Kentucky House passes bill allowing for penny breakage; goes to Senate

The Kentucky House of Representatives late on Monday passed a bill that would require racetracks to round payoffs to the nearest penny and subject all parimutuel wagers on Kentucky races to a 1.5 percent tax.

The House passed the bill by a vote of 66-29, according to legislative records. The bill was sent to the Senate Licensing and Occupations Committee. The vote came at a time when the legislature is grappling with a handful of controversial bills in advance of a March 30 deadline to clear bills in both houses.

The bill would set breakage at the nearest penny for every dollar wagered, down from the current practice of rounding to the nearest 10 cents. Under penny breakage, bettors would get slightly higher payouts, with the most significant impacts on low-odds bets. Kentucky would become the only state with penny breakage, and the bill’s sponsor, Rep. Adam Koenig, a Republican who represents several counties in northern Kentucky, has said that it will give Kentucky racetracks a competitive advantage.

The bill also taxes any wager on a Kentucky race regardless of the source at 1.5 percent, including bets on historical horse racing machines, which are devices similar to slot machines. Currently, bets made through account-wagering companies are taxed at 0.5 percent.

Koenig is also the sponsor of a bill that would legalize sports betting in the state and designate racetracks as one of the entities eligible for sports-betting licenses. The bill passed out of a committee chaired by Koenig earlier this month, but its path to passage in the full House and Senate is unclear. Both houses of the legislature are controlled by a veto-proof majority of Republicans, some of whom object to expanded gambling.