Kentucky Might Pluck These Sports Betting Regulations From Other States

Written By Adam Hensley on June 21, 2023 - Last Updated on June 22, 2023
Kentucky borrowing sports betting regulations from other states Ohio, Massachusetts

During Tuesday’s Kentucky Horse Racing Commission meeting, Chairman Jonathan Rabinowitz said commissioners met with sports betting regulators from other states to implement their best practices into Kentucky’s market.

In other words, the Kentucky sports betting industry will take a page out of the books of several different states.

Kentucky met with state regulators from Massachusetts, Indiana, New Jersey, Ohio and Colorado, Rabinowitz said.

The goal?

“(To draft) clear and concise administrative regulations to govern sports wagering in Kentucky,” Rabinowitz said.

PlayKentucky wasn’t in the room during these discussions, so we can only speculate. But here are a few things Kentucky could pick up from its counterparts.

Why did Kentucky meet with other state regulators?

Kentucky’s sports betting regulations will be revealed next month. But the goal of these conversations was to shape the groundwork for administrative regulations within the state, Rabinowitz said.

He explained that initial regulation drafts have already been shared with licensed associations and industry stakeholders. Additionally, drafts will be accessible to the public within the next few weeks.

The discussions to shape these drafts took place over the past two months.

“Meeting with state regulators in Massachusetts, Indiana, New Jersey, Ohio and Colorado have provided valuable insight into best practices,” Rabinowitz said. ” … Many of these regulators have recently rolled out sports wagering in their states and provided tips learned from real world experience. Meetings with service providers in business with multiple sportsbook sites provided a look at the extensive technologies employed to protect the integrity of wagers.”

Kentucky could take a page out of Ohio’s book for promotional spend tax write-offs

Kentucky hasn’t shared how it will approach the concept of sportsbook promotional spend tax deductions.

Promotional spend is at an all-time high within the first couple of years a state launches. Sportsbooks want to secure customers for life, and one way to do that is by giving them an incentive to return. That incentive could come in the form of bonus bets.

For instance, some promotions could say that if a user deposits and wagers at least $10, they’ll receive $100 in bonus bets. Sportsbooks spend money to give customers more opportunities to bet using their platform.

DraftKings and FanDuel are the kings of promo spend

DraftKings and FanDuel are two of the largest online sportsbooks in the country. They also are two of the largest spenders of promotional dollars.

It’s expected that DraftKings Kentucky and FanDuel Kentucky will continue that trend. As a result, analysts from Eilers & Krejcik Gaming believe the two sportsbooks will garner 75% of the Kentucky market.

Here’s where Kentucky will have a decision to make. Will sportsbook promotional spend be able to be used as a tax write-off?

Different states have different laws, and we’ve seen a number of states backtrack their original regulations after seeing tax dollars left on the table.

Having met with Ohio and Massachusetts, our money is on Kentucky to have similar legislation. Massachusetts doesn’t allow promo spend write-offs. Ohio does not allow for promotional spend to be used as a tax write-off for the first four years of its industry’s operation.

From there, though, it scales back up in anticipation of a more mature market with less promo spend. Starting in 2027, operators can write off up to 10% of gross revenue. If they spend more than 10% of their gross revenue on promotions, anything beyond that is taxable. That 10% jumps to 20% starting in 2031.

This is a way that Kentucky could cash in on taxes while promotional spend is at an all-time high and then allow a certain percentage to be a tax write-off after the market evens out over time.

Kentucky could get creative with where its tax dollars go

One reason states favor sports gambling is the tax dollars. It’s wildly popular, and states can decide where those tax dollars go.

Many states direct their tax dollars to educational purposes, reinvesting those dollars into their public schools.

Colorado got creative and made sure to advertise that sports betting tax dollars go toward a good cause.

In that state, 10% of the sports betting tax goes toward the Colorado Water Plan. The Colorado Water Plan helps meet the state’s “critical water challenges,” according to a report from the state’s water conservation board.

Tax dollars from sports betting go toward a variety of projects, including:

  • New water storage
  • Raw water supply
  • Planning
  • Water conservation
  • Agricultural projects like water sharing agreements, watershed and recreation projects, water education and innovation

Kentucky has a plan for its sports betting tax revenue. The legislation allocated 97.5% of it to fund the state pension program. The remaining 2.5% will go towards a problem gambling fund.

It’s the first time Kentucky allocated public funds for problem gambling solutions. Therefore, there is some leeway with how they could spend the money. As long as officials can justify it will help curb problem gambling.

Kentucky took note of Ohio’s problem gaming laws

Rabinowitz noted that Kentucky specifically spoke with Ohio regulators to learn more about its problem gaming programs.

“There have been discussions with stakeholders about problem gambling programs in Ohio to inform the program being developed in Kentucky at the guidance of health and family services,” he said.

Ohio offers a number of options to educate, prevent and help those suffering from gambling addictions.

Users can find various links to treatment programs, warning signs and more at the Ohio Lottery’s website. There’s the Ohio for Responsible Gambling initiative, the Ohio Casino Control Commission and the Problem Gambling Network of Ohio.

Additionally, Ohio (like many states) offers a voluntary self-exclusion program. Those suffering from a gambling addiction can opt to ban themselves from casinos, racinos or sportsbooks for a year, five years or life.

Expect Kentucky to offer a self-exclusion program with similar time frames.

Massachusetts could be a good model for responsible gaming, too

In March, the Massachusetts Gaming Commission opted to require responsible gaming messaging in the form of advertisements. At the same time, it finalized its process for a problem gambling helpline and other gambling addiction resources.

Previously, the Boston Globe critiqued the state’s stance on responsible gambling. And in turn, sportsbook advertisements must include specific responsible gaming messages, such as the hotline and access to self-exclusion programs.

Kentucky likely doesn’t want to catch any heat from irresponsible gambling advertisements and will likely consider adding these requirements.

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Adam Hensley

Adam Hensley is a staff writer for PlayKentucky. His byline has appeared in the Associated Press, Sports Illustrated and sites within the USA Today Network. Hensley graduated from the University of Iowa in 2019 and spent his college career working for the Daily Iowan’s sports department, both as an editor and reporter.

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