The Kentucky House passed legislation Thursday that would lead the operators responsible for the vast majority of sports betting taxes to leave the state.
HB 904 by Rep. Michael Meredith is a wide-ranging bill that changes multiple aspects of the Kentucky sports betting market, including lifting the betting age to 21 and banning under bets on player props against Kentucky’s collegiate players.
The problem of HB 904 is that it places strict rules against prediction markets that would leave the state with a much different looking sports betting market if the bill is passed into law.
“We also say that if you are a licensee under the bill through sports wagering, a horse racing track or a fantasy sports operator, for the next year you can’t operate a prediction market in Kentucky,” Meredith said at Thursday’s floor vote. “After [July 1, 2027], you’re not allowed to be involved with or in business as a prediction market operator anywhere else in the country if you’re licensed under one of our licensee structures here.”
The bill is currently awaiting a Senate hearing in the Committee on Committees.
Operators push back on predictions language
Kentucky’s sports betting market include DraftKings, Fanatics and FanDuel, all of which have decided to launch prediction markets of their own.
Unsurprisingly, those three are not interested in exiting the growing predictions market just to offer betting in Kentucky. They submitted joint testimony to the House Licensing, Occupations and Administrative Regulations Committee explaining exactly that.
“We are concerned that this legislation may have significant consequences that could materially disrupt the Commonwealth’s successful sports wagering market,” the letter reads.
“As currently drafted, section 20 would gut the regulated sports betting market and force the exit of most, if not all, existing regulated operators from the Commonwealth. This would cost the state more than $40 million in tax revenue every year – money that goes to fund teacher pensions, among others. Kentucky adults would also lose the freedom to use a popular form of entertainment on their preferred regulated sportsbook.”
Kentucky sports betting taxes breakdown
The Bluegrass State currently has nine sports betting operators that have taken more than $6.6 billion in bets since launching in September 2023. Those bets translated to $724.8 million in adjusted gross revenue and $103.2 million in taxes.
Those tax dollars fall significantly without DraftKings and FanDuel in the market. Of those total taxes paid, the two account for $81.2 million, or 78.7% of the total taxes paid to the state.
Add in Fanatics and its $3.3 million paid and the state would be losing three operators responsible for nearly 82% of its sports betting taxes.
The written testimony says the three “respectfully urge careful considerations of these concerns.” The Sports Betting Alliance, which represents all three in lobbying efforts across the country, did not respond to a request for further comment.
Will Kentucky sports betting market have trouble with amendment 2, too?
Sportsbooks will also likely take issue with an amendment that passed by a 54-13 vote that says operators “shall accept any deposit or wager” of up to $1,000.
There are only limited circumstances where the bet could be denied:
- The bet “constitutes suspicious wagering activity” or “indicates that a person is a problem or compulsive gambler.”
- The bettor already deposited or wagered $5,000 or more in the same day.
- The wager would pay out $1 million or more.
Sportsbooks would be required to tell bettors why they are limited or banned and give bettors a week to appeal.
The $1,000 requirement could be higher than some operators want to take on specific markets from any bettors. For example, pitch-specific in-game prop bets are limited to $200 at most U.S. sportsbooks after reaching an agreement with the MLB following allegations of pitch fixing against two Cleveland Guardians pitchers.
Fantasy, predictions taxed
HB 904 also places taxes on predictions trades and the fantasy sports market.
Predictions would be taxed at the same rate as sports betting, 14.25%. It is unclear how that tax would be handled.
Fantasy sports will be taxed at 12.5%. The rules require at least two participants, which ends any operators offering contests against the house in the state. The age to play fantasy sports would still be 18 despite the sports betting age rising to 21.
Operators must pay an initial license fee of $7,500 if they are already a licensed sportsbook or $15,000 if not with annual renewals of $5,000 and $10,000, respectively.
