How Kentucky Sports Betting Launch Will Affect Neighbors

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Kentucky sports betting

Once online Kentucky sports betting starts Thursday, there will be at least some ripple effect on the legal markets surrounding the Bluegrass State.

Almost the entirety of Kentucky except approximately 70 miles next to Missouri is surrounded by states with legal sports betting. So, with Kentucky sports betting fully launched Thursday, surrounding states project to lose at least some measurable amount of handle, and thereby tax revenue.

One of the sports betting legislation’s lead proponents said as much about keeping Kentucky’s 4.5 million residents in the state during one of the in-person sportsbook openings September 7 at The Red Mile.

“Starting today, no Kentuckian will ever have to take their hard-earned money to another state just to place a sports bet,” Sen. Damon Thayer said.

Kentucky sports betting potential

LSR projects Kentucky to add to a record year for US sports betting. That includes contributing $1 billion to the national handle by the end of the year.

Eventually, Kentucky bettors will likely wager $2.3 billion to $2.9 billion annually, according to LSR analysis.

With the expansion of Kentucky sports betting keeping wagers in the Bluegrass State, it also keeps dollars from going into the coffers of neighboring governments.

Keeping people in Kentucky by design

An argument often touted by sports betting legislation proponents is keeping their tax dollars within their borders. That is the hope for Kentucky lawmakers as well, who have touted a projected $23 million in annual taxes from operator sports betting revenue.

That includes Gov. Andy Beshear, who placed two ceremonial first bets on September 7. Beshear also believes the industry can help draw visitors to the state, much like its horse racing industry.

“This is entertainment,” Beshear said earlier this month. “It’s what Kentuckians were looking for. It’s going to boost tourism. It’s going to make sure we don’t lose that many people to Vegas in the first couple rounds in the NCAA tournament.”

Who tried to bet online early in Kentucky?

GeoComply provided pre-legalization geolocation pings, or attempts to wager, in March. GeoComply declined to provide new geolocation information prior to the online launch.

The data showed nearly 300,000 checks from 23,000 unique player accounts between March 16 and March 19. Much of the activity was around blocked access to legal sportsbooks in Ohio, not far from the University of Kentucky‘s home of Lexington, just before a Wildcats March Madness game.

More than 40% of the checks were for Ohio, while 39% came from accounts attempting to access Indiana sportsbooks. The other roughly 20% comes from four other legal markets around Kentucky:

Ohio benefits from growing market

Ohio is a big state with 11.8 million people, which should help weather any negative bump from Kentucky’s legal market. It also helps that the market launched in January, generating $4.2 billion in handle to date.

As a maturing market in its first football season, the handle will likely continue to grow and hide any drop from Kentucky bettors. Operators are still jockeying for the top spot in the Buckeye State, as DraftKings took over the top spot in July. That month, sportsbooks handled $331.1 million, the lowest point since launch because of the slow summer sports season before likely taking record-breaking handle this NFL betting season.

Still, one of Ohio’s largest cities, Cincinnati, has a large chunk of its metro area in Kentucky. Likewise, Lexington, Kentucky’s second-largest city, is a short trip from that border. Kentucky’s 18-year-old age limit could also draw some young Buckeyes over the border.

Indiana likely suffers with Kentucky sports betting

Perhaps the state with the most to lose by Kentucky sports betting launching is Indiana. Kentucky’s largest city, Louisville, sits on the border with the Hoosier State.

Indiana is also an established state, having launched in 2019. It could see a year-over-year loss on monthly handles as it did earlier this year, with at least a few percentage points attributed to Kentucky attrition, according to LSR analysis.

It would be the second time Indiana handle takes a hit from another market this year. In February, after Ohio launched, Indiana sportsbooks took $356 million in wagers, a 13% drop from February 2022’s $409 million.

Since the market’s launch in September 2019, Indiana sportsbooks have taken nearly $13 billion in wagers.

Illinois unlikely to see much of a dent

With most of the Kentucky population along its northernmost border, the Ohio River, Ohio and Indiana are the most exposed to Kentuckians. Moving west, Illinois is also on the Ohio River border, but a much smaller slice.

Unlike neighboring Indiana, Illinois had in-person online betting registration that required bettors to sign up at casinos until March 2022. That hurdle might have hampered any bettors from the Bluegrass State.

Even in the past year with mobile registration, the small population near Illinois has likely kept the effects on the sports betting industry nominal. Illinois is one of the largest sports betting states, with sportsbooks handling $24.7 billion since debuting in March 2020.

Three states share tiny portion of neighboring population

West Virginia and Virginia share the short eastern Kentucky border. The section of the Bluegrass State is not a majorly populated area, so it likely will not result in much loss in bets for the eastern-facing states.

Likewise, the lightest-populated part of Kentucky is the southern border, which runs across the northern border of Tennessee. It is an online-only market, so any Kentuckian over the border could easily register, but there simply are not many.

Total handle from the three states: