Kentucky sports betting operators said previous prediction market language would force them out of state
It seemed only fitting that one of the more complex bills before the Kentucky General Assembly this year passed the state Senate Wednesday in less-than-easy fashion.
House Bill 904 passed the Senate shortly after 10 p.m. ET by a 24-13 vote. However, it needed a second vote after supporters realized they improperly included a floor amendment. Moments later, it passed again by the same tally.
A little over an hour later, the House concurred with the Senate’s changes by a 64-19 vote. The bill now goes to Gov. Andy Beshear for his consideration.
Wednesday was the final day for the General Assembly to meet before it recesses while Beshear considers the bills sent to him. Lawmakers will have a chance to override any vetoes during their final two days in Frankfort, April 14-15.
Both chambers need only simple majorities to override the Democratic governor’s veto. Republicans hold 80% of the 100 seats in the House and 32 of the 38 (84.2%) in the Senate.
Bill in the Works for More Than a Year
The measure, sponsored by Reps. Michael Meredith (R-Oakland) and Matthew Koch (R-Paris), updates several aspects of Kentucky’s gambling laws, from pari-mutuel wagering on horse racing to sports betting to charitable gaming. For sports betting, HB 904 will raise the age limit to establish sports betting accounts to 21 from 18. It will also prohibit under prop bets on in-state collegiate athletes, provide a regulatory framework for fantasy sports operators, and introduce fixed-odds horse racing in the state.
Meredith told Gambling Insider earlier Wednesday that supporters have been working through about a half-dozen iterations of the bill since the legislative session started in January.
Chairman Koch started on the charitable gaming stuff a long time ago,” Meredith said. “I started on the fantasy sports piece a long time ago, and then the other pieces and parts came up over the period of us working on those other parts. Then we merged it all together, but we’ve seen about three or four different prediction market changes as we’ve gone through that process.”
Regarding prediction markets, HB 904 also includes language prohibiting Kentucky-licensed racetracks, sportsbooks, and fantasy sports operators from also offering a federally regulated online exchange in the Bluegrass State. That verbiage, approved by a Senate committee Wednesday morning, dialed down a previous version of the bill that would have shut operators like FanDuel, DraftKings, and Fanatics out of the state for operating a prediction market anywhere in the country, not just in Kentucky.
The state is not seeking to ban prediction markets outright as a separate bill, House Bill 757, includes taxing those operators at 14.25% of adjusted gross revenue, the same as online sports betting operators.
Prediction Market Changes Cause Confusion
However, the language regarding prediction markets still caused some confusion during the Senate’s discussion. Senate Minority Floor Leader Gerald Neal (D-Louisville) asked about the term “service providers” in the bill. Specifically, he asked if the language meant that Churchill Downs would not be able to broadcast the Kentucky Derby nationally if a broadcast network partnered with or ran commercials for Kalshi, Polymarket, or another prediction market.
Sen. Jason Howell (R-Murray) initially said yes, but then backtracked somewhat after further questioning to say he wasn’t aware of Churchill’s broadcast contracts.
“I’m not speculating on hypothetical questions,” Howell said.
The bill’s language states a licensed track, sportsbook, or fantasy operator “shall not contract with a service provider” that either offers event contracts in the state through a prediction market, or “owns, rents, licenses, advertises, operates, is partnered or affiliated with, or has a beneficial interest in, an entity that makes available to its users in any form a prediction market in the Commonwealth of Kentucky.”
Under Kentucky’s law, “service provider” means any entity licensed to offer sports betting in the state. It would also include fantasy sports if this bill becomes law.
The confusion, though, was more than enough for some senators whose districts cover or include Louisville, home of the Kentucky Derby, to change their minds about the bill.
“There’s a lot in this bill I really liked,” Sen. Cassie Chambers-Armstrong (D-Louisville) said in explaining her “no” vote. “However, given (Howell’s) answers that this might possibly impact the ability of Churchill Downs to air the Kentucky Derby on national television – that’s a very big issue – and I cannot in good conscience vote for this bill at this moment in time.”
Kentucky Sports Betting Operators Pushed for Key Change
Should HB 904 become law, and as of late Wednesday, that’s looking very likely. FanDuel, DraftKings, and Fanatics – three of Kentucky’s licensed sportsbooks that also operate prediction markets – will end up among the biggest winners, thanks to changes made Wednesday.
The sportsbooks put a full-court press over the weekend, with FanDuel including a pop-up warning on the home screen of customers accessing the app in Kentucky.
“This could mean losing access to FanDuel in Kentucky,” the Flutter Entertainment flagship brand stated in a pop-up message on its sports betting app’s home screen.
Elsewhere on social media, a group called Protect Our Freedoms Kentucky also urged Kentuckians to contact their lawmakers. That included an online form where people could put their address and hit submit to have a message sent to their representatives.
Without the changes to the prediction market provisions, the group said Kentucky stood to lose more than $40 million in tax revenue.
Protect Our Freedoms Kentucky did not list its members, but its statements included references to DraftKings and FanDuel, the two largest online sports betting operators in Kentucky and across the country.
“Don’t let HB 904 compromise our state’s revenue and your freedom to choose,” the group’s website said.
Why Passing HB 904 on Wednesday Mattered
The last legislative day before the veto period begins is one of the longest, if not the longest day, for Kentucky lawmakers. The Senate Licensing & Occupations Committee took up HB 904 at an 8 a.m. ET meeting, and it took nearly 14 hours for it to finally get to the Senate floor.
While it’s not the final day of the session, both chambers are still trying to get their bills passed while approving changes made to other measures. Multitasking is not optional. It’s imperative. It can also lead to the chaos on the Senate floor Wednesday night.
Moments after the first vote, senators realized they included an out-of-order floor amendment. That amendment, which would have barred state-licensed gambling operator from accepting deposits via credit cards, was removed on the second vote because it was an amendment to the bill the passed the House on March 19 and not the committee substitute that replaced the House version Wednesday morning.
Theoretically, lawmakers could have held HB 904 back to discuss during the final two days of the session. That’s how the General Assembly passed sports betting three years ago. However, lawmakers knew Beshear was an ardent supporter of sports betting, and that he would not veto that measure.
If the General Assembly passes a bill on the final two days of the session, Beshear can still veto it. Then, unlike bills approved by Wednesday, lawmakers cannot return and vote to override.
“I don’t know that (Beshear) would (veto HB 904), but I think with something that has so many pieces and parts and has taken so much work, we would like to preserve our authority to override a veto if necessary,” Meredith told Gambling Insider Wednesday morning.
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