FLORENCE, Ky. — Kentucky’s sports betting market went live Thursday with 10 newly minted gambling regulators who have 100 years of combined work experience in government and no experience in the gaming industry.
Seven of the 10 new employees, hired between June 16 and Aug. 16, transferred to the Kentucky Horse Racing Commission from other state jobs, according to personnel files obtained by the WCPO 9 I-Team in a public record request.
The records show four of the new employees worked as auditors for Kentucky’s Department of Revenue. One rooted out fraud and waste in Kentucky Medicaid spending. Others provided administrative support for Kentucky highway projects, environmental enforcement and public defenders. The team has private sector experience in banking, musicology, bartending and the airline industry.
But none of them have ever worked at a casino, racetrack or sportsbook.
"I would anticipate on day one it’s a bit of a reality shock," said Ian Messenger, president of the Association of Certified Gaming Compliance Specialists in Toronto.
“With the legalization of sports betting in many states, those involved in financial crimes, in match-fixing, in money laundering, are looking for the weakest link,” Messenger said. “We’ve seen time and time again where sports betting goes live within a jurisdiction, there have been attempts to identify vulnerabilities, identify weaknesses, test the capabilities and boundaries of monitoring and detection.”
In a statement, the Kentucky Public Protection Cabinet said all new employees met or exceeded requirements in their job descriptions and the staff is being trained by Gaming Laboratories International, which has helped 25 other states launch sports betting.
“The KHRC is confident that its current staffing level is appropriate, and the team is well-prepared to regulate sports wagering licensees according to Kentucky law,” wrote Ricki Gardenhire, in an email to the I-Team.
Kentucky Gov. Andy Beshear brushed off an I-Team question about a lack of gaming experience when he visited Kenton County for a groundbreaking Aug. 30.
“It’s different, the way we’re doing it in Kentucky, but it’s one that’s going to lend itself to being properly regulated,” Beshear said. “We’re going to learn as we go. We’re going to make any changes that we need to. But I’m confident that we’re going to be ready on day one.”
Critics have repeatedly questioned whether KHRC is ready to regulate sports betting since May, when an I-Team analysis showed Kentucky had 30 times fewer gambling enforcement staff than Ohio and 38 times fewer than Indiana. In June, the Kentucky Horse Racing Commission announced plans to hire 14 new employees to regulate the industry. But only ten of those employees were hired before KHRC awarded licenses to eight racetracks and eight online sportsbooks on Aug. 22.
On Aug. 30, Gardenhire said an 11th employee had been hired and two more positions were in the “final interviewing stages.”
Messenger said those staffing levels aren’t enough to do the job.
“Come launch, those members of staff will certainly have a lot of work on their hands,” Messenger said. “Not just enforcing the existing rules but also adapting the rules and regulations as the realities of the market come to fruition.”
Messenger has followed sports-betting launches in the U.S. and Canada through his trade association, which teaches gaming compliance professionals about fraud, money laundering, internal audits and surveillance systems.
“Having an understanding of how money laundering and fraud occurs in a gambling environment, how some sporting events can be manipulated, how matches can be fixed, these are all niche elements which are all only in existence in the gaming industry,” Messenger said. “An enforcement team has to have knowledge and awareness of what is usual and what is unusual when it comes to sports betting patterns.”
Messenger said states often have a mix of regulatory staff with backgrounds in auditing, law enforcement and gaming compliance. He said Kentucky’s approach of hiring no employees with gaming experience could work if the training is good. But he questions how much training employees got in their first month on the job.
“Having a minimal level of training is not sufficient within this environment,” he said.
Turfway Park Racing & Gaming has no concerns about the regulatory abilities of the Kentucky Horse Racing Commission.
“We’ve been operating gaming in Kentucky for quite some time. So, they have the gaming experience to regulate gaming,” said Michael Taylor, president of Turfway and Newport Racing & Gaming. “They have been here and at Newport to ensure that the software is properly loaded, everything from a regulatory standpoint is in check. They’re ensuring that everything we say we’re going to to do, we have done.”
When Taylor talked to the I-Team on Sept. 1, Kentucky’s director of sports wagering was in the building. Hans Stokke checked machines and conferred with colleagues on the phone. He declined to answer questions about his new job.
Records show Stokke was hired June 16 as an “executive advisor” to “provide support services to agency directors” and “technical management assistance to all organization units within the Kentucky Horse Racing Commission regarding sports wagering.” His annual salary of $81,000 was higher than 11 of the 14 employees holding the same job title at KHRC and the Public Protection Cabinet.
The records also show Stokke’s hiring was pre-approved following an email discussion between Cabinet Secretary Ray Perry and La Tasha Buckner, chief of staff for Governor Beshear.
Before joining KHRC, Stokke worked as a general manager of the San Diego and CVG Airport offices of Clear, according to his LinkedIn bio. Clear is a biometric screening company that allows airline passengers to bypass TSA security lines by providing fingerprints or eye scans and paying a $189 annual fee.
“This year brings me to a career pivot, as I parlay my experience in the biometric security industry to another highly-regulated opportunity with the Kentucky Horse Racing Commission. I'm excited to help build the team who will inspect and enforce compliance regarding HB 551,” Stokke wrote on Linked In.
Messenger said Stokke’s prior work experience is relevant to his new job since it required management and customer service skills. But his lack of gaming experience could be a problem.
“If he is backed up with a strong staffing, a strong department that is well versed in compliance risks, well versed in the risks which come with sports betting, then I don’t see an issue there,” Messenger said. “But again, it really comes down to who is supporting him.”
Beshear is convinced Kentucky has everything it needs to regulate sports betting.
“When you look at who will be allowed to offer sports betting in Kentucky, it’s our tracks that are already highly regulated by the Kentucky Horse Racing Authority,” said Beshear. “Over 30-plus states have sports gaming. We are not the first. We are not the pioneer. We get to look at what’s going on everywhere else, but one of the major differences in Kentucky versus other places is the only groups that are allowed to offer it are groups that are already highly regulated, that already take wagers on horse racing, that already have certain forms of gaming.”
