As 149th Derby nears, Kentucky prepares for sports betting

LOUISVILLE, Ky. (AP) — The Kentucky Derby figures to draw 150,000-plus to Churchill Downs, with many beneath the Twin Spires impeccably dressed as they drink mint juleps, puff cigars and hope their bets on horse racing’s marquee event pay off.

Countless more aim to cash in on Saturday’s 149th Run For The Roses through online bets, although Kentucky’s recent passage of sports wagering means residents of the Bluegrass State can look forward to betting on other sporting events digitally and in person by the fall.

At the very least, proponents of sports betting believe opening sportsbooks at statewide tracks and gaming facilities that feature slots-like historical horse racing (HHR) machines will generate tax revenue that was being lost to neighboring states with expanded gambling options. It’s estimated to generate about $23 million annually in tax revenue and licensing fees, with a percentage earmarked for problem gambling and the state’s public pension system.

In attracting people on other sporting events, the hope is those bettors will also check out live racing. It will also help bolster purse money that tracks point out have continued to grow.

“There’s no revenue stream in the bill specifically for horse racing,” Senate Majority Leader Damon Thayer said of the bill that passed the Republican-dominated chamber 25-12 on March 30. Democratic Gov. Andy Beshear quickly signed the measure into law, which takes effect on June 29.

Thayer added, “But I think by requiring that the retail betting locations are at racetracks and simulcast centers, it can expose a new type of a bettor to horse racing. ... There’s an opportunity to create new fans and anytime you create new fans, that’s good for all participants — racetracks, owners, trainers, jockeys, et cetera.”

Kentucky Thoroughbred Association executive director Chauncey Morris added, “We just see sports wagering as an evolution of a parimutuel product that we’ve been stewards of for two centuries.”

Thayer is among many pleasantly surprised by the bill’s passage following failures in recent years and an uncertain fate in the just-concluded legislative session.

In fact, it broke from the gate so soon that state officials and tracks are trying to catch up by working out regulations, partnerships and locations. Beshear has expressed a desire for sports betting to be operational by the start of the NFL season in September.

What’s settled is the $500,000 upfront fee for horse racing tracks to be licensed as sports betting facilities with an annual renewal fee of $50,000.

Tracks could contract with up to three service providers for sports wagering at the track or through online sites and mobile applications. Those providers would pay $50,000 for the initial license with a $10,000 annual renewal. The Kentucky Horse Racing Commission will regulate sports wagering operations.

KHRC Chairman Jonathan Rabinowitz said in a statement to The Associated Press that the commission is working with the state’s Public Protection Cabinet to draft proposed regulations. They’re also meeting with officials in other states that recently have legalized sports wagering.

Rabinowitz added, “The commission is excited for the opportunity afforded to it and working tirelessly to craft clear, responsible, and thorough regulations for sports wagering in the commonwealth.”

Things are also a work in progress for Churchill Downs Inc., which operates the historic track along with several others including recently-renovated Turfway Park in Florence, near Cincinnati; Ellis Park in Henderson; and Oak Grove.

Those tracks feature live racing along with HHR machines, which look and work like slot machines but allow wagers on past race results. CDI also operates Derby City Gaming near Churchill Downs with another facility under construction in downtown Louisville. The company also features TwinSpires.com for online thoroughbred racing.

CDI did not respond to interview requests, but President/CEO Bill Carstanjen told shareholders during last week’s quarterly meeting conference call that the company will be allowed to have up to nine retail locations and eight online sports betting licenses. He added that the company has a contract to provide online wagering platforms such as FanDuel.com in the Kentucky market.

“We believe our retail sportsbooks help to drive additional traffic to our properties and other states,” Carstanjen said, “and will further help to grow our properties across Kentucky.”

Keeneland director of wagering development Jim Goodman said the Lexington track is also devising its strategy for implementing sports betting.

Goodman noted that the bill’s unexpected approval just a week before the opening of its spring meet ratcheted up the process of negotiating contracts and infrastructure. One upside for the picturesque track is having historical racing machines at Red Mile track near downtown, which allows for quick modifications once plans are finalized.

It's a good problem to have, and the question is how many facilities Keeneland will offer. In any event Goodman sees an opportunity for increased foot traffic, with sports bettors potentially discovering horse racing, and vice versa.

Having the Triple Crown kick off this week certainly helps.

“It’s an opportunity to cross market,” Goodman said. “We take for granted in Lexington that everybody knows about horse racing, but that’s not the case. We’ve got a very knowledgeable fan base here as we do in Louisville, but other places in the country and maybe even in the state can use some maybe some push to get to horse racing.”

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