Kentucky is a state of 4.5 million people. It has no federally recognized tribes and no casinos. But it does have horse racing. And soon it will have legal online and in-person sports betting through up to 27 branded sportsbooks under a sports betting bill signed into law by Gov. Andy Beshear on March 31.
It’s how these sportsbooks will be regulated that makes Kentucky stand out. Licensing and oversight won’t be handled by the state lottery or a gaming commission, as in most states. It will be handled by the Kentucky Horse Racing Commission (KHRC), which oversees the state’s nine racetracks authorized to hold a license under sports betting provisions in House Bill 551.
Only a handful of other states – Arkansas, Iowa, and Kansas – use their racing commissions to regulate sports betting (in cooperation with the lottery in Kansas), although all of those states have licensed casinos.
That makes Kentucky somewhat of a unicorn in the US sports betting industry. But the KHRC is far from a newbie in the gambling world. Regulation of horse racing and pari-mutuel betting by the commission goes back 114 years. The KHRC also regulates historical horse racing machines – pari-mutuel video slots found at some racetracks and OTBs now eligible for sports betting licensure under HB 551.
A Clear Choice for Regulation of Sports Betting in Kentucky
HB 551 adds sports wagering to state law under Kentucky Chapter 230 which is specifically restricted to “horse racing and showing.” Sports betting in Kentucky will not fall under pari-mutuel betting (based on changing odds in betting pools, rather than fixed odds). Sports betting will fall under an entirely new section of the statute.
The KHRC will handle sports betting regulation from the bottom up under KRS 230, according to the official summary of HB 551. The summary states that the KHRC must:
“… institute a system of sports wagering at tracks; limit the types of events upon which wagers may be placed; establish sports wagering licensure requirements; prohibit participants from wagering on events in which they participate and from tampering with the outcome of a sporting event.”
It will be the commission’s first foray into fixed-odds betting. Kentucky does not allow fixed-odds horse race betting, although there has been discussion about it among lawmakers and the horse industry in the past. Those discussions have been shelved – at least temporarily – in favor of the addition of historical horse racing to statutes in 2021 and, now, sports betting.
What is the Kentucky Horse Racing Commission?
The Kentucky Horse Racing Commission is an independently-operated state agency responsible for the regulation of horse racing, pari-mutuel wagering, “and related activities with the Commonwealth of Kentucky.” Fifteen individuals serve on the commission, each of them with ties to the horse racing industry.
The KHRC is chaired by Jonathan Rabinowitz, a partner with the Morgan & Morgan law firm’s Kentucky office who owns and breeds thoroughbred racehorses as co-owner of Kentucky-based For The People Racing Stables.
KHRC and HB 551
First and foremost, KHRC is a horse racing regulatory agency. And under HB 551, only associations with a Kentucky horse racing license will be eligible for a sports wagering license. That limits sports wagering licenses to each of the state’s nine horse racing tracks, which includes Churchill Downs and Keeneland.
Sports wagering will be allowed in-person at a track or simulcast facility (by contract), or online through a website or mobile app. Up to three mobile apps (“skins”, per industry parlance) will be allowed per track, which means that up to 27 apps will be available in the Bluegrass State.
Betting integrity and responsible gaming will also be regulated by the KHRC. According to HB 551, the agency must ensure that tracks and or service providers “implement commercially and technologically reasonable procedures to prevent access to sports wagering by any person under the age of 18.”
Regulation of wagering types, geofencing, and acceptable forms of payment (which will include cash, credit cards, debit cards, and any other form approved by the KHRC) will also fall under the KHRC.
As for launch — that could come this fall at the earliest. The KHRC has six months to get sports wagering up and running after the new law’s effective date in late June.
Kentucky Sports Betting Licensing
Tracks licensed by the KHRC will be allowed to conduct sports wagering themselves or through a service provider – like FanDuel or DraftKings. Service providers must be also licensed by the KHRC. According to HB 551, the suitability of providers will be vetted in part on performance of “past, current, or future operations” and corporate ownership. Both temporary and permanent licensing are authorized under the law.
Tracks that opt to host sports wagering without the use of a service provider to offer or manage their platform “shall comply with the standards established by the racing commission for service providers to ensure the integrity of the system of sports wagering,” per HB 551.
Tracks will pay an initial fee of $500,000 and an annual renewal fee of $50,000. Service providers licensed by the KHRC will pay a nonrefundable application fee of $50,000 and an annual renewal fee of $10,000.
KHRC will collect all license fees from tracks and service providers under HB 551.
What Sportsbooks Might Come to Kentucky?
Kentucky is not early to the sports betting game, of course. The Commonwealth is the 38th state to legalize since the US Supreme Court made sports betting a state issue in 2018. That gives several sportsbooks a head start in meeting KHRC qualifications for temporary licensure based on past performance.
One obvious contender is Churchill Downs Inc. (CDI). The company operates eight retail sportsbooks in the US and owns TwinSpires, which is one of the largest horse race betting apps in the nation.
Just don’t expect TwinSpires to be among the potential online operators — at least not initially. The Churchill Downs Inc. (CDI) horse racing app ventured briefly into the online sports betting and igaming realm before exiting the market in 2022. Still operational is the TwinSpires advance-deposit horse racing app, and CDI retail sportsbooks outside of Kentucky.
Other sportsbooks likely to enter the Kentucky market are FanDuel and DraftKings – with FanDuel out in front. Data from research firm Eilers & Krejcik reported by The Washington Post in Sept. 2022 shows that FanDuel has 47 percent of US sports betting market share, with DraftKings a close second.
The fact that both FanDuel and DraftKings have launched their own pari-mutuel horse racing apps (DK Horse and FanDuel Racing) powered by TwinSpires might also make them attractive to the KHRC. Caesars – another potential licensed provider given its online footprint nationally – has also launched its own pari-mutuel betting app, and you can find the Caesars Racebook promo codes here.