LOUISVILLE, Ky. (WDRB) — When Kentuckians are lastly in a position to legally wager on sports activities later this yr, they may use an app similar to FanDuel or Caesars Sportsbook to make a wager from the consolation of their dwelling rooms.

But even when it’s not obvious to the patron, one other firm apart from the app supplier will get a chunk of the cash from that wager: one of many state’s 9 horseracing tracks.

When legalizing sports betting earlier this year, Kentucky’s Republican-dominated legislature ensured that the horse tracks have a lock in the marketplace: They are the one locations allowed to have bodily sportsbooks, and on-line operators similar to FanDuel, DraftKings and Caesars are required to companion with one of many tracks to get a license to function in Kentucky.

For the tracks, the economics of those on-line partnerships are compelling. The CEO of the state’s largest horse racing firm — Churchill Downs Inc. — defined as a lot throughout a enterprise luncheon in Louisville earlier this week.

“The online people — FanDuel, DraftKings — they have to come get licenses from Kentucky companies. And we get a rev(enue) share based on that. And if you think about that, that’s an infinite return if you don’t have any costs,” Churchill Downs CEO Bill Carstanjen instructed the Kentucky chapter of the Association for Corporate Growth on Wednesday. “We’ve just been awarded the license, but we get a piece of all of their handle (the money placed on sports wagers) for those online platforms that we’ve partnered with.”

Churchill Downs has already capitalized by tying up with FanDuel, although the businesses haven’t quantified the “revenue stream” FanDuel will present to Churchill Downs.

This week, Keeneland Association announced that Caesars Sportsbook will be its partner for on-line wagering in addition to its bodily sportsbooks at its Lexington monitor and Red Mile historic gaming facility.

Speaking to WDRB News following his remarks on Wednesday, Carstanjen stated the “infinite return” partnerships with on-line sports activities wagering platforms aren’t as profitable as they may appear.

He famous that the Kentucky laws, HB 551, supplies every of the state’s 9 tracks with as much as three on-line partnerships. That means there are extra licenses to dole out than on-line platforms searching for them, since every on-line supplier wants just one license to function throughout the state.

“How many leading sports wagering platforms are there?” Carstanjen stated. “You could argue five — not more than 10.”

The surplus of licenses places “enormous downward pressure” on the income sharing proportion that tracks can demand from the web platforms, Carstanjen instructed WDRB.

Carstanjen instructed the enterprise group that sports activities betting — each the web and in-person parts — is a welcome change for Kentucky, nevertheless it won’t have a huge effect on the funds of the $11 billion firm.

“In and of itself, it’s not a big economic opportunity for our company, (but) we’re glad to have it,” he stated.

Carstanjen stated sports activities betting might assist convey clients to Churchill Downs’ casino-like gaming venues that supply slots-style historic horse racing video games, and that Kentuckians have been clamoring for it since sports activities betting is authorized in lots of neighboring states.

‘Ridiculous type of market management’

Kentucky is the 37^th state to legalize sports activities wagering, in keeping with the American Gaming Association. And a lot of these states power on-line operators to offer their native gamers — whether or not casinos, race tracks or sports activities stadiums — a reduce of the motion.

In Ohio, for instance, licenses are awarded to casinos and professional sports teams, who can then companion with on-line suppliers.

Arkansas went a step additional, requiring its casinos to get at least 51% of the sports betting revenue, which drew complaints from on-line operators together with BetMGM, DraftKings, and FanDuel.

Still, the unique deal for Kentucky’s horse tracks didn’t go unnoticed when the legislature’s majority Republican caucus debated the sports activities wagering invoice earlier this yr.

“For a legislature that prides itself on trusting the free market to take care of our economy, it is a ridiculous form of market control to help the one, primary incumbent in the gaming space in this commonwealth,” stated Sen. Whitney Westerfield, a western Kentucky Republican.

Westerfield, who has opposed expanded playing within the state, stated he doesn’t know why his Republican colleagues structured the sports activities wagering invoice favorably for the horse tracks, however he stated the consequence speaks to the facility of the business.

“I feel like the horse racing industry is so entrenched that there was no way any other gambling activity was going to make it through the legislative process without their blessing. And so they could say exactly what their blessing cost,” Westerfield stated.

Churchill Downs spent greater than $43,000 lobbying the legislature, making it the Twenty sixth-biggest spender throughout the 2023 legislative session, in keeping with state knowledge. 

Carstanjen stated the corporate supported the sports activities wagering invoice however “didn’t lead” the hassle. “We were not the champions of sports wagering,” he stated.

The invoice was among the many three items of laws that the corporate acknowledged lobbying in its public disclosures. 

Rep. Michael Meredith, R-Oakland, who carried the sports activities wagering laws, stated the tracks have at all times been considered as a conduit for sports activities bets. That provision has been in earlier variations of the invoice going again years, he stated.

The construction mirrors that of states the place on-line sports activities betting is “tethered” by legislation to casinos, Meredith stated.

“We’re not a casino state. We’re a horse racing state,” he stated. “ … The ‘big brother’ piece of this — the tethering — is going back to the racetracks instead of to the casinos.”

In earlier variations of the sports activities wagering laws, Meredith stated the tracks have been restricted to 1 on-line partnership, that means there may have been not more than 9 on-line suppliers licensed within the state.

Now {that a} most of 27 on-line platforms is feasible, Meredith stated there may be loads of capability for competitors. There could also be a dozen on-line platforms enthusiastic about accessing the Kentucky market, he stated.

“We wanted to create an opportunity for expansion if some of the other folks wanted to get in the marketplace,” he stated.

Sports betting received’t be authorized till the Kentucky Horse Racing Commission units up rules and awards licenses.

That received’t occur till “around football season,” Carstanjen instructed the viewers on Wednesday.