Kentucky entered the legal sports betting market in September 2023, launching both retail and online platforms. This launch was highly anticipated, and in its first year, online betting reached $23 billion, with an adjusted gross revenue of $264.3 million, indicating significant growth.
Launch of Legal Sports Betting in Kentucky
Kentucky officially entered the sports betting market on September 7, 2023, with the introduction of retail sports betting platforms. Three weeks later, on September 28, the online betting platform was launched, allowing residents to easily place bets from home.
In the first year, Kentucky's online platforms saw a total betting amount of $23 billion, highlighting the growth trend in the US online gambling sector, with Kentucky being no exception. The adjusted gross revenue (AGR) for Kentucky's online gambling in the first year was $264.3 million.
Major Operators in Kentucky.
Flutter Entertainment's FanDuel took a leading position in Kentucky's online gambling market. In the first year, FanDuel generated $105.9 million in adjusted gross revenue from $8.17 billion in bets, with a hold percentage of 12.96%, one of the highest in the state.
FanDuel's long-time competitor DraftKings followed closely, earning $100.9 million. Despite a larger betting amount of $8.95 billion, DraftKings had a slightly lower hold percentage of 11.27%, making the competition fierce and close.
BetMGM also posted impressive figures, earning $18.9 million from $1.436 billion in bets, with a hold percentage of 13.16%, ranking high among major operators.
Bet365 and ESPN Bet also contributed to Kentucky's gambling market. Bet365 earned $13.5 million from $1.573 billion in bets, while ESPN Bet earned $10.6 million from $1.043 billion in bets.
In the retail sector, Churchill Downs and its partner Kambi were at the forefront, earning $2.5 million from $351 million in bets, with a hold percentage of 7.06%, making it Kentucky's top retail sports betting. Turfway Park was second in the retail sector, with $147 million in bets and revenue of $920,800, with a hold percentage of 6.25%.
Tax Contributions
The online gambling sector brought in a total of $37.7 million in tax revenue for Kentucky. Although the betting amount for retail gambling was much lower than online, it still contributed $756,517 in tax revenue. Despite being less compared to online gambling, it still made a significant contribution to the overall tax revenue from sports betting.
In August 2024, the total betting volume increased by 17.1% compared to July, reaching $1.514 billion, with $1.47 billion from online betting, further indicating the dominance of online platforms.
Despite the increase in betting volume, the adjusted gross revenue decreased from $15.1 million in July to $11.8 million in August, a drop of 21.9%, highlighting the monthly volatility in sports betting operations.
Esportes Gaming Brazil, currently facing a federal ban imposed by national regulatory authorities, has found a way to continue operations through its ownership of ST Soft Desenvolvimento de Programa de Computadores Ltda, which has obtained a license from the state regulatory authority Loterj.
Regulatory Environment in Brazil
In 2023, Brazil's federal regulatory authority, the Public Security Bureau (SPA), published a list of approved operators authorized to legally operate from January 1, 2024. Operators not approved are expected to cease operations, effectively being marked as unlicensed. Esportes Gaming Brazil is notably absent from SPA's list of approved operators, putting it in a precarious situation. This means that, according to federal law, the company will not be able to operate in Brazil before the official market launch in 2024.
Facing the federal ban, Esportes Gaming Brazil turned to the state-level gambling regulator Loterj in Rio de Janeiro, which operates under a different legal framework. Through its subsidiary ST Soft Desenvolvimento, Esportes Gaming Brazil obtained a state license, allowing it to continue operations under Loterj's jurisdiction. Under this arrangement, the domains Esportes da Sorte and Onabet will now operate under ST Soft's Loterj license, enabling the company to serve customers in Rio de Janeiro.
Court Rulings
The federal court recently ruled that Loterj has no jurisdiction outside Rio de Janeiro, meaning its license holders cannot legally operate in other Brazilian states. This ruling directly challenges Esportes Gaming Brazil's ability to expand its business beyond state borders, although Loterj claims its license should allow nationwide activities.
Despite these legal and ethical challenges, Loterj still insists that Esportes Gaming Brazil meets all legal and technical requirements needed for a state license. The state regulator argues that its license holders are not subject to SPA's federal rules, citing Law No. 14,790, specifically Article 35-A, which states that license holders must follow the law rather than regulatory statutes, providing legal protection for operators under Loterj's jurisdiction.
