- Associated Press - Friday, August 14, 2020

FRANKFORT, Ky. (AP) - Kentucky’s Supreme Court delved into a high-stakes case over the legality of “historical horse racing” machines that are lucrative moneymakers for racetracks and the thoroughbred industry.

Attorneys for racing interests and The Family Foundation argued Friday over the intricacies of what constitutes pari-mutuel wagering. The long-running dispute has evolved into a difficult puzzle to piece together, a couple of justices acknowledged during the 90-minute hearing.

The conservative Family Foundation contends that the slots-like historical horse racing machines don’t meet pari-mutuel wagering standards under Kentucky law. Attorneys for the racing interests insisted that historical horse racing is a valid form of wagering.

In his arguments Friday, Family Foundation attorney Stan Cave said: “This case has a 10-year history and it’s time to bring certainty to the question of the legality of historical horse racing.”

For Kentucky’s signature horse racing industry, a lot is riding on the outcome.

Bettors in Kentucky wagered more than $2 billion on historical racing machines in the previous fiscal year ending June 30, according to the Kentucky Horse Racing Commission. At Kentucky Downs, the machines have been a big hit in drawing people from across the border in Tennessee. Churchill Downs has aggressively tapped into historical racing as a revenue source.

For years, Kentucky tracks pushed to legalize casino-style gambling, but those proposals died in the state legislature. The tracks instead ventured into historical horse racing, which pumped money into race purses and breed development funds to put them on more solid ground in competing with tracks and horse breeding operations in other states.

The slots-style machines allow people to bet on past horse races. The games typically show video of condensed horse races. Kentucky collected more than $33 million in excise tax revenue from the wagering last fiscal year, according to the state Public Protection Cabinet.

In pressing his attack that historical horse racing skirts state law, Cave said the prizes are determined by “mathematical formulas and pay tables,” not by pari-mutuel payout odds shown on racetrack tote boards. He said bettors “are not wagering among themselves on the same uncertain event or group of uncertain events as required by the regulatory definition.”

It’s the second time the case has come before Kentucky’s highest court.

Attorneys for racing interests said Friday that historical horse racing amounts to another type of pari-mutuel wagering that meets those definitions under state regulations. They said The Family Foundation was trying to relitigate issues the high court decided in 2014.

Citing the court’s prior decision, attorney Jay Ingle said: “What this court did not do was add any elements to that definition. That definition nowhere says it has to be on the same event. It doesn’t say you have to wager against each other. It says patrons have to wager among themselves collectively. They have to be betting into the same pool.”

The case could carry an even broader threat to the horse racing industry. It threatens to invalidate long-established exotic betting, such as Pick 6 wagers, if the court sides with The Family Foundation’s arguments, the industry’s attorneys said. That would put Kentucky tracks at a competitive disadvantage with tracks elsewhere, they said.

The Family Foundation offered another reason for declaring historical horse racing machines illegal - the lack of state legislative approval for installing the machines.

“With no legislative action whatsoever, no voter approval and not even an executive order, an unelected, independent Kentucky Horse Racing Commission has permitted historical horse racing to … occupy the gaming space in Kentucky,” Cave said.

Ingle countered that lawmakers have known for nearly a decade that the machines are operating but have taken no action to take them down.

“If the legislature thought this was bad policy, if they thought historical horse racing terminals should be illegal, they would have said so, and they have not,” he said. “And their silence speaks volumes.”

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