A safe bet for increased revenue? Bill prefiled to allow sports betting in Kentucky

Did Kentucky hit the jackpot when the U.S. Supreme Court in May struck down a ban on sports betting?

The Bluegrass State, renowned for its horse racing industry and thirsty for new revenue streams, would seem to be a good fit to legalize sports betting in the wake of the high court’s overturning of 1992’s Professional and Amateur Sports Protection Act.

Four states – Delaware, Montana, Nevada and Oregon – approved sports betting before the federal ban went into effect, but that leaves 46 states trying to be among the first out of the gate in approving gambling on games.

At least two legislators believe Kentucky needs to go to the whip to get a bill passed that would allow betting on college and professional sports in the commonwealth.

State Sen. Julian Carroll, D-Frankfort, prefiled a bill that would legalize sports wagering and use the majority of any revenue to help prop up the state’s ailing retirement systems.

Kentucky Senate Majority Leader Damon Thayer, R-Georgetown, has been cheerleading for betting on sports, saying at a recent Sports Wagering and Impact on Horse Racing symposium: “I don’t want to be one of the last states to pass sports wagering. I want us to be one of the first 10 states to pass sports wagering, and I want it to support the horse industry.”

Thayer said bipartisan sports betting legislation will be ready to be considered when the legislative session begins Jan. 8, but Carroll’s bill is already out there, and it appears at first glance to be a boon to both state-licensed racetracks like Franklin’s Kentucky Downs and the retirement systems.

Carroll’s Bill Request 29 calls for the Kentucky Horse Racing Commission to set up regulations for sports betting at racetracks and simulcast sites. Under his proposal, an initial sports wagering license would cost $250,000 and annual renewals would be $25,000. The bill calls for a 3 percent excise tax on each bet.

License fees and wagering taxes would go into a sports wagering distribution trust fund, with 60 percent of the money going to the nonhazardous funds of the Kentucky Employees Retirement System and the Kentucky Teachers Retirement System. Another 30 percent would go to the Kentucky Educational Excellence Scholarship fund, and the remaining 10 percent would be deposited in the Kentucky Thoroughbred Development Fund.

Just how big of a windfall such a structure would mean for tracks like Kentucky Downs and for the state treasury is in question.

“I think it would be great for the industry, if it’s done correctly,” said Ted Nicholson, Kentucky Downs senior vice president and general manager. “If part of the money goes for (horse racing) purses, it will be beneficial for everybody.”

The recent five-day, 50-race meet at the track saw Kentucky Downs increase the amount wagered by about 20 percent over last year’s meet. Casino slot machines and terminals that allow betting on replays of past races have allowed Kentucky Downs to boost its purses each year.

Still, Nicholson is intrigued by the idea of having fans of the Hilltoppers, Wildcats and Cardinals come to Kentucky Downs to watch the games and place bets on their favorite team.

“If nothing else, it would be great for increasing traffic,” he said. “But I have no idea what revenue it would generate. Sports wagering is hard to quantify because there’s so much illegal betting going on.”

That is backed up by figures from the American Gaming Association, which estimates that illegal sports betting revenues are about $380 billion annually throughout the United States. That dwarfs the $35 billion that casinos and lotteries bring in annually, leading one horse racing proponent to also advocate for sports betting.

“We all see the great potential that sports wagering can bring to the state,” said Elizabeth Jensen, executive vice president of the Kentucky Equine Education Project. “Currently, Kentucky’s horse racing industry is unparalleled in nearly every metric when compared to other states. Not only could sports wagering benefit the state financially, but it can also be done in a way that will preserve and grow the success that horse racing has seen in this state over the last decade.”

Proponents of sports betting point to the experience of New Jersey, which started allowing wagers on sporting events shortly after the Supreme Court ruling.

New Jersey’s gambling law includes an 8.5 percent tax on in-person wagers and a 13 percent tax on bets made online. The state’s gamblers anted up $95 million for bets on sporting events in August, fueling one of the biggest monthly revenue increases in decades for Atlantic City’s casinos.

Despite the potential revenue boost New Jersey’s experience hints at, one local state legislator is cautious.

State Rep. Wilson Stone, D-Scottsville, acknowledges that the state has “legitimate revenue needs,” but he isn’t sure sports betting is the answer.

“I don’t have a strong opinion on whether or not we should move forward (with sports betting),” Stone said. “The Supreme Court case opened the gates, and I suspect many states will move forward with it. But I don’t know if it will move quickly in Kentucky or not.”

At Kentucky Downs, where the majority of the revenue comes from Tennessee bettors, Nicholson cautions against being too cautious in implementing sports betting now that other states are rushing to legalize.

“You don’t want to be the last one to the party,” he said.

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