An omnibus bill in Kentucky that would make numerous changes to the state’s sports betting market was unanimously advanced by a committee on Wednesday.
A proposed substitute version of Reps. Michael Meredith and Matthew Koch’s House Bill 904 was approved in a 19-0 vote in the House Licensing, Occupations and Administrative Regulations Committee on March 11, sending it to the full House floor for consideration.
But Kentucky’s leading online sportsbooks sounded the alarm, warning that a section of the legislation that aims to stop sports betting licensees from affiliating with prediction markets risks forcing them to abandon the state’s regulated sports wagering market.
HB 904 would ban prediction market partnerships
HB 904 seeks to do many things, such as raising the legal minimum sports wagering age from 18 to 21, explicitly regulating and taxing daily fantasy sports (DFS), banning prop bets on Kentucky college athletes’ performances and introducing fixed-odds wagering.
Section 20 in the original bill, bumped down to Section 25 in the proposed House substitute (PHS 1), is particularly notable, given the current gaming climate. It would change state law to prevent any racetrack (the entities that receive sports betting licenses in Kentucky) from either offering prediction markets or partnering with a company that operates, or is affiliated with, a prediction market platform.
“A track or association that holds a license to conduct horse racing, sports wagering, or a licensee offering fantasy contests under this chapter or its affiliate shall not participate in or contract with platforms that offer events contracts through a prediction market or have a beneficial interest in the proceeds of prediction markets,” reads the section of the bill. Licensees would not be able to partner with a service provider that runs a prediction market or has a beneficial interest in an entity that does.
The bill defines an affiliate in that case as an entity that is owned or controlled in whole, or in part, by the licensee and defines “a beneficial interest” as receiving proceeds from prediction markets or event contracts in any capacity.
Leading Kentucky sportsbooks run prediction platforms
That section has attracted the attention of three of the state’s biggest online sportsbooks.
FanDuel, DraftKings and Fanatics all partner with Kentucky racetracks to offer state-wide mobile sports betting. These days, they all also operate prediction market platforms in various U.S. states — FanDuel Predicts, DraftKings Predictions and Fanatics Markets — and offer sports event contracts via those apps in some of those jurisdictions. DraftKings has announced the imminent launch of a “super app” that will host its sports betting and prediction markets offerings all in one place, with the exact products available varying depending on state regulations.
In written testimony submitted for Wednesday’s hearing, that trio of operators, who each have a foot firmly in both camps when it comes to sports betting and sports contracts, outlined the “significant consequences” they argue could follow in a worst-case scenario if Kentucky implements such a law.
They forecasted that if the bill were to pass in its current form, it could ultimately “gut” Kentucky’s state-regulated sports betting market.
Predictions-affiliated sportsbooks warn of consequences
Effectively, they warned that making that legislative change to state gaming law would revoke their right to partner with a Kentucky racetrack and offer regulated sports betting in the state, a state of play which they say could force them to quit the state’s regulated market.
“As currently drafted, [the bill] would gut the regulated sports betting market and force the exit of most, if not all, existing regulated operators from the Commonwealth.”
HB 904 testimony from FanDuel, DraftKings and Fanatics
The operators warned that their potential withdrawal from the market could end up costing Kentucky more than $40m in tax revenue every year, as well as denying state residents the chance to use three of the most popular licensed sportsbooks to do their wagering. They also stressed that the measure would damage existing relationships with Kentucky’s tracks.
DraftKings, FanDuel and Fanatics wrote that they remain committed to working with lawmakers to enhance Kentucky’s gaming regulatory structure.
“However, any changes should preserve market stability, avoid unintended harm, and ensure that the Commonwealth’s sports wagering framework continues to operate effectively and competitively,” they cautioned. “We respectfully urge careful consideration of these concerns and stand ready to engage constructively on workable solutions.”
As well as those three sportsbooks, leading DFS operators PrizePicks and Underdog also offer sports event contracts on their own platforms in various parts of the U.S., as well as providing fantasy contests in Kentucky. PrizePicks did not offer comment when asked about the bill’s prediction markets measure and the sportsbooks’ comments, while representatives from Underdog did not respond by the time of publication.
Kentucky Reps says exclusion not the aim
Both primary sponsors of the bill commented on the prediction markets aspect of the bill, as quoted by The Lexington Times. Meredith admitted that his preference would be to see firm federal changes that allow for the rapid expansion of prediction markets to be curbed.
“This prediction market space has been something that has happened very quickly, and we’re all trying to adapt to it the best we can,” Meredith said. “We would love to see change at the federal level that would allow this to be addressed in a little different way.”
Koch stressed that forcing companies out of business is not the end goal of the prediction markets section of the bill.
“We don’t want to run them out of business,” he said. “That is not our goal. Our goal is to make sure that we can have state regulations on this… We can’t have one that’s not operating by our rules.”
