TOPEKA, KANSAS - The future of Kansas's sports betting market has become increasingly uncertain after the state legislature passed a late amendment to the state budget bill, SB 125, on the final day of its session last Friday.
The amendment stipulates that no funds allocated from the state general fund or special revenue funds can be used by the Kansas Lottery to enter into contracts or renew existing ones for the management of sports wagering during the fiscal years 2025 and 2026.
While the decision is not expected to have an immediate impact on the market, it casts a shadow over the long-term operations of sports betting in the state. Jeremy Kudon, a lobbyist for the Sports Betting Alliance (SBA), noted on social media platform X that "most Lottery contracts run through 2027." The SBA represents major online sports betting (OSB) operators including FanDuel, DraftKings, BetMGM, and Fanatics.
As Kudon pointed out, the six major operators currently active in Kansas, including Caesars Sportsbook and ESPN Bet, hold licenses until August 27, 2027, according to a report by Covers. However, with the passed amendment's expiration date set for June 30, 2026, these operators could face a forced exit from the state if no resolution is reached within that timeframe.
The SBA cited Kudon's post in response to requests for comment from its member companies. In contrast, the iDevelopment and Economic Association (iDEA), which also represents SBA-affiliated operators, strongly condemned the policy change.
"This is a reckless budget maneuver that undermines a successful, regulated sports wagering market for no meaningful fiscal purpose, and will only serve to take money and consumer protections away from Kansans and push them to illegal, untaxed, and unsafe offshore gambling websites. Bad policy, bad process, and a bad outcome for Kansas," said John Pappas, iDEA's state government advocacy director.
Possibility of a Single-Operator Model Emerges
While the amendment concerning license renewals does not outright ban sports betting, it could significantly alter the state's market structure. Sources speaking to iGB suggest that a solution could be found before the amendment's expiration.
However, the possibility of the state government pursuing a single-operator model has also been raised by some observers. The single-operator model has generally been viewed unfavorably in markets where it has been implemented.
Washington D.C. serves as a prime example, where the single-operator system struggled for years before the introduction of multiple platforms in July of last year led to increased revenue and usage. The industry generally opposes the anti-competitive nature of single-operator models, arguing that they disadvantage consumers and negatively impact tax revenue generation.
"Looks like the GOP in Kansas wants to try to prove once again why communism doesn't work," quipped Brendan Bussmann, managing partner of B Global Advisors. "The same principles should apply today as they did three years ago when the gaming expansion resulted in stable revenue generation."
According to the Kansas Lottery, the total sports betting handle in Kansas reached $248.4 million in March, generating $8 million in revenue. While the handle saw a slight decrease of 1.7% year-over-year, revenue increased by 12.4%. The state collected $803,000 in taxes in March, bringing the fiscal year-to-date tax revenue to $13.1 million.
Operators Grapple with Increasing Regulatory Changes
The recent developments in Kansas underscore a growing trend of policy shifts targeting sports betting operators across the United States. Illinois, which initially started with a 15% tax rate, implemented a tiered tax structure in 2024, ranging from 20% to 40% based on revenue.
Ohio doubled its tax rate from 10% to 20% in 2023 after initially launching at the lower rate. While Ohio Governor Mike DeWine proposed a further increase to 40% this year, it did not materialize. Maryland increased its tax rate from 15% to 20% this year, with Governor Wes Moore having initially proposed a 30% hike.
In Massachusetts, a bill proposing to increase the tax rate to 51% and introduce several new regulations, including a ban on in-game and proposition betting, as well as advertising restrictions, was filed this year. Vermont even saw a bill introduced that aimed to eliminate the sports betting and lottery industries altogether.
Amidst these state-level changes, the SAFE Bet Act, which seeks to transfer regulatory authority over sports betting to the federal government, has also been proposed in Congress. The situation in Kansas adds another layer of complexity for sports betting operators to navigate.
"These state moves only further empower the illegal market that has operated tax-free for decades and harms those trying to operate a legally regulated business," lamented Bussmann.
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