Committee Testimony on HB 137 - Sports Wagering

January 15, 2020
Senior Policy Analyst Martin Cothran’s Testimony before the Kentucky House Licensing, Occupations,  and Administrative Regulations Committee on January 15, 2020.
     Mr. Chairman, members of the committee, thank you for letting us address HB 137.
     There are of course many reasons to be concerned about the societal effects of this bill, in particular, its effects on those who can least afford to be on the losing end of the wagers made under it.
     We believe it would further serve to target the poor and particularly young people.
     But I want to direct my remarks to something that is, in a certain sense, more disturbing even than that, and that has to do with the manner in which this bill proposes to change our law. 
     HB 137 is an expansion of gambling. I have heard a several supporters of this bill–people I know and respect–who will acknowledge that expanded gambling requires a constitutional amendment and, in the next breath support this bill, an expansion of gambling, which flouts the language of the Constitution.
     There is no criteria by which we can say both that expanded gambling requires a constitutional amendment and that sports wagering does not. Because–and I’ll say it again–sports wagering is expanded gambling.
     I have walked the halls of this legislature for 28 years now. I think I have been here longer than most of the committee members. And I have been involved in the gambling debate for most of those 28 years. And, with one or two exceptions, the assumption has always been the same: an expansion of gambling requires a constitutional amendment.
     There are only three forms of wagering allowed under our Constitution and the jurisprudence that has been issued interpreting it: parimutuel horse betting, charitable gaming, and the Lottery.
     This restriction comes from very language of our Constitution which says, in subsection (3) of section 226:
     Except as provided in this section, lotteries and gift enterprises are forbidden, and no privileges shall be granted for such purposes, and none shall be exercised, and no schemes for similar purposes shall be allowed.
     This committee has heard during the interim the argument from a gambling industry lawyer from Florida, Mr. Daniel Wallach, that sports wagering is not a lottery and is therefore not prohibited in our Constitution. 
     Mr. Wallach was apparently unfamiliar with Kentucky case law on this issue, and he was clearly not aware that there are two very distinct terms of art in the law. “Although these terms coexist in the same section of the Constitution,” said then Attorney General Ben Chandler in an AG opinion he issued in 1999, “each term’s legislative history, circumstances of adoption, and operation in the context of Section 226 as a whole differ drastically.”
     Very briefly, the term “Kentucky State Lottery” is limited to certain limited kinds of instant and online games. We know this because in The Report of the Kentucky Lottery Commission, October 31, 1988, said so.
     We also know this because on March 10, 1988, on the House floor in that building right across the way over here, Rep. Louis Johnson, was assured by Rep. Bill Donnermeyer, during the debate on the Lottery bill, that the Lottery language was restricted to “instant and online games” common in traditional state lotteries at the time. Johnson was concerned that, because of advancing computer technology, the bill might eventually be interpreted to allow slot machines and other “electronic games.” 
     That discussion is on tape, Mr. Chairman. It’s available at KET.
     The term “Kentucky State Lottery” has a very limited definition.
     But the simple term “lottery” has a very different definition. “For over a century,” said General Chandler, “Kentucky courts have considered a lottery to be … any game distributing a prize predominately by chance for consideration..” (Otto v. Kosofsky, Ky., 476 S.W.2d 626, 629 (1971))–pin-ball, prizes based on theatre ticket sales, pyramid schemes, numbers games.
     Mr. Wallach confused these two terms and made it sound like the restriction on “lotteries” didn’t apply to sports wagering because he was confusing the term with the very different “Kentucky State Lottery.” 
     The restriction on “lotteries and gift enterprises” applies to all other forms of gambling other than the three specifically allowed. In other words, as I said before, sports wagering is expanded gambling and requires a constitutional amendment.
     And I should point out, that if Mr. Wallach’s testimony was correct, then all form are allowed under our Constitution.
     There is only one case I can remember, when, instead of a constitutional amendment, a statute was proposed to expand gambling in this legislature–a statute that would have changed our laws on gambling and which simply ignored the Constitution. It came from our former Speaker of the House, Greg Stumbo. Conservatives in this legislature opposed that effort on Constitutional grounds.
     And yet here we are–in a legislature controlled by what most everybody considers the conservative party–and we are presented with a bill that employs the same unconstitutional strategy as was attempted by former Speaker Stumbo: It proposes to expand gambling in Kentucky beyond the Constitutional limitations with a mere statute.
     With this bill, we are going to jettison the assumption we’ve all been using, ignore a century of legal opinions, and thumb our noses at the Kentucky Constitution.
     I am a conservative, Mr. Chairman, a political label I share with a lot of those who have come to Frankfort to represent conservative constituencies. And one of the words I hear conservative lawmakers use all the time is the word “constitutionalist.” We are “constitutionalists,” we will say. 
     I would submit to you Mr. Chairman and members of this committee, that House Bill 137 is an anti-Constitutionalist bill. It not only ignores the Constitution, it defies it.
     There is no way we can call ourselves Constitutionalists and support this bill.
     Finally, Mr. Chairman, just one more thing. Would you please look with me at the text of House Bill 137, on p. 16, lines 18-21, where it says, and I quote:
     “Sports wagering” means the placing of wagers on the outcomes of professional sports contests and other events in conformance with federal law and as authorized by the racing commission at tracks and through advanced deposit wagering as authorized by this chapter and Section 19 of this Act;
     You know, that sounds to me an aweful lot like expanded gambling. And lots of it. And that requires a constitutional amendment. 
     Thank you.
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