Kentucky Governor Budget Will Fund Education by Taxing Online Poker

2020 seems to be off with a bang for the sports betting industry in Kentucky, after HB137, the bill that seeks to legalize online poker, sports betting, and fantasy sports contests, has passed through the committee stages, and now the proposed Budget 2020-2022 by the state Governor, among other sources of revenue, is counting on tax money from online poker operations.

The push for expanding the area of gambling that started back in late 2018, when Andy Beshear was the state General Attorney, gained traction during his campaign for the post of Governor in 2019, but really started materializing after he had won the race and become Kentucky State Governor.

Senate and House May Amend

Though legalization of sports betting, fantasy sports, and online poker is estimated to raise more than $37 million in the next two years, the proposal could face serious troubles passing through the Senate and House, both being controlled by Republicans, and especially with the history of the House of Representatives making significant amendments to the budget proposals of the previous state Governor Matt Bevin.

And initial reactions after the budget proposal has been announced do not give much ground for optimism, with the Senate President Robert Stivers expressing his skeptic view that the budget is “puppy dogs and rainbows”, and the House Speaker David Osborne remaining neutral as “it’s impossible to tell at this point” whether the House will approve what the Governor wants, even though the idea of generating extra funds from online gambling operations is appealing to the Republicans.

Requirements for Online Poker

Spearheaded by Rep. Adam Koenig, the bipartisan effort behind HB137 seeks to establish firm definitions about online poker, rake and net poker revenue, provide clarity regarding administration and promotion of poker operations, tasking  the Public Protection Cabinet with it, as well as setting strict requirements for online poker operators in terms of geolocation software capabilities to confine  participation only within the state of Kentucky, age verifications procedures to ensure players are 18 or above, security requirements to minimize the probability of data theft or hacker attacks, and accounting standards to provide for transparency and prevent money laundering.

Besides the provision that does not allow licensing for vendors that had been convicted of any violation of the Unlawful Internet Gambling Enforcement Act /UIGEA/ of 2006, there is one specific text that refers to operator liabilities “incurred due to litigation with the Commonwealth over internet domain names”, referring to the seizure of online gambling domains in 2008, among which PokerStars, the latter may end up losing license as their case may still go to the Kentucky Supreme Court and be ruled against them.

In terms of fees for the poker operators, the proposed bill includes an initial license fee of $250,000, valid for one year and renewed for $10,000, and 6.75% of net poker revenue to be paid as a gaming fee.

Whether there will be amendments to the proposed budget will be seen by the end of February, with the constitutional deadline for enacting the budget mid-April, before the end of the General Assembly session.