As of Sept. 28, online sports betting in Kentucky is officially live and legal. It joins the retail sports betting market, which launched in the state on Sept. 7. The hype around Kentucky sports betting is high, but how big can this market get?
Sports Betting Projected to Generate $23 Million in Annual Tax Revenue For KY
In March, prior to the passage of HB 551, Kentucky Majority Floor Leader Damon Thayer told his fellow legislators at a meeting that he estimated the sports betting market in Kentucky to generate around $23 million in annual tax revenue. He used Tennessee as a baseline to discern this number – Tennessee generated $68 million in tax revenue in 2022, but is home to roughly 2.5 million more people and a tax rate that’s nearly double Kentucky’s 9.75%.
This $23 million may be somewhat conservative on Thayer’s part when comparing it to Louisiana, a state with a similar population size and tax rate as per an analysis conducted by Legal Sports Report. Louisiana generated over $2 billion in total handle and $30 million in tax dollars in its first full year.
Some Kentucky Sportsbooks Legal For 18-Year-Olds
Kentucky stands to be even more competitive than Louisiana, all things considered. For starters, sports betting is only legal in 55 of Louisiana’s 64 parishes, while it’s completely legal statewide in Kentucky. Tennessee on the other hand doesn’t allow retail sportsbooks, which also gives Kentucky a boost relative to its size and population.
Where Kentucky has the real edge is on its age requirements. Some Kentucky sportsbooks (DraftKings, Bet365) only require bettors to be 18 years old to place sports wagers in the state, making Kentucky the only state in the region that allows people under 21 years of age to bet. This means that 18-20 year olds in Indiana, Illinois, Tennessee, Virginia, West Virginia, and Ohio can drive across state lines and place sports wagers, exposing Kentucky to a much bigger market. This is a huge competitive advantage.
Kentucky Sports Betting First Year Revenue Projection
Given that, the online sports betting market in Kentucky should generate north of Louisiana’s $2 billion in total wagers relatively comfortably and between $30-40 million in tax revenue for the state. Anything more than $40 million in annual tax revenue would be a stretch with a 9.75% tax rate.
All tax revenue will go into the Permanent Pension Fund which provides retirement, disability, insurance and other benefits to over 410,000 public servants in the state.
Retail Sports Betting Launch Suggests Successful Future
While the early numbers for Kentucky online sports betting are not available yet, the retail market has generated considerable revenue. According to a press release from the Kentucky Horse Racing Commission (KHRC), over $4.5 million was wagered in the first two weeks of retail sports betting in Kentucky.
“This is a strong number that certainly reflects the excitement Kentuckians have for the opening of sports wagering,” Gov. Andy Beshear was quoted as saying in the release. “With college football and the NFL season underway, plus the launch of mobile wagering, we expect that number will grow significantly.”