time, sportsbooks come out ahead. But bettors can have an exceptional weekend during football season that could deplete a small business’ cash reserves.
While security is always an issue with cash on-site, flawed cash flow management remains the greater threat to small businesses. Owners who see the revenue but miss the cash flow will be greater threats to their own businesses than sportsbooks, robbers, or thieves.
AP Photo/Susan Haigh