The Economic Impact of the Kentucky Derby

This past weekend was the 143rd running of the Kentucky Derby at Churchill Downs Racetrack in Louisville, Kentucky.  Known as the “Greatest Two Minutes in Sports,” I thought it would be interesting to see the economic impact that the Kentucky Derby has beyond those two electrifying minutes.

According to my research, there are essentially two ways that the Derby provides an economic stimulus to the region: first, from the race itself (by way of tourism, ticket sales, etc.) and, secondly, from wagers placed on the races—both those legally recorded and those that were not placed through an official Las Vegas book.

The Kentucky Derby Museum, the non-profit organization that collects information on the race and preserves its history, released financial figures about the race.  The Museum deems the Derby as an “economic event,” with the most recent study finding that the Derby has a $217 million immediate impact on the region.  According to the same study, the equestrian industry has an economic impact of just over $3 billion in the state of Kentucky alone.  The industry generates an employment opportunity to over 55,000 people in Kentucky as well.  Clearly, the equine industry is a massive part of Kentucky’s economy, and the main-event, the Kentucky Derby, is the most important part of the industry.

Determining the exact economic impact that gambling on the races at the Kentucky Derby is significantly more tricky.  This is due to the fact that so many wagers are placed illegally, or through any means other than an officially-licensed Las Vegas casino.  According to the Washington Post, near $4 billion is wagered legally in Las Vegas every year.  However, anywhere from $80 to $380 billion is wagered illegally—the wide range in estimates goes to show just how much money is not adequately being regulated.  The official numbers for the 143rd Kentucky Derby have yet to be officially released yet, but the numbers from 2015 and 2016 paint a consistent picture of what economists can expect.  In 2015, a record-breaking $194.3 million was wagered legally, while estimates for illegal wagers are many times more than that.  In 2016, $192.6 million was wagered legally, a slight decrease from 2015.  Expectations for 2017’s Derby are in the same range.

Clearly the Kentucky Derby plays a significant economic role in the state of Kentucky and in the United States in general.  Most of the economic stimulus to Kentucky is through that of the equine industry, while the larger economic impact is through the black-market of sports gambling.

https://www.derbymuseum.org/education/why-study-the-derby.html

https://www.washingtonpost.com/sports/sports-gambling-in-us-too-prevalent-to-remain-illegal/2015/02/27/f1088e4c-b7d3-11e4-9423-f3d0a1ec335c_story.html?utm_term=.ce53fb59a1de

http://www.betfirm.com/how-much-is-bet-on-the-kentucky-derby/

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7 thoughts on “The Economic Impact of the Kentucky Derby

  1. evanmegan

    I never knew how much more money is waged on illegal betting than legal, $80-$380 billion was way larger than I would’ve expected! It makes you wonder the effect that legalizing and regulating all types of betting may have on government revenue, the economy, and American culture.

    Reply
  2. nbharp18

    I think the impact of the equine industry on Kentucky is definitely significant like you’ve said, and an event like the Derby is definitely a large economic driver for the state. Maybe not on the same level of an economic driver as the bourbon industry, but still quite significant. Also enjoyed your point about the illegal gambling brought on by the Derby. If we could find a way to legitimize that $80-380 billion, Kentucky could see huge tax revenue spikes from the derby alone, I think.

    Reply
  3. hmpete18gholycrossedu

    Really interesting read. If the government were to regulate sports gambling, then it could greatly impact the communities in which it is relevant due to an extreme increase in potential tax revenues. It is also curious to see that the amount of legal gambling on the event decreased from 2015 to 2016. Perhaps this is due to more people betting illegally due to better payouts, or maybe it was because of the hype surrounding American Pharoah in 2015.

    Reply
  4. kathrynmckenzie18

    Interesting post — reminded me a lot of the class discussion on the economic impact of the Super Bowl this year.

    Reply
  5. emmawarren18

    Really liked this post, especially the part about illegal gambling. I think it’s also interesting that the Kentucky Derby is one of the highest attended sporting events. I believe this year’s attendance was around 167,000. If it were possible, it’d be interesting to see how many of those were locals and how many were tourists and compared those numbers to the average number of tourists during the spring/summer seasons.

    Reply
  6. lukemadden19

    After attending the Belmont last year, this post caught my eye and was every bit what I would expect. People seemed to throw money around as if it was nothing, which as you have described occurs down in Kentucky as well.

    Reply
  7. jackmccabe53

    I really enjoyed reading this post, especially after we talked about the economic impact of the super bowl earlier this spring. Like the last comment, I too went to the Belmont and after being there it does make you think about how much money the races bring in. I also saw a lot of ads for the Derby like in a Vineyard Vines catalog which probably cost the company a lot of money such to buy the rights to the name.

    Reply

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