Kentucky House passes bill to ban sportsbook-prediction market deals

The Kentucky House of Representatives passed a bill on Thursday that would attempt to take one of the firmest stances on prediction markets seen from any state to date.

Reps. voted 79-15 to pass a committee substitute version of House Bill 904 with amendments and send it on to the Senate.

The large bill would make several changes to the state’s sports betting market, including raising the legal wagering age from 18 to 21, licensing daily fantasy sports (DFS) and taxing operators at 12%, banning college player prop bets on in-state student-athletes, and introducing fixed-odds wagering.

But the most eye-catching aspects relate to how the state would treat prediction market platforms, as well as the sportsbooks and DFS operators that partner with them.

A novel approach to prediction markets

Put simply, the revised House-approved version of HB 904 would:

• Tax prediction market platforms at 14.25%, the same rate as it charges on online sports betting.
• Ban horse tracks that hold sports betting licenses, as well as licensed DFS operators, from partnering with any entity that offers any prediction markets for trading in Kentucky.
• From 2027, extend that ban to encompass entity that offers any event contracts anywhere in the country, not just in Kentucky.

The bill’s engrossed text specifies that a licensee shall not contract with platforms that offer event contracts through a prediction market in Kentucky or that have “a beneficial interest in the proceeds of prediction markets” in the state. The bill defines “beneficial interest” as participation in the proceeds of prediction markets or event contracts as an entity that receives such proceeds in any capacity, including an operator or affiliate of prediction market platforms.

“Prediction markets have started moving into the space of betting on ball games, sporting events, and even prop bets on athletics as well,” one of the bill’s primary sponsors, Rep. Michael Meredith, said on the House floor on Thursday before the vote.

“We put a tax on those prediction markets and their derivatives and swaps equal to what the sports wagering tax is on online sports wagering. We also say that if you are a licensee under this bill through sports wagering, a horse racing track or a fantasy sports operator for the next year, you can’t operate a prediction market in Kentucky.”

Kentucky tweaked original prediction markets proposal

Initially, the Kentucky bill did not distinguish between in-state and out-of-state prediction market activity and would have immediately banned any gaming licensee from offering or partnering with platforms that offer event contracts anywhere in the U.S.

FanDuel, DraftKings and Fanatics all have partnerships with Kentucky racetracks that allow them to offer state-wide mobile sports betting. They all also run their own branded prediction market platforms in various states. The trio submitted joint written testimony while the bill was in the House Licensing, Occupations and Administrative Regulations Committee to argue that a blanket ban on prediction market platforms would “force the exit” of existing regulated operators from the state.

In effect, that implied that all three would ultimately choose to surrender their Kentucky state sports wagering opportunity in favor of continuing to offer sports event contracts.

After that testimony was submitted, Meredith changed the terms of his bill to limit the prediction market partnerships ban to activity inside Kentucky only until mid-2027 or later. On or after July 1, 2027, the ban on sportsbook-prediction partnerships would apply to entities that offer prediction market activity to operators both in and outside of Kentucky. Meredith did not specify any motive for changing those parameters.

“After that, you’re not allowed to be involved with or in business as a prediction market operator anywhere else in the country if you’re licensed under one of our licensee structures here,” he added.

In effect, the alteration made in Floor Amendment 5 would give the likes of FanDuel, DraftKings and Fanatics more than a year to plan their potential exits from the state’s regulated sports wagering market as long as they stopped offering event contracts in Kentucky immediately. As of the time of writing, FanDuel Predicts and DraftKings Predictions are both available in Kentucky, although neither offers sports-specific contracts in the state. Fanatics Markets has no presence in Kentucky.

Bill sponsor acknowledges federal vs. state conflict

However, even as representatives passed the amended bill, Meredith acknowledged the quandary created by the various ongoing court cases across the country in which prediction market platforms like Polymarket are at loggerheads with state regulators and attorneys general.

The central contention of all of that litigation is the fundamental question of whether sports event contracts should be regulated at the federal level or the state level.

“There has been a large-scale discussion at the national level, led by states across the country, on what is the place for regulation in these markets,” Meredith acknowledged. “Should states be able to regulate those sports-related event contracts? We still don’t know the answer to that yet … We do not directly regulate these markets under this [bill], because we still don’t know if we have the clarity to do so …

“We have a huge, huge influx of money being bet in the prediction market space instead of at our licensed sportsbooks right now, because those have been given the green light at the federal level, at least temporarily.”

By delaying the proposed ban on sports betting licensees affiliating with prediction markets available outside Kentucky, Floor Amendment 5 would also kick the can down the road as the mishmash of state court cases heads towards a seemingly inevitable Supreme Court case.

https://sbcamericas.com/2026/03/20/kentucky-house-bill-prediction-markets/