Kentucky ‘Considered’ Taxing Sports Betting Handle Like Tennessee, Expert Says

A prominent expert in gaming law based in Nashville says Kentucky contemplated taxing sports betting handle like Tennessee recently decided to do. And she thinks there’s a chance Kentucky will follow Tennessee’s lead in the future.

In an interview with Gaming Today, Catie Lane Bailey, a partner and lobbyist with Holland & Knight in Nashville, said West Virginia, Minnesota, and Kentucky lawmakers have all “considered a handle tax, but have declined to enact it.”

Will Kentucky Ever Tax Handle? ‘Potentially’

Does Bailey, who’s a leading lobbyist for companies entering the Tennessee sports betting market, ever see Tennessee’s northern neighbor switching from a revenue tax to a handle tax?

“Potentially,” Bailey said, later adding: “If regulators in other states see that (Tennessee’s) model is successful, it could serve as a template for other state to adopt in the future.”

Besides Tennessee, the only active handle tax in the country is the federal 0.25% excise tax.

How KY Currently Plans to Tax Sports Betting

Currently, Kentucky online sports betting revenue is set to be taxed at 14.25%, and retail revenue at 9.75%. West Virginia taxes all revenue at 10%. Minnesota hasn’t launched sportsbooks yet, although previous versions of legislation set the tax rate at 10%.

Tennessee just started taxing handle at 1.85% after taxing revenue at 20% since its industry launched in November 2020.

Its new handle tax law also eliminates the minimum 10% hold the state required of its sportsbooks. The operators favored this, as nine of 11 Tennessee sportsbooks failed to reach that requirement and paid $25,000 fines since the November 2020 launch.

So, the operators are happy with no more hold requirements, and the state is happy with more tax dollars.

“According to the fiscal note attached to the recent legislation,” Bailey said, “the state could have collected approximately $15 million more with a handle tax as opposed to the 20% gross gaming revenue tax.”

A Tennessee Perspective on Kentucky’s Betting Age Limit

The legal sports betting age in Tennessee is 21. In Kentucky, however, it will be 18, making the Bluegrass State the largest 18-and-over sports betting jurisdiction in the US.

Was Bailey, who’s based just three hours from Kentucky, surprised the age limit was set at 18?

“Not necessarily,” she said. “The legal gambling age in the United States varies depending on the state and the activity on which the consumer wishes to gamble.  A number of states across the country set the minimum age to 18 for participation in the lottery, pari-mutuel betting, casinos, and now sports wagering.”

As they did with taxing handle, Kentucky lawmakers also discussed setting the age limit to 21. In fact, there were amendments presented that would have raised the limit to 21 and banned credit cards for sportsbook deposits. Both amendments failed.

Interestingly, 71% of Kentucky residents prefer the sports betting age to be 21, not 18, according to an exclusive Gaming Today survey from June.

Advice for Kentucky Regulators

When asked if she had any advice for Kentucky regulators as they prepare to launch retail sports betting on Sept. 7 and online sports betting on Sept. 28, Bailey said she’s urged them to “collaborate with the operators and protect the data.

“Most of the sportsbook applicants already exist in jurisdictions all over the country (and in some cases the world),” she continued. “They are subject to a variety of regulations and have seen what policies work most effectively to protect the consumer.  As the industry experts, operators are an invaluable resource for information.”

About the Author
Matthew Bain

Matthew Bain

Matthew Bain is a contributor to Gaming Today. Before joining Catena Media in 2022, Bain spent six years with the USA TODAY Network as a reporter and deputy sports editor at the Des Moines Register. A California native, Bain helped spearhead Prop 26 vs. Prop 27 coverage. He has led Catena Media’s coverage of the Massachusetts sports betting launch and the legalization of Kentucky sportsbooks.

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