Kansas Enacts “Compromise” Sports Betting Law Designed to Lure Professional Sports Teams

On May 12, 2022, Kansas Governor Laura Kelly signed S.B. 84 legalizing retail and online sports betting throughout the state. The newly-enacted law represents a compromise between the “single operator” and “free market” frameworks adopted in many other states; it gives the Kansas State Lottery (the Lottery) exclusive ownership and control of retail and online sports betting, but provides that the state’s four commercial casinos shall conduct sports betting operations on the Lottery’s behalf.

In addition to legalizing sports betting, the new law is designed to further the state’s efforts to secure a professional sports franchise, allocating a significant percentage of net betting revenue to a fund established for that very purpose.

Licensing Framework for Commercial Operators

Kansas’ sports betting law amends the previously-enacted Expanded Lottery Act (the Act). The Act gave the Lottery exclusive control over commercial (i.e., non-tribal) gaming and authorized the Lottery to contract with up to four private casino operators to construct and operate commercial casinos on the Lottery’s behalf. Under the Act, these private casino operators are referred to as Lottery Gaming Facility Managers (LGF Managers). The newly-enacted sports betting law authorizes the Lottery to contract with LGF Managers to add retail and online sports betting to the gaming operations they are conducting on the Lottery’s behalf.

Pursuant to the law, each LGF Manager may offer up to three online sports betting platforms. An LGF Manager may develop and use their own online betting platforms or contract with third-party platform operators to conduct online sports betting on their behalf. All online betting platforms must be approved by the Lottery prior to use. Additionally, to the extent an LGF Manager partners with a third-party online betting platform operator, the third-party operator must be certified by the Kansas Racing and Gaming Commission.

Marketing Agreements

Kansas’ sports betting law also allows LGF Managers to enter into agreements with “marketing entities” (professional sports franchises, auto racetracks and other organizations/establishments in the state) for the purpose of promoting sports betting to patrons at the marketing entities’ facilities. Pursuant to these agreements, an LGF Manager may authorize a marketing entity to offer sports betting via electronic kiosks and/or mobile applications that accept and route wagers to the LFG Managers’ online betting platforms. In some cases, these electronic kiosks and mobile device applications may be branded with the marketing entity’s name, logo or likeness.

LGF Managers are permitted to enter into up to 50 marketing agreements, provided at least 20% are with non-profit fraternal or veterans organizations.

All marketing agreements are subject to the Lottery’s approval. Marketing entities are expressly prohibited from having any access to/control over the LGF Managers’ online betting platforms.

Tribal Gaming

In addition to commercial operators, S.B. 84 gives the state’s federally-recognized Indian Tribes the opportunity to offer sports betting. Specifically, the law provides that, upon request by a Tribe, the Governor’s office shall negotiate and execute a Tribal-State Gaming Compact or amended Compact allowing the Tribe to offer sports betting on tribal lands in accordance with the Indian Gaming Regulatory Act.

The law also gives the Tribes the opportunity to participate in online sports betting, indicating that upon receipt of a Tribe’s request to negotiate or re-negotiate a Compact to include sports betting, the Governor’s office shall forward the request to the Lottery, which may negotiate a management contract authorizing the Tribe to operate an online sports betting platform on the Lottery’s behalf.

The “Attracting Professional Sports to Kansas” Fund

Notably, as discussed above, S.B. 84 was designed at least partially to further Kansas’ efforts to incentivize professional sports franchises to relocate to the state. The law establishes an “Attracting Professional Sports to Kansas” Fund, the proceeds of which may be used to pay the principal or interest on any state or municipal bonds issued to cover the construction, rehabilitation, revitalization or expansion of a professional sporting facility (stadium, arena, etc.) in the state. The law provides further that roughly 80% of the net sports betting revenue credited to the Lottery shall be allocated to said Fund.

“Launch” Timeline

At this juncture, it appears sports betting will officially “launch” sometime in Fall 2022. S.B. 84 gives the Lottery until August 1, 2022, to prescribe a procedure for conducting background investigations on online sports betting platforms and indicates the investigation process must commence by August 15 at the latest. The law further requires that the Lottery finalize its procedures for approving online sports betting platforms by September 1, 2022.

Additionally, although S.B. 84 gives the Kansas Racing and Gaming Commission until January 1, 2023, to promulgate sports betting regulations, it gives the Commission to authority to implement “temporary” rules and regulations in the meantime.

White and Williams will continue to monitor developments in Kansas and provide further updates when appropriate.