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Sports betting in Kentucky: Odds improving gambling comes to state
11th September, 12:35Legalized sports betting is not yet inevitable in Kentucky, but it no longer appears impossible.
Backers of a bill that would regulate and tax wagering on sports other than horse racing say the necessary votes should be in place when the state legislature reconvenes in January.
Resistance remains, but the search for new sources of revenue and competition from surrounding states has led local lawmakers to reevaluate their options in the wake of the Supreme Court's 2018 decision that allows individual states to permit gambling on games.
Indiana sports betting went live on Sept. 1, with Gov. Eric Holcomb placing the first bets at the Indiana Grand Casino in Shelbyville. Tennessee's online-only sports betting became lawful this spring despite the objections and without the signature of Gov. Bill Lee.
With 13 states already allowing some form of sports betting, Kentucky was categorized as "moving toward legalization" in an ESPN state-by-state breakdown in August.
"I think attitudes toward various forms of gambling have evolved over the last 20 years," Senate Majority Leader Damon Thayer said. "Sports betting is less controversial than casino gambling. We need all of the revenues we can get to continue funding pensions."
At issue is whether the potential tax revenues are large enough to justify what opponents describe as a regressive tax with a disproportionate impact on the poor and problem gamblers. At issue is whether Thayer and other Republican leaders have the will and the influence to overcome objections within their own party, notably those of Republican Gov. Matt Bevin.
"It's quite an interesting political dynamic because the governor is against all of this," said Al Gentry, the Louisville Democrat who has partnered with Republican representative Adam Koenig to build support in the House of Representatives. "So you don't know, even if we get the votes, is (Senate President Robert) Stivers going to send him a bill that he's not going to sign?
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"Is this something the governor is going to look the other way and let it pass without his signature or is he going to put political pressure on some of his members, which he never hesitates to do?"
Bevin did not stake out a definitive position on sports betting when the Supreme Court ruling came down last May.
"Sports betting has happened since the dawn of time," he told reporters. "People have always done it. It's done - heck, we just came off a (Kentucky Derby) weekend in which it happened at a pretty prolific rate here in Kentucky. So, ultimately, what it means to us as a state policy-wise, it's way too early to tell."
Yet as his re-election campaign has progressed, Bevin's rhetoric has grown more bellicose. Bevin said there was "no political appetite" for expanded gambling in Kentucky during a July radio interview, adding the unverified claim that, "Every night somewhere in America, somebody takes their life in a casino because they've wasted the last semblance of dignity and hope that they had."
Bevin has described state reliance on gambling tax revenues as a "sucker's bet."
Thayer said Monday he knows of no commitment from Bevin to either sign a sports wagering bill or allow it to pass without his signature. The Georgetown Republican says he believes Bevin will not stand in the way of its passage based on "gut feeling." A spokesman for Stivers replied to an interview request last week by saying the Senate President would not be able to comment on sports betting legislation because of a full schedule.
With super-majorities in both the House of Representatives and the Senate, Kentucky Republicans can often turn legislation into law without benefit of a single Democratic vote. But gambling issues cross different divides than the traditional gap between the two parties: religious versus secular, rural versus urban and, in some minds, virtue versus vice.
"It can easily get through committee unless word comes down from leadership that they don't want it out of there," said Martin Cothran, policy analyst for the Kentucky-based Family Foundation. "But I see it languishing on the house borders for quite a while as they try to gather their votes. If it gets out of the house, I don't see it as having any chance in the senate."
In need of 60% support to raise or spend money in an odd-year session, Koenig was unable to rely on his fellow Republicans to get the sports betting provisions of House Bill 175 passed in March. Though Koenig expressed confidence in getting the required votes in 2020, when a simple majority will be sufficient, he is counting heavily on the bill's bipartisan appeal.
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Politics has seldom made for stranger bedfellows. Gentry, who lost his right arm to an industrial accident, has found common cause with Koenig after some spirited battles over workers' compensation legislation.
Despite the unambiguous opposition of the Kentucky Baptist Convention, three of the co-sponsors of House Bill 175 are Baptist: Democrats Kathy Hinkle and Susan Westrom and Republican Derek Lewis.
"I didn't agree with everything in the bill," said Lewis, of London, Kentucky. "But at the same time, I think it's a step in the right direction as far as raising revenue. It's one of those things I think we need to tweak."
Another Baptist, Lexington Democrat Ruth Ann Palumbo, is a yes vote on the Licensing, Occupations and Administrative Regulations committee Koenig chairs.
"I actually have not been hearing negative comments," Palumbo said. "... I believe in the separation of church and state, and most of our (church) members do, too."
Baptists are the largest religious denomination in the state legislature, with 27 of the 100 members of the House of Representatives and 13 of the 38 senators affiliated with a church that has long equated gambling with sin.
"As much as ever, Kentucky Baptists ... oppose gambling in all its forms," said Todd Gray, executive director of the Kentucky Baptist Convention. "We know the stories of families that have lost everything because the husband got addicted to scratch-offs. We just don't see any hope in gambling to help families or help people."
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Barring the passage of casino gambling, which has an advocate in Democratic gubernatorial candidate Andy Beshear, it is also unclear that sports betting will make a significant difference to state coffers. Jason Bailey, executive director of the Kentucky Center for Economic Policy, projects Kentucky tax revenues from sports betting would likely yield less than $10 million annually.
"In the context of the $11 billion state budget, that's really a rounding error," Bailey said. "It's not real money that would make a difference in a budget situation. We're not against it, wouldn't take a position against it, but don't think it's a real solution to the budget challenges we face."
Crafting legislation that maximizes tax revenues while fostering growth entails some delicate calculations. According to Casino.org, of the 18 potential operators that initially inquired about being licensed in Rhode Island, only one applied. The state's subsequent shortfall -- $2.2 million in tax revenues from sports betting in the last fiscal year compared to a $23 million projection -- was attributed to Rhode Island's 51% tax rate on sports betting revenues, which is more than seven times the 6.75% rate Nevada charges its sports books.
Kentucky's proposed tax rate is two-tier: 10.25% for in-person wagering; 14.25% for online betting. Indiana's tax rate is 9.5%.
"You have to make sure you're competitive with the rates you charge," Gentry said. "Some states are not generating nearly the revenue (projected) because their taxes are so high."
Before House Bill 175 cleared Koenig's committee, the proposed license fee to operate a sports betting operation was cut from $1 million to $500,000. By comparison, Churchill Downs paid $10 million for a similar license for its Presque Isle Downs and Casino in Pennsylvania.
"That (licensing fee) number is lower than Pennsylvania and New York, but higher than other states like West Virginia and Mississippi," Koenig said via e-mail. " Pennsylvania and New York, in particular, already have robust casino operations in their states that make those sorts of initial fees more palatable.
"The tax rate is the equalizer, as the areas with more population will pay more in taxes than the more rural areas (Ellis Park; the new track going in Hopkinsville). We can't differentiate the license fee. It has to work for everyone."
The Family Foundation's Cothran says sports betting does not really work for anyone, characterizing government involvement in gambling as cynicism; "the exploitation of its own people as long as it gets a piece of the action."
"Liberals should be against this on social justice grounds," he said. "Of the forms of gambling we have now, the lottery is probably the worst in terms of a regressive tax. Sports wagering could be worse because of these."
He held up a cell phone.
"Conservatives should be against it on constitutional grounds," Cothran continued. "We've always said that there is an inherent connection between gambling and corruption. Big money like this corrupts. It's already corrupting things because we've got people in the legislature wanting to wholesale ignore the constitution."
Kentucky's constitution does not specifically prohibit sports betting, but neither does it clearly include it among permitted forms of gambling: pari-mutuel wagering on horse racing, state lotteries and charitable gaming. While Cothran says sports betting's supporters are attempting to pass a statute likely to be shot down by the state Supreme Court, Thayer describes sports wagering as a natural extension of horse racing.
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"It's not going to be a home run for the general fund," said Thayer, who has worked as a racetrack executive and consultant. "I don't think it's going to be a home run for the operators. But the end of the world isn't going to happen because we allowed sports betting."