House Republican lawmakers unveiled a package of new bills Monday to legalize sports betting in Kentucky, while also banning so-called "gray machines," the games resembling slot machines proliferating in convenience stores around the state.
Other bills seek to alter the tax structure on horse racing and pari-mutuel wagering — while keeping the rate on historical horse racing unchanged — and set up a trust fund to create awareness and treatment for gambling addiction.
Rep. Adam Koenig, R-Erlanger, announced the four new bills at a press conference—along with one omnibus bill that would include language from all four bills— which would be filed later that afternoon.
He told The Courier Journal he hopes all four will pass under the House Bill 610 omnibus bill, but if not, as many of the four individual bills as possible.
Here is what is in each of the four gambling bills:
Legalizing sports betting
Kentucky is one of only 17 states to have not legalized betting on sports contests, despite a recent poll from a pro-legalization lobbying group finding voters supporting it by a 65% to 26% margin — including a majority of Republicans.
Koenig's new sports betting bill is similar to the one he pushed in the 2020 session, allowing sports betting at licensed horse racing tracks and the Kentucky Speedway, as well as on a mobile phone app.
"This is freedom," Koenig said. "This is government getting out of the way, allowing adults to make adult decisions."
Despite passing out of committee by a 18-0 vote in 2020, Koenig's similar sports wagering bill — estimated to bring in $22.5 million in annual revenue for the state —died in the House without receiving a vote.
It failed because it didn't gain the support of the majority of the House Republican caucus, with socially conservative legislators opposing expanded gambling and others opposing tracks having a monopoly on sports betting facilities.
The new version of Koenig's bill would allow the sports betting app to be downloaded anywhere and not just at licensed tracks.
Koenig says he is not yet sure how his caucus will split on the bill, but pointed to the poll showing bipartisan support and the fact that Kentucky keeps getting left behind on revenue from the many residents already betting on sports — as all surrounding states but Missouri have already legalized such wagering.
House Minority Leader Joni Jenkins of Shively lent her backing to the bill at the press conference, saying her Democratic caucus is fully in support of "adults making decisions for themselves without interference" and creating more tax revenue for the state.
Banning 'gray machines'
Rep. Killian Timoney, R-Lexington, is filing the bill to ban gray machines, saying the games have "spread like wildfire" in Kentucky because of a lack of a clear prohibition under law.
Under the proposed bill, such "skill games," or machines resembling slots, will be prohibited under statute unless specifically allowed by the Kentucky Lottery Corp., Kentucky Horse Racing Commission or Department of Charitable Gaming.
These three groups have lobbied for a ban on the gray machines, which the Lottery says have now now grown to at least 1,391 machines in 361 retailers across 71 counties and are siphoning off its revenue that goes to postsecondary scholarships.
Timoney said the bill would send a message to companies that "asking for forgiveness, instead of permission, is something that we don't like from a policy standpoint."
Koenig said the legislation would leave it up to local officials to find and prosecute those operating illegal gray machines, while also directing the Kentucky State Police "to create a task force to go after these machines."
Prominent Technologies and Pace-O-Matic — two out-of-state companies who manufacture the most common of the machines in Kentucky — have lobbied to keep the machines legal so the state can regulate and tax them, noting they've helped some small retailers stay in the black.
Keeping 'historical horse racing' unchanged
Another bill to be filed by Koenig seeks to "modernize" taxation on pari-mutuel betting, while keeping the tax rate the same for historical horse racing — the games resembling slot machines that the legislature voted to legalize last year.
Under the bill, all forms of pari-mutuel betting will now be taxed at 1.5% — the current rate on HHR wagering. The tax rate on advanced wagering deposits — such as those used on the Twin Spires app owned by Churchill Downs — would be raised from its current .5%, while the rate on simulcast betting would be lowered from 3%.
Altogether, Koenig estimated the tax changes would be a net positive for state revenue, amounting to an additional $20 million annual after the first few years in effect.
Additional changes in the bill would be the elimination of a 15 cents-per-person admissions tax at race tracks and altering the current breakage system for bettor payouts — down to the exact penny, instead of rounding down by every 20 cents.
Koenig said these lower tax rates and more favorable breakage would "make Kentucky the most attractive place for horse players to come and bet all across North America."
Since HHR was legalized last year, Democrats and some Republican critics of the horse racing industry have pushed for a significantly higher tax rate on the machines, saying they are only a fraction of what other states levy on slot machines at casinos.
In place for over a decade while their legality was questioned in court, HHR machines have provided a massive revenue stream for the horse racing industry.
Creating a problem gaming trust fund
The third individual bill filed by Koenig would put the entirety of the state's recent $225 million legal settlement with PokerStars into a new problem gaming trust fund to help people with gambling addiction.
Koenig said the deposit of the full settlement amount could keep the program functioning for up to a century, as it would be responsible for promoting awareness of gambling addiction and resources for those who need treatment for such an addiction.
The trust fund a program would be managed by a board of five appointees, according to Koenig.
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