State politicians are looking to make Kansas the first US state to directly run gambling operations, in a move expected to have widespread implications for the gambling industry nationwide.
In contrast to Nevada, which merely permits gambling, Kansas is hoping to run state-sponsored gambling operations.
However, the bill (SN 587) was narrowly defeated in the State Senate by 20 votes to 16, with four abstentions. Nevertheless, with a near 50/50 split many expect the bill to pass eventually.
Had the bill passed, in its current form it would allow the state to establish two casinos and would have also permitted racetracks to operate electronic games like video slots and video poker.
Meanwhile, the state would assume responsibility for overseeing gambling by conducting audits and setting odds.
However, while the bill may have failed at this reading, the fact that Kansas, one of the original dry states, had proposed this bill suggests that some states may be prepared to give in to gambling.
Mathew All, chief counsel to Kansas's Democratic governor, said: "We're not thrilled about gaming, but we're surrounded by it."
The popularity of gambling particularly online was underlined by a survey from public opinion organisation Zogby International, which found that almost 80 per cent of Americans are opposed to proposals from the federal government to severely restrict online gambling.