KY Approves Licensing of ADW, Tote Companies

Both sets of regulations follow the same format and require annual license fees.

The top horse racing regulatory agency in Kentucky has approved regulations governing the licensing of advance deposit wagering providers and totalizator companies.

Both sets of regulations, which follow the same format, were approved June 8 by the Kentucky Horse Racing Commission. The licensing regulations were hammered out over a series of meetings conducted by KHRC committees.

The ADW licensing regulation would require “any person or entity that offers advance deposit account wagering to Kentucky residents” to submit an application and pay an annual $1,000 licensing fee. In addition, the applicant must submit a cashier’s or certified check for $5,000 to cover the commission’s costs for reviewing the applications, including background checks. Should the costs associated with the application review be less than $5,000, the unused portion would be returned to the applicant. The applicant will be required to pay more than that amount if the process costs more than $5,000.

In addition, “based upon an applicant’s demonstrated financial and operational stability,” an applicant may be required to submit a Type II SAS 70 report and a bond “up to $500,000” as part of the application. Renewal applications must be received by Sept. 1 of each year, with the KHRC making a decision by Dec. 15 of the respective year. ADWs currently operating in Kentucky are required to submit an application but have a grandfather period to continue operating while the application is being reviewed.

An overview of the regulation provided commissioners at the June 8 meeting noted that legislation enabling the commission to license and regulate ADW providers said the annual fee could be as much as $10,000.
“The (Wagering Integrity) Committee looked at other states and attempted to balance the need of the KHRC to recoup its regulatory costs without imposing an overly burdensome licensing fee on businesses that may wish to operate in Kentucky,” the document stated.

Susan Speckert, general counsel for the commission, said all ADW companies taking wagers from Kentucky residents required to submit an application and be licensed. She said it applies even to off-shore companies, which could be problematic.

“It enables us to license entities that offer ADW wagering to Kentucky residents; as far as enforcing that, that is another question,” Speckert said.

The licensing regulation for tote companies, which process wagers placed at Kentucky wagering entities, also provide for an annual $1,000 licensing fee, but the cost of reviewing the application requires a check for $10,000. As with the ADW license application, any unused portion would be returned and the applicant would have to pay more if it was insufficient to cover the costs of the review. Renewal applications are due Aug. 1 of each year, with a Dec. 20 deadline for the commission’s decision.