Kentucky Moves Toward Legal Sports Betting and Online Poker

State flag of Kentucky

30-second summary

  • Kentucky historically has only supported gambling on horse races
  • No casinos are operating in the state
  • A new bill would legalize sports betting and online poker
  • There is significant support for sports betting, but online poker could be a tricky sell

Kentucky’s historical gambling stance

Kentucky has always been very strict when it comes to its gambling policies. The only exception to this is Kentuckians’ love for horse racing. It is one of the leading states for both breeding and racing horses.

The state lottery has been in operation since 1988. Kentucky residents can also take part in multi-state lottery offerings such as Mega Millions. In the past few years, citizens have been able to buy these lottery tickets online. Non-profits are allowed to hold raffles and bingo to raise funds.

There are no casinos in the state, which means that a lot of residents travel to other states to play their favorite casino games. Bills to make casinos legal were considered in both 2010 and 2012 to try, but they were met with heavy resistance.

The legislature did not want to put revenue coming from the horse racing industry in jeopardy by opening up casinos. Seven racetracks operate in Kentucky. The Churchill Downs racetrack is well known globally because it plays hosts the Kentucky Derby annually.

These tracks take in about $840m (£651m) each year. Of this, about $310m (£240m) goes to the government in taxes. The racetracks have gaming machines on their premises to help boost their revenues and allow them to stay in operation.

The owners of Churchill Downs are keen to see legal sports betting. They recently invested in casinos in Mississippi and Pennsylvania in anticipation of sports betting legalization.

Potential sports betting legalization

Since a Supreme Court decision ended the federal ban on sports betting in May 2018, Kentucky has been considering legalizing sports betting. Some neighboring states are close to opening sportsbooks or have bills in the works, so the state doesn’t want to fall behind. A couple of sports betting bills have been put before the Kentucky legislature.

The latest, House Bill 175, was introduced by State Representative Adam Koenig. It includes provisions to allow both daily fantasy sports and online poker. Koenig says that it has more support than any other bill he has filed.

With sports betting being a massive black market activity, it makes sense for Kentucky to just legalize it. This will allow the state to benefit from reducing financing to criminal groups, as well as using tax revenue for good causes. There is bipartisan support for sports betting in Kentucky.

Funds needed

House Bill 175 would allow existing racetracks and sporting venues in the state to get sports betting licenses. Online sportsbooks would also be permitted. However, a prospective bettor would need to open the account in person at one of the respective venues before being able to play online.

The Kentucky Horse Racing Commission would be in charge of regulating sports betting. Each of the licenses would carry a $1m (£780,000) fee. There would be a 10.25% tax for bets placed at physical locations, while online sports bets would be subject to a 14.25% tax.

The state currently is in the midst of a serious pension deficit. It faces a shortage of almost $33bn (£25.6bn) for retired public workers in the next three decades. Therefore, the state is looking closely at ways in which they can generate new revenue streams.

House Bill 175 would also legalize online poker, but many believe that could be a step too far for many lawmakers.

Kentucky has a hostile relationship with online poker, having filed numerous lawsuits against online poker companies in the past. In 2015, a court ruled that PokerStars owes the state $870m (£674.3m). That’s the amount that residents of the state supposedly lost between 2006 and 2011 when the activity was not legal. Eventually, this fine was dismissed by a judge who said that the ruling was “absurd and unjust.”

As part of this bill, the Kentucky Lottery would be in charge of regulating the online poker sector. There would be a limit on how much one can wager on a given game. There would be an age limit of 18 years or older to use these platforms.

A 6.75% tax would be imposed on online net poker revenue. The current legislative session ends on March 29 and there is hope that significant progress can be made on these issues in the meantime.