Legislation that recently passed both of Kentucky’s legislative chambers would eventually ban online sportsbooks from participating in prediction markets if they want to maintain their licenses.
Kentucky Forces the Issue
Kentucky’s legislators passed HB 904 earlier this week when, following approval from the House, a Senate committee substitute also passed the bill 24-13 while the House subsequently concurred via a vote of 69-19.
The bill is controversial in that it bans its online sportsbooks from operating prediction markets. Although this legislation will not affect most of the state’s nine online sportsbooks, powerhouses like DraftKings and FanDuel, and to a lesser extent, Fanatics, will have a decision to make, as all three currently operate their own prediction market brands.
The sponsor of the bill, Representative Michael Meredith, has been eager to regulate Kentucky’s online sports betting market and offered the following during the lower chamber’s initial vote.
“We also say that if you are a licensee under the bill through sports wagering, a horse racing track, or a fantasy sports operator, for the next year you can’t operate a prediction market in Kentucky,” Meredith said during the House’s initial vote.
“After [July 1, 2027], you’re not allowed to be involved with or in business as a prediction market operator anywhere else in the country if you’re licensed under one of our licensee structures here.”
The Key Changes
The bill would also institute the following changes:
- Raises betting age to 21 from 18
- Restricts in-state collegiate athlete prop bets
- Authorizes fixed-odds wagering on horse racing
- Sets up fantasy sports regulations, taxing those companies at 12.5% and banning house pick’em contests
Bluegrass Blues
DraftKings and FanDuel have promised not to operate their prediction markets in jurisdictions where they hold digital sports betting licenses. Therefore, both platforms would immediately cease operating their prediction brands in the Bluegrass State should the governor sign the bill.
However, this bill would force both companies, as well as Fanatics, to choose whether to continue operating in Kentucky and forfeit their prediction licenses nationwide under the Commodity Futures Trading Commission (CFTC) or withdraw from Kentucky’s online sports betting industry.
Operators Oppose Bill
Naturally, the companies impacted by the bill voiced their displeasure. DraftKings, FanDuel, and Fanatics submitted joint testimony to the legislative bodies, which read:
“We are concerned that this legislation may have significant consequences that could materially disrupt the Commonwealth’s successful sports wagering market,” the letter reads.
“As currently drafted, section 20 would gut the regulated sports betting market and force the exit of most, if not all, existing regulated operators from the Commonwealth. This would cost the state more than $40 million in tax revenue every year – money that goes to fund teacher pensions, among others. Kentucky adults would also lose the freedom to use a popular form of entertainment on their preferred regulated sportsbook.”
Kentucky Sports Betting Market Growing Fast
Kentucky’s online sports betting market launched in March 2023, and since that time, its sportsbooks have handled north of $6.6 billion in sports wagers. Of that amount, $724.8 million in revenue has been generated for Kentucky’s sports betting platforms, of which $103.2 million has been rendered to the state’s tax coffers over nearly three years.
Moreover, the vast majority of those taxes have come from DraftKings and FanDuel, which contributed a combined $81.2 million—approximately 80% of the total, while Fanatics added another $3.3 million.
Kentucky Governor Andy Beshear now has the option of signing the bill, vetoing it, or allowing it to become law without his signature.
