Digital Wager Wire highlights the most significant events affecting the domestic and international sports betting and gaming industries each week throughout the year.
Kentucky Changes Sports Betting Law
Prediction markets have shaken the world of mobile sports betting ever since they began offering sports event contracts approximately 15 months ago. Kalshi, Polymarket, and Crypto.com are the most recognizable names, and all are licensed by the Commodity Futures Trading Commission (CFTC), allowing unfettered access to all 50 states.
However, state gaming regulators have vehemently objected, arguing that these brands are masquerading as commodity brokers that historically allowed customers to trade in gold, silver, and pork bellies but are now essentially mobile sportsbooks, despite their pleas to the contrary.
Because prediction markets scored several early legal victories, major mobile sportsbooks like DraftKings, FanDuel, and, to a lesser extent, Fanatics, have all started their own prediction markets.
This led Kentucky to put the proverbial hammer down, as they, along with many other states, view prediction platforms as an enemy to their sports betting industry. Prediction platforms are not obligated to pay the state taxes on their revenues due to their status as a licensee of a federal governing authority, the CFTC.
Thus, Representative Michael Meredith was inspired to sponsor HB 904, a bill that would make substantive changes to Kentucky’s sports betting law and force its sportsbooks to choose between operating in Kentucky or maintaining their prediction market brands nationwide.
The Senate did not want to issue its biggest earners an ultimatum, knowing none of them operate prediction markets in states where they hold sportsbook licenses, so the upper chamber struck that language from the bill. The House passed the amended version, 69-19.
In addition to the clause prohibiting sportsbooks from operating prediction markets in the Bluegrass State, HB 904 also includes the following:
- Raises betting age to 21 from 18.
- Restricts in-state collegiate athlete prop bets.
- Authorizes fixed-odds wagering on horse racing.
- Sets up fantasy sports regulations, taxing those companies at 12.5% and banning house pick’em contests.
CFTC Challenges State Gaming Commissions
In a related story, the CFTC has thrown down the gauntlet and invited state gaming regulators and attorneys general to fight the agency, and not its licensees, in court regarding the hot-button topic of offering sports event contracts.
CFTC Chairman Michael Selig testified during his confirmation hearings last year that if confirmed, he would likely allow the courts to decide whether the federal authority of the CFTC supersedes state gaming laws when it comes to its prediction market licensees.
However, since his confirmation, his perspective has shifted markedly, and he is now itching for a legal fight.
“The concern is, when states start suing our registrants, this is not the right fight,” Selig said. “The fight is with us.”
“And that just wastes your own state’s taxpayer dollars in suing participants that are complying with federal law,” he said. “So, if you want to fight with us, we’ll fight with you in court, but the real work should be done in the policy spectrum. Come in and comment, and we’ll work with you all to get the policy right.”
