Kentucky sports betting projected to bring in millions in tax revenue. Here's what to know

Matthew Glowicki and Olivia Evans, Louisville Courier Journal
Updated ·5 min read

Sports betting is now legal in Kentucky after years of legislative attempts to bring the form of gambling to the Bluegrass State.

Kentucky is now the 38th state to legalize sports betting, joining nearly all of its neighbors. Retail betting locations — Kentucky’s licensed horse racing facilities — were allowed to start offering sports betting Thursday, while online betting is set to open on Sept. 28.

The state is expected to see millions of revenue in fees and taxes from the newly legalized form of entertainment. Here's what to know:

What is sports betting?

Sports betting is new to Kentucky after an uphill battle for years in the Kentucky statehouse.

Kentuckians are now allowed to place bets on professional, college and amateur sports as well as international sporting events, including the Olympics.

Legislators narrowly passed the sports betting bill, House Bill 551, on the last day of the 2023 session in March. The bill successfully made it out of the statehouse but not without opposition, largely on moral and religious grounds.

While the bill took effect June 28, sports betting didn’t go live for in-person wagering until Sept. 7, coinciding with the first day of the 2023 NFL season. Mobile betting is set to follow on Sept. 28.

Kentucky joins Illinois, Indiana, Ohio, Tennessee, Virginia and West Virginia in allowing sports betting. A slew of states have legalized the practice in the wake of a 2018 U.S. Supreme Court ruling that struck down sports gambling bans.

How much does Kentucky stand to take in?

Official estimates put Kentucky’s anticipated yearly revenue at $23 million.

The state stands to make money through a new excise tax on wagering: 9.75% on wagers made at licensed facilities and 14.25% on online wagers.

There are also new fees associated with wagering licenses: an initial $500,000 wagering license fee for racetracks offering sports betting and a $50,000 renewal fee.

Licenses for mobile service providers (apps such as FanDuel and DraftKings), which must partner with racetracks to do business in Kentucky, have a $50,000 initial fee and a $10,000 renewal fee.

“This is not a huge amount of money for the state. Let me be clear,” said sports betting bill co-sponsor state Rep. Michael Meredith, R-Oakland, at a legislative hearing earlier this year. “But that’s $23 million that’s either not being given to any government right now or being given to one of our border states.”

Similarly, Senate President Robert Stivers told the Courier Journal during the legislative session that sports betting wouldn’t “change the trajectory of the state.”

The relatively small sum will be split three ways, with the majority going to the state’s underfunded pension system.

Surrounded by lawmakers and members of the Kentucky Horse Racing Commission, Kentucky Governor Andy Beshear, center, signs off on the regulations that will guide officials as they roll out sports wagering around the state. July 10, 2023
Surrounded by lawmakers and members of the Kentucky Horse Racing Commission, Kentucky Governor Andy Beshear, center, signs off on the regulations that will guide officials as they roll out sports wagering around the state. July 10, 2023

After first paying for regulatory and oversight costs associated with sports wagering, 2.5% will go toward a problem gambling assistance account run by the Cabinet for Health and Family Services.

The bulk will go toward Kentucky’s permanent pension fund and would help reduce the system’s unfunded actuarial liability.

Thomas Lambert, an assistant professor at the University of Louisville specializing in economics and the equine industry, said the $23 million tax revenue projection appears conservative.

“States of similar size which have legalized sports gambling have earned more,” he said.

He noted there’s a “high degree of fluctuation” in gambling revenues, and thus state tax revenues. Gambling varies seasonally, tending to rise during football season and basketball tournaments.

Tax revenue forecasts may fall short, Lambert said, in tougher economic times, as gambling is driven by disposable personal income.

“As the economy goes, so does DPI,” he said.

Who is overseeing sports betting in Kentucky?

Members of the Kentucky Horse Racing Commission gathered at The Red Mile in Lexington, Ky. to vote on sports betting regulations on Monday morning. Kentucky Governor Andy Beshear signed the regulations passed Monday by the KHRC that will guide officials as they roll out wagering around the state. July 10, 2023
Members of the Kentucky Horse Racing Commission gathered at The Red Mile in Lexington, Ky. to vote on sports betting regulations on Monday morning. Kentucky Governor Andy Beshear signed the regulations passed Monday by the KHRC that will guide officials as they roll out wagering around the state. July 10, 2023

The Kentucky Horse Racing Commission, an independent agency in the state’s Public Protection Cabinet, is the regulatory body overseeing sports wagering in Kentucky.

A newly formed seven-member Sports Wagering Advisory Council is tasked with advising the full commission. It’s made up of the Public Protection Cabinet secretary, three Horse Racing Commission commissioners, a Horse Racing Commission employee, and two at-large members.

Where can I place a bet in person in Kentucky?

A rendering of the new facility at 140 South 4th Street that will be the home of Derby City Gaming Downtown.
A rendering of the new facility at 140 South 4th Street that will be the home of Derby City Gaming Downtown.

On Aug. 22, the Kentucky Horse Racing Commission approved temporary licenses for seven racetracks and their satellite facilities as well as nine service providers, most of which will run mobile applications.

Churchill Downs dominates the space, with licenses at six of its properties: Churchill Downs racetrack and Derby City Gaming & Hotel, both in Louisville; Turfway Park Racing & Gaming in Florence; Newport Racing & Gaming in Newport; Oak Grove Racing, Gaming & Hotel in Oak Grove and Ellis Park Racing & Gaming in Henderson.

Other approved licensees include The Mint Gaming Hall Cumberland Run in Corbin, The Mint Gaming Hall Cumberland in Williamsburg, and The Red Mile in Lexington. Upcoming facilities that won approval include Derby City Gaming in downtown Louisville, Ellis Park in Owensboro and Sandy’s Gaming and Racing in Ashland.

Speaking on an earnings call in April weeks after the passage of the sports betting bill, Churchill Downs CEO Bill Carstanjen called sports betting “a nice bonus.”

“It’s not material to the scale of the company or anything like that,” he said. “But it’ll help each of these (historical racing machine) properties not only from the contribution of the sports wagering piece but from the additional traffic that it drives to the rest of the facility.”

Churchill Downs bought Turfway Park in Northern Kentucky and intends to build a new clubhouse, historical racing machine facility and a second track for horse racing.
Churchill Downs bought Turfway Park in Northern Kentucky and intends to build a new clubhouse, historical racing machine facility and a second track for horse racing.

He noted in other markets where sports wagering is already legal, sports betting helps “the overall energy and flow of people through our properties.”

“We actually designed our facilities thinking that this may happen in Kentucky at some point,” he said. “So we’ve already built the sports bars, and we’ll put in the kiosks, refine the customer offering.”

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Growth & development reporter Matthew Glowicki can be reached at mglowicki@courier-journal.com, 502-582-4000 or on Twitter @mattglo. 

This article originally appeared on Louisville Courier Journal: Legalized sports betting in Kentucky begins. What the state could gain