2019 October PUBLISHED BY LEGISLATIVE RESEARCH COMMISSION Volume 32, No. 7 LEGISLATURE.KY.GOV/LEGISLATION/PAGES/DEFAULT.ASPX Preliminary Kentucky’s growing hemp estimates suggest industry faces challenges General Fund by Rebecca Hanchett LRC Public Information surplus FRANKFORT—Six years ago, the for FY 2020 Kentucky General Assembly created a framework for production of industrial hemp. by Rebecca Hanchett Now the state is a hemp production leader, LRC Public Information with around 26,000 acres planted this year alone. FRANKFORT—Preliminary estimates But the growth of hemp and hemp from a group of state economic forecasters processing in Kentucky under 2013 Senate Bill predicts that Kentucky will end this fiscal year 50 and the 2014 U.S. Farm Bill has presented with a General Fund revenue surplus of $26.7 what Kentucky Agriculture Commissioner million. Ryan Quarles calls “growing pains,” with The preliminary fiscal year 2020 forecast farmers and processors facing some Senate Majority Floor Leader Damon Thayer, R-George- —based on projected revenue growth over uncertainty from both federal regulators and town, talks about hemp in Kentucky at the Oct. 7 meet- the state’s current official revenue estimate, financial lenders. ing of the Interim Joint Committee on Agriculture. issued in late 2017—adopted on Oct. 15 by the Although the federal government no Consensus Forecasting Group (CFG) reflects longer classifies hemp – a type of cannabis especially when it comes to any “consumable 0.8 percent projected General Fund growth by plant--as a controlled substance under federal end product” like CBD which is often the end of FY 2020. It also predicts 2.0 percent law, it still regulates the sale of cannabis consumed as an edible or in drops under the revenue growth in FY 2021 and 1.7 percent and cannabis-derived products such as the tongue. growth in FY 2022. increasingly popular CBD (or cannabidiol). Quarles said Kentucky has been in talks The CFG also adopted revenue estimates That has not changed according to the federal with the FDA about hemp’s potential as a yesterday for the state Road Fund which funds Food and Drug Administration, which stated food or other additive, but that uncertainties state transportation projects. Preliminary on its website in July that only one CBD remain. estimates suggest FY 2020 Road Fund revenues product (the epilepsy drug Epidiolex) had “We still like to remind all of our will exceed the current official estimate by $52.7 been approved by the FDA to date and that program participants … that this is still a crop million. marketing of any other CBD product for that has risks involved,” he told the Interim The CFG will meet later this year to therapeutic, health or food use is “currently Joint Committee on Agriculture on Oct. finalize the state’s FY 2020-2022 revenue illegal.” 7. “But the FDA is a very process-oriented estimates for both the General Fund and the Quarles said FDA oversight is the top Road Fund and issue official estimates in issue facing hemp growers and processors, Continued on page 3 December, giving the 2020 Kentucky General Continued on page 3 THE KENTUCKY GENERAL ASSEMBLY 1 New way to bet on the ponies pondered by Jim Hannah LRC Public Information State Sen. Denise Harper Angel, FRANKFORT – A thoroughbred racing D-Louisville, think tank has asked Kentucky lawmakers to asks a consider allowing a new type of bet on horse questions about races. fixed-odds Fixed-odds wagering would allow track wagering on operators to be competitive against the expan- horse races sion of legalized sports betting in other states, during the Oct. said Patrick Cummings of the Thoroughbred 2 meeting of Idea Foundation of Lexington. He made the re- the Interim Joint marks during the Oct. 2 meeting of the Interim Committee Joint Committee on Licensing, Occupations on Licensing, Occupations and Administrative Regulations. and This new type of wager would allow bettors Administrative to compete against the house, or bet taker. Regulations. The house would set fixed odds on horses that bettors could choose to lock in with a wager. In general, sports betting on football, basketball and other sports are made under this model. Cummings, a former executive with the what other countries had legalized fixed-odds try as required from legal gambling operators. Hong Kong Jockey Club, said this would be a wagering on horse racing. Cummings said it Sen. Christian McDaniel, R-Taylor Mill, historic shift from pari-mutuel wagering now is legal in Australia, South Africa, England, asked where Churchill Downs and Keeneland offered across the horse racing industry. That’s a Ireland and likely many other European juris- stood on fixed-odds wagering on horse races. business model where bettors compete against dictions. “Churchill has not publicly commented on other bettors with the track removing a per- Cummings added that many American the matter that I’ve been able to assess,” Cum- centage of the pool, known as the takeout, be- track operators, including Keeneland, have busi- mings said. “I’ve certainly had conversations fore distributing the rest of the pool to winning ness arrangements with overseas bookmakers with Keeneland, and they certainly seem very players. The odds change as the pool fluctuates to offer fixed-odds wagering on American horse supportive of this concept – both from the mar- until the race begins. races to European bettors. He speculated that keting side and certainly the business side.” “This is clearly an opportunity to develop the market for fixed-odds betting by Europe- In response to another question from Mc- a complementary product for racing’s existing an customers on American races is about $1.4 Daniel, Cummings said Churchill and Keene- customers while introducing a modern form of billion. land were not members or financial supporters betting for new ones as well,” Cummings said In response to a question by Rep. Bud- of his organization. while explaining why pari-mutuel betting isn’t dy Wheatley, D-Covington, Cummings said “Everything is privately funded by indi- being embraced by younger generations. “This New Jersey is the only state to offer fixed-odds viduals,” Cummings said of the source of his opportunity should be embraced with Kentucky wagering on horse racing. He added that legal group’s money. leading the way.” alternatives to fixed-odd betting in racing is Rep. Jerry T. Miller, R-Louisville, asked Cummings said legislators should consider incredibly limited. whether Kentucky voters would have to approve adding a provision to allow fixed-odds wagering “Outside of the few days when Churchill a constitutional amendment to allow fixed- on horse racing to any bill that would legalize Downs offers their future wager via a limited odds wagering on horse racing. Koenig said he sports betting. Currently, Sen. Julian M. Carroll, pari-mutuel pool ... American customers cannot didn’t think a constitutional amendment would D-Frankfort, has prefiled a sports betting bill. place a bet on the Derby until Derby or Oaks be necessary but added that he hoped to have Senate Majority Floor Leader Damon day and they won’t know their potential return a nationally recognized legal expert on this Thayer, R-Georgetown, asked committee Co- until the betting is stopped and the race is al- type of betting testify before the committee in chair Rep. Adams Koenig, R-Erlanger, to con- ready underway,” Cummings said December. sider refiling a sports betting bill he introduced He said the biggest threat to track operators Carroll, a member of the committee, asked last session with the addition of the fixed-odds is offshore entities that offer fixed-odds wager- about the taxing implications of the propos- wagering for horses. ing on horse races, including the Kentucky Der- al. Cummings said he envisioned the take, or “I think this is an idea whose time has by. Cummings said one of the biggest operators amount retained by the bet taker, to be 10 per- come,” Thayer said of fixed-odds wagering on catering to American horse racing fans is based cent or 11 percent for brick and mortar sports horse racing. “I’m supportive of it. And I would in Costa Rica and licensed in Curacao. He said bets and 14 percent for online operators. Thayer like to see Kentucky lead the way on this.” these types of operators do not return any por- Sen. Reginald Thomas, D-Lexington, asked tion of their profits to the thoroughbred indus- Continued on page 3 2 2019 Interim LEGISLATIVE RECORD from page 2 from page 1 Betting, purses or horsemen. Budget, Sen. Denise Harper Angel, D-Louisville, added that would be in line with previous sports expressed her support of the proposal. Assembly the information it needs to consider wagering legislation considered in Kentucky. “I think this is a great idea,” she said. “I’m budget legislation for 2020-2022. Cummings said any of those figures would the proud senator that represents Churchill One factor influencing current national be a higher take than traditional sports bets, Downs, doubly proud because my father was an economic forecasts is the ongoing trade conflict which are around 5 percent. He said the higher owner and trainer there for 40-plus years before with China, State Budget official Dr. J. Michael take was necessary for horse racing because that moving on to Santa Anita. We have to stay Jones told the CFG on Tuesday. He said it is sport, unlike football or basketball, is funded ahead of this.” assumed in the economic forecast released by through wagering. Thayer said he was happy the proposal the global firm IHS Markit—which supplies House Majority Whip Chad McCoy, received a largely receptive response from com- economic information to the CFG—that “all R-Bardstown, asked how the proposal would mittee members.