High stakes gamble?

Before delving into the looming debate in Columbus over the enticement that casino and racino operators use to lure customers to play, here’s a factoid that undoubtedly has Ohio Lottery officials high-fiving one another: Keno has become a veritable gold mine for the state.

The game was launched in 2009 and has grown each year in revenue. In 2015, Keno and Keno Booster annual sales increased by 11 percent for a total of $329.5 million.

Little wonder the lottery commission has monitors in just about every bar, restaurant and neighborhood business so players can watch winning numbers flashing on the screens every couple of minutes.

In addition to Keno, the lottery commission also launched the EZPlay Tap games at veterans and fraternal halls. Sales in fiscal year 2015 were $24 million.

“The committee should continue to monitor progress in these growing aspects of lottery operations.”

That conclusion is contained in the annual report from the Ohio General Assembly’s Permanent Joint Committee on Gaming and Wagering. The report was made public last month.

But compared with the positive news on the Keno front, storm clouds are gathering over what is known in the gaming business as “Promotional Spend.” It is also referred to as “promotional play” or “promotional gaming credits.”

It’s a widely used marketing tool by which casino and racino operators offer customers house money to wager.

Point of contention

The dollars are not taxed, as other wagered amounts are, and that has become a major point of contention for some members of the Permanent Joint Committee on Gaming and Wagering.

Why? Simply because hundreds of millions of dollars in promotional spend have been redeemed by patrons.

The first casino in Ohio opened its doors in March 2012, and since then players in the four Vegas-style casinos in the state have redeemed over $320 million in tax-free play.

But that isn’t all. There are seven racinos (horse-racing tracks and slots-only casinos) operating in Ohio, and they gave away $330 million worth of free play.

The $650 million-plus is now the target of some lawmakers who believe that taxing such dollars is good public policy.

As the report notes, “Gaming tax revenue in Ohio is dedicated for funding of schools and local governments; this tax exemption has led to a significant loss of funds for these entities. In order to explore the issue further, the committee reached out to Penn National, Rock Gaming and other national gaming industry representatives.”

Therein lies the rub. While state lawmakers obviously see the “Promotional Spend” as a taxation gift that keeps on giving, the gaming industry has a totally different take.

Consider this reaction from Bob Tenenbaum, spokesman for Penn National Gaming:

“Any change in the current promotional tax credit would, as we told the committee, negatively impact casino revenues, hinder the growth of the industry in Ohio, and make it more difficult for Ohio gaming facilities to compete with those in neighboring states.”

Tenenbaum warned that such a change in the tax code would drive customers to facilities in Pennsylvania, West Virginia, Indiana and Michigan.

The committee report dismisses such warnings.

Here’s what the report says in part:

“A tax promotional spend, it was argued, would lower the amount of free credit operators would be willing to hand out, thereby eliminating an important competitive advantage for Ohio operators and driving dollars to out-of-state establishments.

“This argument is specious, as only one of Ohio’s neighbors, Pennsylvania, permits tax-free promotional spend (Pennsylvania also taxes its casinos at a much higher effective tax rate of 55%). Indeed, another neighboring state and corporation home of Rock Gaming, Michigan, taxes all promotional spending dollars.”

It’s clear that this is an issue that won’t be addressed without a fight. The casino and racino operators can be expected to rally their customers, who not only gamble, but also are voters. State legislators will find out just how impassioned they can be if they believe government is trying to take something away from them.

The annual report from the Permanent Committee on Gaming and Wagering also addresses the Queen of Hearts and other such games of chance. It specifically talks about last year’s headline-grabbing event at Barry Dyngle’s pub in Austintown.

A future column will detail what the committee report is proposing as to oversight by the state.

Finally, the committee should investigate the so-called sweepstakes parlors that claim to offer patrons games of skill, rather than chance.

However, law enforcement agencies have found that what occurs in such places is gambling and should be banned.