- Not all states allow gambling or run an official state lottery, although an increasing number of states is doing so as a way to raise revenue. The state of Kentucky, famous for its history of thoroughbred racing, has a robust system in place for wagering on horse races and harness racing. But the state does not permit casino-style gambling, not even on Native American reservations.
- Kentucky Sales and Use Tax is imposed at the rate of 6 percent of gross receipts or purchase price. There are no local sales and use taxes in Kentucky. Sales and Use Tax Laws are located in Kentucky Revised Statutes Chapter 139 and Kentucky Administrative Regulations - Title 103.
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For tax year 2018 only, Kentucky did not allow gambling losses as an itemized deduction. For tax year 2019 and after, gambling losses are allowed as an itemized deduction to the extent of gambling winnings. The state would tax profits at 10.25 percent for in-person betting and 14.25 percent for online betting. The Kentucky Racing Commission would oversee betting. $20 FOR 1 YEAR Get unlimited digital.
Several forms of in-person and online gambling are legal in Kentucky today.
On the brick-and-mortar side are horse racing betting, the state lottery and historical horse racing machines at racetracks.
Horse racing has been legal here since nearly a decade before Kentucky even became a state. A lottery was approved in 1988 and historical horse racing machines were approved by the KY Horse Racing Commission in 2010.
Online gambling in Kentucky consists of horse racing betting and the online lottery. Daily fantasy sports sites also operate in Kentucky despite state law not addressing the issue one way or another. The common interpretation of the law is that DFS sites fall under game of skill provisions.
Sports betting legislation was introduced in 2017, 2018 and 2019 but has failed to gain traction every time. The fact that lawmakers pressed the issue three years running shows there is demand, but the likelihood of sports betting being legalized in Kentucky is hard to estimate at this point.
Legal forms of gaming in Kentucky:
- Horse racing: Live racing, off-track betting parlors and mobile devices
- State lottery: Online and in-person
- Historical racing: At state racetracks
- Bingo and raffles: Registered charities
- Daily fantasy sports: Online / mobile
Gambling Site
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Online Gambling in Kentucky
Mobile horse racing betting was the first form of online gambling to be legalized and regulated in Kentucky. All major mobile operators accept Kentucky horse bettors and customers may sign up remotely from anywhere within state lines.
Major horse racing sites that operate in Kentucky include:
- TVG
- BetAmerica
- TwinSpires
- AmWager
Daily fantasy sports are not addressed by Kentucky law, but generally fantasy contests are treated as games of skill rather than gambling. An attempted to regulate daily fantasy sites failed in the legislature in 2017 and since then, lawmakers seem to have shifted to other priorities.
In the meantime, all the big fantasy providers operate in Kentucky:
- FanDuel
- DraftKings
- Fantasy Draft
- Yahoo DFS
Online lottery sales launched in 2016 with draw games, instant win scratch games and keno all offered through the official website of the KY Lottery:
- Play.KYLottery.com
Land-based Casinos in Kentucky
The Kentucky Legislature has a casino gaming bill filed every year. It ends the same way each time, dying in committee or before a vote. There is not enough support in the state to authorize full-fledged casinos even though the historical horse racing machines installed at Kentucky Downs, Derby City Gaming and others are barely distinguishable from actual slots.
For now, gamblers looking for the full casino experience can visit casinos in any number of neighboring states. Illinois, Indiana, Ohio, West Virginia, Missouri and Arkansas all offer casinos just across the border.
Historical Racing Machines
Historical horse racing machines are the closest thing to actual casino gambling in Kentucky, and in reality, there is not much different between these and real slots.
For one, historical racing machines look like slots. They also feel and sound like slots when in action. The difference is historical horse racing machines are based on the outcomes of past races and ask players to select a horse (whose name is hidden) based on past performance data.
Most players, however, use the quick pick function to pick horses for them. The race can be viewed in its entirety, but most players also skip this and watch the spinning reels work their magic (for entertainment purposes only of course). The payouts also work a bit differently than slots as historical horse racing winnings are paid out parimutuel-style from a pool of players all playing the same games.
Historical horse racing machines can be found at four venues today:
- Derby City Gaming in Louisville
- Ellis Park in Henderson
- The Red Mile in Lexington
- Kentucky Downs in Franklin
The Kentucky Horse Racing Commission redefined pari-mutuel betting to include races that are not live in July 2010 and then asked a court to determine if the action was legal. The court agreed, but this kicked off a legal battle that would drag on for eight long years.
Sports Betting in Kentucky
Sports betting is not legal in Kentucky. Bills that hoped to change that died in the state legislature in 2017, 2018 and 2019.
Former Kentucky Governor Matt Bevin was opposed to gambling expansion, but Governor Andy Beshear took over in 2020 after campaigning in favor of expanded gambling to include traditional casinos and legal sports betting.
The odds of Kentucky legalizing sports betting have increased with the election of Andy Beshear, who called on the legislature to consider legalization in 2021. However, current projections point to 2022 being a more likely target for lawmakers to seriously consider the issue.
Poker in Kentucky
Commercial poker rooms are not legal in Kentucky. Players will need to go to a neighboring state where it is legal, including Ohio, Indiana, Illinois and West Virginia, to play in a live poker room.
Online poker is similarly prohibited. Certain offshore gambling sites continue to target Kentuckians with offers of online poker, but those sites are completely unregulated and it has become difficult for players to move funds back and forth (if they are even paid, which is not guaranteed).
Home Poker Games
Kentucky law on home poker games is not cut and dry, but it appears to be legal to host a social game as long as the house does not take a fee or have an edge. Additionally, others cannot be induced to play in social poker games.
If no rake is taken and all players have an equal chance of winning, the game is likely OK from a legal standpoint. That being said, it would be wise to get professional legal advice prior to hosting a game at your house.
Fantasy Sports in Kentucky
Fantasy sports are presumably legal in Kentucky due to the state’s definition of gambling not appearing to cover fantasy contests. There is no regulation over the industry, but major fantasy sites such as FanDuel and DraftKings are regulated in other states and hold themselves to a high standard.
The state legislature introduced legislation in 2017 that would have set a low tax rate of 6% and reasonable licensing fees of $5,000 for operators, but it was unable to advance beyond a House vote.
Kentucky Horse Racing Betting
Kentucky has a well-deserved reputation for horse racing as the ancestral home of the Kentucky Derby and Churchill Downs. Betting on horses has been legal since the 1700s and today there are seven racetracks in operation.
Each KY track offers live and off-track betting, and five of them host historical horse racing machines that look and function similarly to slots.
Mobile Racing Betting
Online racing betting is legal in Kentucky and serves as the state’s only form of true online gambling aside from the lottery. BetAmerica and TwinSpires, both operated by Kentucky’s own Churchill Downs Inc., are two of the country’s largest horse racing wagering sites.
Kentucky licenses mobile racing betting sites (also known as ADWs or advance deposit wagering operators), but state law is somewhat weak on enforcement. As a result, some US-based horse racing sites operate in Kentucky without a license.
Kentucky Racetracks
Seven tracks host live horse racing and wagering today.
Kentucky Lottery
The Kentucky Lottery was created through a statewide voter referendum in November 1988. The first scratch-off tickets were sold in April 1989. Kentucky also sells lotto tickets. This includes a mix of interstate and intrastate drawings. There is also a keno game that has drawings every four minutes. Proceeds from the Kentucky Lottery go to the state’s general fund. This equates to about 26% of sales.
Kentucky Intrastate Lotto Games
- Kentucky’s Quick Bucks
- Kentucky Ca$hball
- 5 Card Ca$h
- Pick 3
- Pick 4
Kentucky Interstate Lotto Games
- Mega Millions
- Powerball
- Lucky for Life
KY Online Lottery
In 2016, Kentucky became the third state to authorize online lottery sales. Residents may visit KYLottery.com to register an account, make a deposit and play games online from home or while on the go.
Games that can be purchased or played online through the KY Lottery include:
- Intrastate lotto games
- Interstate lotto games such as Mega Millions and Powerball
- Online instant win games
- Online keno
The minimum age to play the KY Lottery online is 18.
Games of Skill
Kentucky Revised Statutes § 528.010 defines gambling as:
staking or risking something of value upon the outcome of a contest, game, gaming scheme, or gaming device which is based upon an element of chance, in accord with an agreement or understanding that someone will receive something of value in the event of a certain outcome. A contest or game in which eligibility to participate is determined by chance and the ultimate winner is determined by skill shall not be considered to be gambling.
This translates to any game with an element of chance is considered gambling if a player puts up money to participate in it. This would make most card games illegal. However, competitions in traditional skill games like chess, checkers and athletic contests where the participants wager among each other would be valid.
Esports
Gambling on eSports is not typically legal in Kentucky. An exception may be when the bettors are also the participants and skill is the main determiner of a winner. Esports betting sites that accept Kentucky residents include:
- PlayersLounge.co
- GamerSaloon.com
Traditional Online Skill Games
According to skill game sites like WorldWinner, the state’s definition of gambling does not apply to pure games of skill. King Games also accepts Kentucky players. Sweepstake sites such as WPT Online are also open to Kentuckians.
Skill-based Gaming Machines
Skill-based gaming machines are not legal in Kentucky.
Charitable Gaming Laws
Kentucky permits registered charities to offer bingo games, sell pull tabs and hold raffles. It is licensed by the Department of Charitable Gaming. Charities pay a tax of about one percent of gross revenues. Raffle tickets under $5 may be sold without approval. A sales tax on charitable fundraising was dropped after the law was changed by the Kentucky Legislature in 2019.
Kentucky Gaming Law
Legalized gambling predates the statehood of Kentucky. Horseracing betting started in 1783 while Kentucky officially became a state in 1792.
Despite the state’s initial comfort with horse racing betting, any additional significant gambling expansion would not occur for over 200 years. It wasn’t until voters approved a state lottery in 1988 and charitable gaming went live in 1992 that residents saw their gambling options increase.
The minimum gambling age for all forms of gaming currently regulated in Kentucky is 18.
Ky Gambling Casinos
Gambling expansion in Kentucky does not always require voter approval. Some expansions may be done by the legislature or racing commission. In odd years, it requires 60% in both the house and senate. In even number years, it only requires a majority.
The following agencies regulate gaming in Kentucky:
Kentucky Lottery Law
The Kentucky Lottery was approved by voters in November 1988. It passed in a constitutional referendum by a 61 to 39 margin.
The first tickets were sold in April 1989. Lotto and scratch-off tickets are available, as well as keno at select locations that often include taverns. Keno drawings are held every four minutes. Lottery tickets may only be sold at retailers or through the official KY Lottery website or mobile app.
Lottery players must be at least 18 years of age. Money raised by the lottery is divvied up as follows:
- 64% is paid to winners
- 25% goes to KY to fund college scholarships and grant programs
- 6% goes to retailers
- 5% goes to administration
Charitable Gaming Law
Charitable gaming is permitted through any nonprofit that is registered with the Internal Revenue Service and the state. Bingo games may be held. Raffle tickets may be sold. Pull tabs awarding prizes may also be offered.
Certain policies designed to keep scam charities out of Kentucky apply to the operators of charitable games. There is a tax of about one percent on revenues, which creates a paper filing that fosters future investigations if needed. Additionally, charity employees may not be paid more than $50 per event and no more than $15 in food may be provided to employees.
Online Gambling Laws
The only forms of legalized online gambling in Kentucky are mobile horse racing wagering and the lottery. Bettors may create accounts on the apps and process all deposits and withdrawals there.
The Kentucky Lottery went online in 2016 in order to “be more attractive to a younger demographic who are accustomed to conducting a majority of their retail purchases online.” What began with a small collection of instant win games and tickets to several drawings has expanded to include dozens of games today.
Under state law, online lottery players must be at least 18 years old and have a valid Kentucky address. State law also prohibits the KY Lottery from allowing customers to withdraw funds they have deposited in an effort to combat money laundering. Players beware: winnings may be withdrawn at any time, but deposits must be played.
Sports Betting Laws
Sports betting is not legal in Kentucky. It is not due to a lack of trying. Bills failed in the 2018 and 2019 legislative sessions, but that is probably a good thing because both bills called for outrageous tax rates that would have killed the industry.
There is hope moving forward now that Kentucky has a more gambling-friendly governor in place.
KY Gambling Domain Seizures
In 2008, Kentucky attempted to seize 141 domains related to offshore gambling companies. After a six-year fight, the state lost its legal battle. The domains were permitted to remain in the hands of the registrars.
Kentucky Gambling FAQ
Does the Kentucky Lottery permit anonymous winners?
No. The names of Kentucky Lottery jackpot winners must be made public.
Are gambling winnings taxed in Kentucky?
There is a tax on gambling winnings of up to 6% in Kentucky. This is in addition to anything owed to the federal government. Out-of-state residents may receive a tax credit if paying the same amount or more in their home state.
Is sports betting legal in Kentucky?
No. Sports betting bills died in the Kentucky Legislature in 2018 and 2019.
Is poker legal in Kentucky?
Ky Gambling Tax Exemption
Poker rooms are not legal in Kentucky. Home poker games are if the game is fair and no fee is charged.
Are casinos legal in Kentucky?
No. Historical racing at the state’s racetracks is as close as it gets.
What is historical racing?
Kentucky racetracks offer historical racing. The machines use a database of races and picks one at random. The players pick horses or allow the computer to do it, participating in a racino-wide pari-mutuel pool.
Are daily fantasy sports contests legal in Kentucky?
Bills to regulate fantasy sports in Kentucky failed in the legislature. Currently, it appears the games are legal as all major operators accept players from the state.
Does Kentucky ban smoking in gaming establishments?
Kentucky does not have a statewide smoking ban. However, there are some local ones that ban smoking in some or all establishments.
A Kentucky state senator with professional ties to the racing industry is endeavoring to change a recently-enacted state tax that he believes unintentionally penalizes racetrack bettors by taking away their ability to offset gambling winnings with losses when calculating income.
“There was never any specific intent to target horseplayers,” Damon Thayer, the Republican Majority Floor Leader, told TDN via phone on Monday. “I’m trying to get some language in [a new bill] to fix the problem.”
Although the tax changes brought about by HB 487, Kentucky’s sweeping tax reform bill, were first enacted on Apr. 27, 2018, many horseplayers and tax professionals are just now becoming aware of the potentially costly gambling-related consequences as they prepare their 2018 tax returns.
Frank Angst of Blood-Horse first broke the story Sunday, detailing complaints from bettors who could face thousands of dollars in new taxes because they can no longer mirror federal income-calculating guidelines that pertain to gambling winnings when filing their 2018 Kentucky state income tax returns.
A closer look at HB 487, which passed the House (51-38) and the Senate (24-14) before becoming law without the governor’s signature last year, shows that only a single line of text within the bill without any reference at all to “gambling,” “winnings” or “losses” is what has triggered the potentially onerous tax liability for bettors.
The clause within the 417-page bill was inserted on page 166, where in a section detailing how the calculation of income should follow federal standards, one of ten exceptions to following the federal code states that “Any deduction allowed by 26 U.S.C. sec. 165 for losses” is no longer permitted.
Section 165 of the federal code reads, in part, “Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions [and] the term ‘losses from wagering transactions’ includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction.”
This means Kentucky residents are still able to deduct losses to the extent of winnings on their federal returns, but not on their state returns for 2018.
Thayer, upon first hearing word Monday about how this clause will negatively affect Kentucky taxpayers, said, “It was news to me, because I was in the room with [Speaker of the House] David Osborne, who is also a horse racing industry participant like me, and there was never any mention of pari-mutuel wagering, losses, deductions, anything. So I think it’s a misapplication of the law by the finance cabinet.”
Thayer explained how in the wake of passage of any wide-ranging state tax reform, lawmakers typically have to come back and put together a “cleanup bill” as constituents come forward with complaints. That process, he said, already began months ago in Kentucky, and is not limited to Thayer’s efforts to change the way gambling winnings are reported.
“Any time you do a major tax overhaul like we did last year, there are always unintended consequences that you have to do a cleanup bill [for],” Thayer said. “It just passed the House last week. We just got it. It’s in the possession of our Appropriations and Revenue Committee, and I’m already working with Senator Chris McDaniel, the chairman of the committee, to see if we can insert some language. He’s working on an amendment to the House bill, and I’m going to try to get some language in there to fix it. We’ve only got 12 days left in our legislative session, so time is of the essence.”
But Thayer said it is unlikely that the changes will help horseplayers on their 2018 returns.
“It’s difficult to do those things retroactively,” Thayer said.
So is 2019 the target date for rolling back the tax change?
Ky Gambling Taxes
“That’s to be determined, but I would say that’s a likely application,” Thayer said.
TDN attempted to contact Republican Phillip Pratt of Georgetown, who sponsored last year’s sweeping tax bill, to ask why HB 487 stripped out the ability to deduct losses from winnings in the first place. But a message left with a staffer did not yield a return call prior to deadline for this story.
Jeff Platt, the president of the Horseplayers Association of North America, told TDN via phone that one “silver lining” for Kentuckians is that because of tax-friendly code changes initiated at the federal level in 2017 (in which a bettor’s entire-pool investment, as opposed to only the amount wagered on the correct result, determines the amount reported or withheld for tax purposes), the number of “signers” is down significantly. Thus, for Kentucky residents, there are fewer documented winnings that need to be reported at the state level.
Ky Gambling Age
“Me personally, I’m against these kinds of tax code changes,” Platt said of the new Kentucky law. “Give the taxpayer the option of either using a short form or a really extensive long form to deduct stuff like this.
Ky Gambling Tax Rate
“The thing is, so few people actually win on horse races,” Platt continued. “Even those who might hit lots of signers during the year, they tend to churn most of it back. The number of people who win in this industry is maybe 1% or 2%, something like that. The maddening thing is that this type of statute discourages someone from even going to a horse track.”