Kentucky Approves Sports Betting, Grey-Market Games Bills

March 9, 2023
Kentucky has moved closer to passing two significant gambling reforms after a House committee approved legislation to authorize sports wagering and the full House passed a measure to prohibit unregulated gaming devices supposedly based on skill.


Kentucky has moved closer to passing two significant gambling reforms after a House committee approved legislation to authorize sports wagering and the full House passed a measure to prohibit unregulated gaming devices supposedly based on skill.

In a hearing on Wednesday (March 8), Republican Representative Michael Meredith admitted to his colleagues that he cannot debate anyone’s moral or religious objections to gambling but he stressed that illegal and unregulated sports betting in Kentucky is already a billion-dollar business that needs to be legalized.

Meredith and Representative Al Gentry, a Democrat, testified before the House Licensing, Occupations and Administrative Regulations Committee on House Bill 551, which would legalize, regulate and tax sports betting in Kentucky.

Meredith noted that there had been some technical changes to the bill from when it was first introduced, including allowing sports-betting operators to run retail locations at the state’s nine licensed racetracks, as well as permitting wagering at simulcast facilities state-wide.

A provision requiring a 12-month in-person registration requirement has also been removed.

Meredith said even though sports betting is illegal in the commonwealth, residents are wagering about $1bn annually through underground bookmakers and offshore websites. Kentucky residents have also been crossing into the border states of Tennessee, Ohio and Indiana to place wagers where sports betting is legal.

“I want you to understand that this is not a product that isn’t already happening within the state,” Meredith told the committee. “It’s just happening in an illegal and unregulated fashion.”

He said that 80 percent of state residents who take part in illegal wagers through offshore sites think it is legal.

“It is not,” Meredith said. “They don’t understand that because the internet does not bar them from going to those sites and placing those wagers.”

Under HB 551, the Kentucky Horse Racing Commission would regulate the sports-betting industry. The state’s nine racetracks would be permitted to obtain a license through the commission for retail sportsbooks at the tracks and their offsite venues offering historical horseracing machines (HHR).

The tracks would also be able to partner with up to three providers to offer mobile wagering skins in the state.

The state would make an estimated $23m annually from sports betting, according to Meredith and Gentry. Retail bets would be taxed at 9.75 percent, while mobile wagers would be taxed at 14.25 percent, mirroring the equivalent tax rates already in place in New Jersey.

Efforts to legalize sports betting in Kentucky have fallen short over the last five years, including during the 2022 legislative session. Meredith said the difference between his bill and previous measures was his does not include language legalizing daily fantasy sports and online poker.

The House committee voted 20-0 to approve the bill on Wednesday and it now heads to the House floor. As HB 551 has had only one reading of the required three readings, it likely will not be considered until later Thursday (March 9), at the earliest.

If approved by the full House, the bill would then have to go through the Senate before the legislative session concludes on March 30.

Although there is bipartisan support in Kentucky for legalizing sports betting, some socially conservative lawmakers and opponents continue to oppose the idea of expanding gambling.

David Walls, executive director for The Family Foundation, said the group is against the expansion of predatory gambling in Kentucky.

“This type of predatory gambling is designed to prey on human weakness with the government colluding with gambling interests to exploit our fellow Kentuckians,” Walls said.

Bluegrass State Closer To Skill-Games Ban

In a separate legislative development, after Republican Representative Killian Timoney’s bill to ban so-called skill-based games, also known as grey-market machines, was tabled in the House on Friday, Republican Speaker David Osborne made a motion on Wednesday to move House Bill 594 for passage.

There was no debate on the motion to take the bill off the table, and there was little discussion before the House voted 64-32 to approve the bill. The bill now heads to the Senate.

“Kentucky has always done an excellent job of regulating gaming, and we want to continue that effort now by outlawing illegal gaming machines and explicitly saying what is not gambling and what devices and machines are gambling machines, and which are not,” Timoney said.

The machines, which are similar to slot machines, have proliferated throughout Kentucky over the last two years. Estimates place the number of grey-market machines at upwards of 40,000, an increase from around 12,000 in 2022.

Kentucky has three legalized forms of gambling in charitable gaming, a state lottery and horseracing, including historical horseracing, machines with anything outside that considered illegal.

Unregulated skill-game machines were almost outlawed last year, but a bill by Timoney was killed in the House.

Timoney’s proposal this session would ban the machines while also implementing a $25,000 fine for those operating the machines that would be paid to the county they were operated in.

Republican Representative Chris Fugate said he was divided on the bill even though he is against gambling. He voted yes on HB 59, saying the grey-market machines “are taking the money off my people back in the 84th District.”

The bill passed with a floor amendment that deals with esports and ensures the term is clearly defined to not include casinos games such as blackjack or roulette, as well as an amendment approved by the House Licensing, Occupations and Administrative Regulations Committee last week that states the bill “relates to the regulation of game machines.”

An alternative measures, House Bill 256, authored by Republican Representative Tom Smith, would regulate and tax skill games. The measure remains in the House Appropriations and Regulations Committee with no hearing or vote scheduled as of late Wednesday.

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