Funds for Regulation Focus of KY Bills

A Kentucky lawmaker has introduced legislation that would impose a 3.5% tax on out-of-state advance deposit wagering companies that take bets from Kentucky residents.

The bill is one of three offered by Democratic Rep. Larry Clark. The second would increase the pari-mutuel excise tax paid by Churchill Downs and Keeneland from 3.5% to 3.825%, while the third would expand the powers of the Kentucky Horse Racing Authority to include oversight of training centers that time workouts and authorization to conduct out-of-competition testing.

All three bills are geared toward the KHRC, which is in need of funding to support programs and staffing.

During the February KHRC meeting, commission chairman Robert Beck Jr. said the body planned to ask the General Assembly for long-term funding.

“We are horribly underfunded at this point,” Beck said. “In my mind, (funding) is crucial to the integrity of the game. It’s the single-most important thing going on with the commission right now.”

The ADW bill identifies providers located outside of Kentucky. The tax would be levied only on bets made by residents of Kentucky.

The bill defines a secondary pari-mutuel operation, or SPMO, as an entity other than a licensed association or simulcast facility, including a wagering hub or ADW provider.

The bill says 30% of revenue from the tax would support KHRC operations, 30% would go to the Kentucky Thoroughbred Development Fund, and the remainder to the state’s general fund. The KTDF, funded by a tax on “live” handle in the state, continues to decrease as handle shifts to account wagering outlets.

The only in-state account wagering services are operated by two harness tracks, Players Bluegrass Downs and The Red Mile. Churchill Downs owns an ADW—TwinSpires.com—that hubs through Oregon, which gets a small tax on handle through the system.

As written, the bill would apply to TwinSpires.com and other entities such as TVG, XpressBet.com, and Youbet.com. It doesn’t appear to address the in-state harness ADWs.

The Red Mile now derives most of its handle from its ADW service, which is known in the harness industry to offer rebates to high-volume players. Most of the handle comes on out-of-state harness and Quarter Horse racing. A handful of Kentucky harness horsemen have questioned the amount of ADW revenue that goes to purses for live meets at the Lexington track.

The KHRC would have “jurisdiction over any SPMO that offers and accepts pari-mutuel wagers on races conducted at any racing association” in the state, and has the right to impose a licensing fee.

The KHRC “cleanup” bill also gives the entity jurisdiction over tote companies, which could be subject to licensing fees, and manufacturers, wholesalers, distributors, and vendors of equine medication purchased by or delivered to racing licensees in the state.

The out-of-competition testing provision in the legislation grants the KHRC authority to access offices, racetracks, and farms, and other places of business of licensees that participate in horse racing or breeding in Kentucky.

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