CINCINNATI — A month before March Madness, the Kentucky Horse Racing and Gaming Corporation has downsized its sports-betting enforcement team, as the 7-month-old enterprise reshapes how Kentucky regulates the gambling industry.
The shakeup comes two years after critics complained Kentucky wasn’t adequately staffed to regulate sports betting and five months before the corporation is scheduled to add charitable gaming to the portfolio of gambling segments it oversees.
The WCPO 9 I-Team learned about the downsizing from three people hired to oversee the 2023 launch of sports betting, which generated $2.6 billion in betting activity last year from eight online sports books and 13 retail locations.
The former state employees said all 10 people who worked for the agency when the first sports bets were placed on September 7, 2023, have since lost their jobs. The downsizing concluded with the firing of three enforcement employees on Feb. 11, said David Mcanally, one of those fired that day.
The corporation’s website shows its gaming division now has three managers and one gaming compliance officer.
Learn more about Kentucky's sports betting shakeup here:
The corporation declined to comment on the firings or explain how it plans to regulate the industry with fewer enforcement employees.
“The Kentucky Horse Racing and Gaming Corporation does not comment on personnel matters,” said Travers Manley, senior vice president of gaming. “The KHRGC fulfills its statutory and regulatory obligations in the oversight of horse racing, pari-mutuel wagering, and sports wagering, as it always has, and remains committed to ensuring the compliance of our licensees and the protection of the wagering public in Kentucky.”
Kentucky’s “light touch” regulatory approach will make it easier for sports books to ignore responsible gaming rules and introduce pricing strategies unfavorable to bettors, said Ian Messenger, president of the Association of Certified Gaming Compliance Specialists in Toronto.
“The approach by the Kentucky regulators certainly opens up the opportunities for predatory behavior,” Messenger said. “In almost every other jurisdiction my organization (has) worked with, as the market has grown, we’ve seen staffing levels increase in order to meet the demands, in order to meet the new opportunities and challenges.”
This is not a new problem
Kentucky emerged as an outlier in gambling enforcement in a May 2023 analysis by the WCPO 9 I-Team. It compared Kentucky’s enforcement staff to Ohio and Indiana. Kentucky had one enforcement employee for every $2 billion wagered in 2022, compared to one for every $181 million in Indiana and $246 million in Ohio.
One month after the I-Team report, the commission announced plans to hire 14 new employees in sports wagering, including “leadership roles as well as investigative, analytical and administrative positions.” By September, the commission hired ten employees to regulate the new industry. But that number began to shrink in December, when Sports Wagering Director Hans Stokke left the agency, according to his LinkedIn bio.
Two more employees were fired in January. Others left or were fired after the passage of Senate Bill 299, which created the corporation and put it in charge of horse racing, sports betting and pari-mutuel wagering. That’s how Kentucky refers to its slot machines, also known as historical horse racing terminals, which were legalized in 2021. SB 299 also gives the corporation the right to regulate charitable gaming, starting July 1.
“With the passage of SB 299, we’re taking a crucial step in safeguarding the integrity and prosperity of our signature horse racing industry,” said the bill’s primary sponsor, Republican Senator Damon Thayer, in a March 2024 statement. “As a cornerstone of Kentucky’s heritage and economy, it’s imperative that we uphold strong oversight and management of these vital industries. I contend the success of this industry demands it be a stand-alone entity capable of utilizing its funding without having to get authorizations from a bureaucratic agency. I am proud to sponsor this measure to promote this integral part of the Commonwealth.”
‘We’re essentially a startup’
The Kentucky Horse Racing and Gaming Corporation is taking shape with a series of decisions approved by its 17-member board, including a $962,000 contract with Lexington-based accounting firm Dean Dorton Allen Ford PLLC. Meeting materials show Dean Dorton will provide “outsourced finance and HR services” through June of 2026.
The corporation is also taking bids for banking services, with contract approval expected in March. And it’s working on a new logo and tagline with BCH, a Louisville-based advertising agency.
“We are essentially a startup that has been a state agency for over 100 years. So, there are certainly some challenges. But we also see great opportunities that we’re very excited about,” Chief Operating Officer Susan Speckert told state lawmakers in November. “Our board out of the gate created transition and hiring committees to oversee the transition and to ensure there was no interruption of our services.”
Before its last three enforcement staffers were fired, the corporation renewed licenses for eight online sports books and one company that runs retail sports books for four horse tracks. It also approved a new license for Prime Sports KY, an online sports book that has yet to launch in Kentucky.
But the documents in support of these licensing decisions offer no insight on whether enforcement employees had any problems with company submissions.
“As a part of the application renewal review process, KHRGC staff reviewed items including organizational structure, key personnel, technical requirements and certification, the contract to provide services to a sports wagering operator and contracts with other entities requiring occupational licenses,” Sports Wagering Director Hannah Simms wrote in Dec. 4 memo in support of license renewals. “Throughout the duration of the license, applicants must furnish details concerning significant changes to ownership structure, server equipment and software, arrangements with third-party service providers, house rules, internal controls, and potential impacts on the Commonwealth of Kentucky.”
Expert sees ‘gaps' in Kentucky approach
An organizational chart, provided to board members in September, shows its gaming division will have more than a dozen employees at some point in the future, including four auditors who report to Simms and four “resource analysts” who report to Pari-Mutuel Wagering Director Melissa Combs-Wright. The chart also shows an unspecified number of gaming employees will be hired for charitable gaming, enforcement and licensing.
That would be a big increase over its current staffing level four employees, which includes Simms, Combs-Wright, Director Manley and Gaming Compliance Coordinator Tyler Sisk. His LinkedIn bio shows Sisk was hired by the corporation three months ago after working as a customer service supervisor for TwinSpires, an advance-deposit wagering service owned by Churchill Downs.
“Looking at this at the org chart and looking at the steps that have taken place over recent months with the downsizing of compliance, that suggests to me that a lot of the onus will be on the operators,” Messenger said. “There will be a lot of trust from the regulator that the operators are doing what they should do. But by doing this, it does create those gaps that could lead to greater issues.”
Messenger runs a trade organization that teaches gaming compliance professionals how to spot money laundering, fraud and cheating by bettors.
He said the best gaming regulators “have a 360 view of what players are doing” so they can monitor and alert sports books about predatory promotional practices and suspicious betting behaviors. He questions whether Kentucky has those capabilities with its current staffing levels.
“We've heard from a number of individuals in Kentucky, in horse racing as well as in sports books, that there are intense commercial pressures, which are sometimes limiting the compliance duties” they’re able to perform in Kentucky, Messenger said.
Messenger also questions why the corporation doesn’t have any responsible gaming staff listed on its organization chart.
Kentucky diverts 2.5% of its sports betting excise tax to problem gambling initiatives, but other states play a more active role in this area. In Ohio, for example, the state lottery and the Ohio Gaming Control Commission jointly administer a self-exclusion list that allows gambling addicts to ban themselves from all casinos, racinos and sports betting apps.
Kentucky requires sports books to operate their own exclusion programs but there is no way for bettors to ban themselves from all forms of gambling.
“The challenge is that whilst an individual can exclude themselves from one sports book, that doesn't potentially prevent them from going to a competitor,” Messenger said. “The way we overcome this is by having a centralized self-exclusion system. This centralized approach is not just for responsible gaming, but it's also for things like anti-money laundering and fraud and other areas of concern. Having centralized functions allows greater oversight, making sure that a problem area is not simply moved from one sports book to another.”
