You can't bet on Kentucky Derby in NC, but lawmakers could change that soon
North Carolinians won't be able to legally bet on the May 4th Kentucky Derby despite the launch of mobile sports betting across the state in March.
Betting on horse races is permitted by the legislation, but no operators have applied for a costly license in the state nor has the state lottery commission formalized rules for horse racing at this point.
State lawmakers will consider changes to state law during the legislative session that begins at the end of the month to bring in horse racing operators.
"We've got a barrier to entry with the high fee," said Rep. Jason Saine, R-Lincoln County, the main sponsor of the sports betting legislation.
Saine said he's spoken with operators who want to come into North Carolina.
Under the current law, operators must pay $1 million for a five-year license or $200,000 annually. Eight operators are now taking legal sports bets in the state. But the market for horse racing is smaller, and no operators has applied for a license to take bets on horse racing.
In a required sports betting report to a state legislative committee, the lottery commission outlined some of the reasons why.
The licensing fee "is substantially higher than any other jurisdiction in the United States," the report said. "New York has a $20,000 per year license fee, which is currently the highest in the country, and it would be quite surprising if any operator chose to enter the market with a license fee 10x the New York fee."
The commission wrote that "this could potentially be rectified by allowing an advance deposit wagering [ADW] operator to partner with a sports wagering operator, but that likely would require a legislative amendment."
Saine said the issue "wasn't at the forefront of the debate" when sports betting was passed in 2023. But he said he plans to try to lower the fee since horse racing has already been authorized by the legislature.
"The debate over whether or not it's going to be allowed has already sailed," he said. "It's now how we get it to happen in North Carolina. As we go back into the session, it's something we're going to have to talk about or at least kick around."
Revenue higher than expected
Sports betting was projected to bring the state less than $10 million in fees and taxes in the 2023-24 fiscal year, which ends June 30. It was projected to bring the state about $260 million over the next five years.
Those numbers are likely to be far too pessimistic based on early numbers. In the first week, operators in North Carolina had total wagering revenue of $198.1 million and gross wagering revenue of $42.7 million, according to the lottery commission.
North Carolina collects an 18% tax on gross wagering revenue. Off the first week alone, the state will collect more than $7.6 million in tax revenue.
"It's going to be grossly low," Saine said. "It's going to be a bigger revenue source than maybe even I imagined."
At no point in the next five years did the pre-passage projections exceed $72 million.
Saine, a legislative budget writer, said he expects tax revenue from sports betting to be more than $100 million every year and said it could hit $400 million to $500 million.
"If it's that high, it's a much bigger cash cow than one would have imagined," he said. "It's a self-selecting tax. If you don't want to pay it, don't do it."
The law commits the first $8.4 million in revenue to various places, including $2 million for gambling addiction treatment programs. The biggest beneficiaries could be the athletic departments at 13 UNC System schools, which each receive $300,000 plus 20% of revenue after the initial obligations are paid.
No ban on prop bets on college athletics
NCAA President Charlie Baker called on states with legal sports betting to ban prop bets on college athletes. Prop bets are wagers on certain individual stats within a game, such as points or rebounds.
“Sports betting issues are on the rise across the country with prop bets continuing to threaten the integrity of competition and leading to student-athletes getting harassed,” Baker said. “The NCAA has been working with states to deal with these threats and many are responding by banning college prop bets.”
Louisiana banned prop bets on individual college players beginning Aug. 1. Vermont, Ohio and Maryland have also banned prop bets on college athletics. Other states do not allow prop bets on in-state teams.
Some athletes have said that they've faced harassment from bettors, particularly on social media.
"It's terrible," UNC center Armando Bacot said before the Tar Heels' Sweet 16 NCAA Tournament game. "Even at the last game, I guess I didn't get enough rebounds or something. I thought I played pretty good last game, but I looked at my DMs, and I got, like, over 100 messages from people telling me I sucked and stuff like that because I didn't get enough rebounds."
"I think it's definitely a little out of hand. But at the same time too, I get the point of it too. Like, if you bet a lot of money on something, and you're, like, one pick away and somebody messes it up, I understand the part of fans being made. But it's annoying, too, at times."
Saine said he would not pursue a ban on those types of bets. He said he would consider additional laws or stiffer penalties to counter harassment of athletes.
"I'm not going to reward bad behavior by limiting people who are behaving the right way to place bets the way they want to," Saine said.
