How Would Kentucky Regulate Online Poker Under Proposed Law?

The state of Kentucky is attempting a combo bill in 2020 that would legalize and regulate both online poker and online/mobile sports gambling. It’s an uphill battle, but optimism is high for the state to expand its gambling industry after nearby states have already greatly beefed up theirs.

Under the pre-filed legislation, the Kentucky Lottery Corporation would regulate online poker. Persons seeking to offer real-money online poker to individuals within state borders to those 18 years of age and older would need a license from the Lottery Corporation.

It would cost $250k for an online poker license, with a $10k annual renewal fee. In addition to the licensing fee, a gaming fee of 6.75% of net poker revenue would be imposed on each online poker vendor, according to the bill. That’s arguably an industry-friendly tax rate for iPoker revenue.

Friction for PokerStars?

The worldwide leader in online poker is a platform called PokerStars. It recently launched in Pennsylvania, following a launch in New Jersey several years ago. In late 2018, PokerStars scored a victory in the Kentucky Court of Appeals over a whopping $870.7 mm judgment against the poker site. Kentucky went after the company in court for its activity in offering online poker to Kentuckians before Black Friday in April 2011. Kentucky said online poker was against state law. The case took years to play out.

According to a report from the Louisville Courier Journal after PokerStars’ victory on appeal, the state Justice and Public Safety Cabinet indicated it would ask the Kentucky Supreme Court to weigh in. The state’s high court hasn’t done so and it’s unclear if it ever will. With that said, the Kentucky regulated online poker bill appears to make reference to this situation. Under the bill, it appears that PokerStars could be licensed to offer online poker in Kentucky, despite the rocky history with the state.

“Award of an online poker license under this section shall not absolve any person of any liability which has or may be incurred due to litigation with the Commonwealth over internet poker domain names,” states the bill. “Any person who has been issued a license under this section shall have the license suspended by the corporation if a final judgment is issued against the person for the improper use of internet domain names. The license suspension shall continue until all fines and fees assessed under the judgment are fully paid.”

The legislation also states that online poker vendors would be ineligible if they have “been convicted of a violation of the Unlawful Internet Gambling Enforcement Act of 2006.” It’s worth noting that PokerStars was not found to have violated UIGEA. It settled with the federal government earlier this decade without admitting to wrongdoing, paving the way for future licensure by states.

PokerStars’ parent, The Stars Group, recently agreed to merge with FanDuel parent Flutter Entertainment. The conglomerate could also be involved with Kentucky online sports gambling. Poker and sports betting are considered to have a similar customer base.

What’s poker under the bill?

Regulated Kentucky poker sites would be akin to their counterparts in Pennsylvania and New Jersey. Poker platforms could potentially offer “any form of poker” — which would include all the staples such as hold’em and Omaha.

The bill would not allow live, brick-and-mortar poker rooms in the state.

The legislation would also seek to keep poker in Kentucky as strictly skill based.

“Online poker shall not include video lottery terminals or slot machines using electronic representations of cards in a game of chance in which skill does not play a part,” states the proposal.

The Lottery could theoretically, under the bill, place limits on the stakes in poker games. That’s unlikely to be relevant to Kentuckians, as there really isn’t a large market for high-stakes games. Nearly one in five Kentuckians live in poverty. Kentucky poker sites would be lucky to have vibrant low-stakes games, given the intra-state nature of the player pool. Kentucky has about 4.5 mm people.

How many Kentuckians could be online poker players? Well, the lawsuit against PokerStars provides a figure on a possible ceiling. Kentucky was seeking to recover poker losses from more than 34k of its residents. That player pool existed between 2006 and 2011.

Those 34k Kentuckians who played on PokerStars lost an average of $8,500 during that roughly five-year time frame, according to the state.

Of course, 34k Kentucky online poker players doesn’t mean anywhere close to that number of players were active simultaneously. On PokerStars in Pennsylvania, the site is currently peaking at a little more than 1k active players, according to PokerScout. The Keystone State has 12.8 mm people.