How has the first year of legal sports gambling in Kentucky gone? It’s a winning bet.

With television cameras recording the event, at 10 a.m. sharp on Sept. 7, 2023, at the Churchill Downs Race and Sports Book, Kentucky Gov. Andy Beshear placed the first legal sports bet in the state.

After the passage of House Bill 551 , the governor bet a $20 parlay, picking the over on Kentucky and Louisville football win totals and the under on Duke. Alas, Beshear lost the bet as UK came right in at its over/under win total of seven.

Ah, but that hasn’t stopped the state from having a robust first year of legalized sports betting, one that most analysts believe has exceeded economic projections.

The Kentucky Horse Racing Commission has yet to release the numbers for August. Through July, almost $2.2 billion had been wagered online with another $82 million bet at the brick-and-mortar facilities located at the tracks.

“I think that’s maybe a little bit better than initially expected,” said Steve Bittenbender , who covers the industry for betkentucky.com . “July and August are typically slow, so I don’t think we’ll see $3 billion for this first year, but definitely $2.5 billion is in the ballpark, which is a great way to start Kentucky sports betting for the first full year.”

It should be noted that while betting at brick and mortars began on Sept. 7, 2023, online betting in the state did not launch until three weeks later on Sept. 28.

“I think we’ve been very satisfied with it,” said Jim Goodman , director of wagering development at Keeneland, which partners with Red Mile Gaming. “One of the things that surprised me is that it was such a huge deal when we got it, you know, in September of last year, and we opened up, and we didn’t have mobile (betting) during the first three and a half weeks, and we were slammed at Red Mile. I mean, it was wall-to-wall people all the time.”

Kentucky is one of the few states that has a two-tier system when it comes to tax revenue from sports gambling. Through July, the state has drawn $36 million in tax revenue from online wagering and $731,593 from retail betting. That far exceeds the initial estimates of $23 million.

“That is basically about 150 percent over,” Bittenbender said. “I’d say 38 or 39 million, somewhere in that ballpark, when you provide the numbers of August and September. So it has been great for the state and especially for the pension fund, which has needed a source of income to solidify that.”

Oakland state representative Michael Meredith sponsored the bill, which was signed into law by Beshear.

“The first year of sports betting was hugely successful and it exceeded all expectations,” the governor said in a press release commemorating the one-year anniversary on Sept. 7. “For fiscal year 2024, sports wagering beat all odds by bringing in $37.2 million in revenue from sports wagering, taxes, and licensing fees. In July, driven by interest in the summer Olympics, the trend continued, generating an additional $2 million in state tax revenue and bringing us close to $40 million in revenue through July. With one year of data, we can see some initial trends.”

When advocating for passage of the bill, state senator and Republican floor leader Damon Thayer said he believed the projected $23 million in first year tax revenue was too low. Thayer was right.

“I always though the projections were too low,” Thayer said this month. “The numbers certainly have been eye-popping, haven’t they? I thought the rollout and implementation were very smooth. I thought the Horse Racing Commission did a terrific job. One of the best things about being among the last groups of states to pass sports betting, we were able to learn what worked well and what didn’t work well in other states. It’s led to be a pretty great first year.”

Surprised?

“No,” said Brad Taylor , who hosts a daily sports gambling show on WLXG radio in Lexington. “I think they tried to temper people’s expectations. But in reality, we knew this was going to be a big deal.”

Young men, football and March Madness

Though there isn’t a demographic breakdown of sports gamblers in the state, most believe it is most popular with young men.

“Everywhere I go, everybody talks to me, especially guys younger, about sports games, football, basketball,” Taylor said. “People are on their phones. So it’s exactly what I thought it would be, because it has already been going on everywhere else.”

Taylor’s show started before sports gambling was legalized in the state. (He beat the drum daily for legalization.) Since the launch, he said he’s seen an uptick in text messages he receives during his one hour on the air and interest in the show in general.

As expected, football is the main driver for legalized sports betting in Kentucky. But, as expected, betting on basketball has been a strong draw in the state, as well.

For example, the online handle in Kentucky for December was $254.9 million, a solid first-year number for a month that includes the college football championship and bowl games, plus the stretch drive of the NFL season.

Despite football being completed by March, Kentucky’s online handle for that month was $246 million, a number that reflects the popularity of March Madness in the commonwealth, even in a year in which the Kentucky Wildcats were eliminated in the first round of the NCAA Tournament and the Louisville Cardinals failed to make the 68-team field.

The role of the sportsbooks

Among online sportsbooks, DraftKings and FanDuel are No. 1 or No. 2 in the state, depending on the category. DraftKings is No. 1 in revenue while Fan Duel is No. 1 in handle.

“DraftKings and Fan Duel are established as the top two, not just in Kentucky but nationally,” Bittenbender said. “I don’t see anybody knocking one of those two off the pedestal. We’re talking like Secretariat and Sham versus the rest of the 1973 3-year-old field, in horse racing terms.”

The surprise has been the strength of bet365 , based in England, which has emerged as No. 3.

“A lot of the European companies have struggled in the U.S.,” Bittenbender said. “You look at Ohio, where there are 18 operators, and they just couldn’t get traction. I think bet365 has been willing to invest in the promotions, in the advertising. If you watched the Reds on Bally Sports Ohio , there were as many bet365 ads as there were DraftKings ads.”

Circa sportsbook opened sports betting at the Mint Gaming Hall at Kentucky Downs on Aug. 12. Prime Sports and Bettor Sports Betting could be added sometime in 2024 or 2025. That would bring the number of sportsbooks in Kentucky to 10.

What has gone wrong the first year? Taylor said one shortcoming lies with the gamblers more than the sportsbooks.

“Forbes magazine had a report that DraftKings made about $10 billion so far this year and 85 percent of that money came from parlaying,” Taylor said of wagers that tie two or more bets together on the same ticket to create a larger bet. “What they do is market to people who are trying to get rich quickly. They’re trying to give squares like you and me hope that we can (hit big) and that’s how they make their money. As for the people that are betting, that’s the biggest mistake they make.”

As for other aspects, the complaints have been few and far between.

“All in all, you have to give it a thumbs up,” Thayer said. “People still talk to me about it more than any other issue when I’m out in the community.”

What is the ceiling for sports betting in Kentucky?

Now that the newness has worn off, will there be a downturn in the numbers? After all, sportsbooks used tantalizing promotions to coax players into signing up when Kentucky’s sports gambling launched a year ago. Those have all but disappeared.

“Actually, what we’ve seen is the sportsbooks start getting a little more outreach in the next year,” Bittenbender said. “Existing customers will still be there, and they’ll be more comfortable. You’ll probably see them betting a little more and even starting to go into newer markets. People who typically have just been on football, may be looking to go into basketball or baseball. There will probably be more soccer betting going on and so forth.”

“They’ll find ways to make it more appealing to ‘Marge in accounting,’ said Taylor, who wrote the gambling book “ Side Hustle .” “But at the end of the day, they know you’re sitting there on a Saturday for about six, seven months a year here in Lexington, watching college football and college basketball — they know what they’re doing, they’re appealing to those guys.”

A strong second year is contingent on the economy, of course. A downturn in economic fortunes could lead to less discretionary income, thus fewer gambling dollars.

“But all things being equal,” Bittenbender said. “I’m bullish about where Kentucky will be this time next year.”

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