Online betting regulation takes shape

Kentucky moved closer Wednesday to regulating betting services that allow people to make online or phone wagers on horse races — a fast-growing business that includes Churchill Downs as a big player.

A proposed regulation approved by the Kentucky Horse Racing Commission calls for state licensing of so-called advance-deposit wagering operations that have Kentucky customers. The proposal now heads for a review by state lawmakers.

Operators would face a $1,000 annual licensing fee plus costs for reviewing the application, including background checks.

The commission action is the result of a measure approved by Kentucky lawmakers this year. It requires state licensing of advance-deposit wagering operators and quarterly reports by those companies on all such wagers made on Kentucky races.

Sen. Damon Thayer, R-Georgetown, who pushed for the law, called the commission's action "a positive step in the right direction on getting a clearer picture on ADW bets on Kentucky races."

The state oversight probably will result in follow-up legislation next year, Thayer said. That measure might seek to funnel a portion of those online and phone bets into a fund that boosts purses for Kentucky-bred horses at Kentucky racetracks, he said.

Currently, a portion of many wagers made on Kentucky races goes into the fund, but the levy doesn't apply to advance-deposit wagering — the only growth segment in pari-mutuel horse wagering, Thayer said. By knowing how much is bet through ADW providers, and from where the bets come, lawmakers can consider transferring "a rightful portion" of those wagers to the fund to strengthen racing and breeding operations in the state, he said.

Thayer said he plans to meet with House Speaker Pro Tem Larry Clark, D-Louisville, this summer to discuss possible legislation.

Churchill Downs, whose properties include its namesake Louisville track, has emerged as a key player in the online betting business through its account-wagering site. Churchill strengthened its position by acquiring online rival

The online business has grown so much that it's now seen as one of Churchill's three primary business segments, along with racing and gaming, said company spokeswoman Julie Koenig-Loignon.

"It is difficult to predict whether there could be taxing of ADW wagering in the future," she said. "Absent that information, we can't really speculate on what future taxes — should they materialize — would mean for our ADW business."