Derby City Gaming player at machine

Derby City Gaming in Louisville, Ky., January 2019.

LOUISVILLE, Ky. (WDRB) – The justices of Kentucky Supreme Court on Friday did not seem to relish having to decide whether historical horse racing -- the slot-like gaming that has quickly grown to a $2 billion industry – is legal in a state that permits betting on horses but not casino gambling.

“Very few state courts have been called upon to make this sort of decision,” Chief Justice John Minton said during an oral argument in a decade-long case challenging the legality of the slot-like racing machines. “This is a legislative sort of decision that’s been punted.”

Historical horse racing grew up in Kentucky through regulations of the gubernatorial-appointed state horse racing commission, starting in 2010 under Democratic Gov. Steve Beshear, continuing through the tenure of Republican Matt Bevin and now with the support of Beshear’s son, Andy, who defeated Bevin last year.

Beginning with Kentucky Downs in 2011, there are now four venues containing nearly 3,000 machines that resemble slots, with at least three more gaming facilities in the works.

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All along, the state legislature, which was jointly controlled until Republicans flipped the Kentucky House in 2016, has not stepped in to stop the expansion – a fact that leads attorneys on either side of the case to opposite conclusions.

“If the legislature thought this was bad policy -- if they thought historical horse racing terminals should be illegal -- they would have said so,” said Jay Ingle, a Lexington attorney representing gaming venues at Kentucky Downs, Ellis Park and the Red Mile. “And they have not. And their silence speaks volumes.”

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Stan Cave, an attorney representing the conservative Family Foundation of Kentucky, said historical horse racing is a “policy question for the legislative body,” but there has been “no legislative action whatsoever” to legalize the machines.

“It’s not something an unelected, unaccountable, independent racing commission, acting on the advice of a gaming consultant, can just say, ‘Oh it (pari-mutuel wagering) means whatever we say it means,’” Cave told the justices on Friday. “There is a rule of law in this commonwealth. It has not been adhered to in this case.”

While the role of the legislature is one disagreement, Friday’s argument centered on the precise definition of “pari-mutuel wagering” and whether Franklin Circuit Judge Thomas Wingate erred in 2018 when he ruled that the gaming system behind the machines at Kentucky Downs and Ellis Park constituted pari-mutuel wagering.

Cave told the justices that Wingate “misapplied” the definition of pari-mutuel wagering – which generally refers to bets players make against themselves and not against the house.

Wingate overlooked the fact people who sit at the machines and hit a button are not betting on the same horse races and that their payouts upon a successful wager are not dependent on how other players bet.

Lawyers for the racetracks and the racing commission said the foundation is trying to rewrite the definition of pari-mutuel wagering to a narrower meaning than what the high court tacitly approved in 2014 when it blessed the horse racing commission’s authority to adopt regulations surrounding historical horse racing.

The requirement that players bet on the same race or set of races is “nowhere set out in the regulations,” said Jennifer Wolsing, the horse racing commission’s general counsel.

Another of the Family Foundation’s complaints about historical racing is that the bet of one player does not influence the payout earned by another player, as in live horse racing with odds that change up to the moment before the race. But that, too, is irrelevant, Wolsing said.

The fact that everyone playing the slot-like machines contributes to a perpetual “pool” from which winners are paid makes it pari-mutuel, she said.

“In essence, patrons are wagering among themselves because they are wagering into the same pool and affecting other patrons who come after them by either increasing or decreasing the pool’s funding,” she said.

To adopt the Family Foundation’s narrow conception of pari-mutuel wagering would make decades-old exotic horseracing games like the Pick 6 illegal as well, Wolsing said.

Reach reporter Chris Otts at 502-585-0822, cotts@wdrb.com, on Twitter or on Facebook. Copyright 2020 WDRB Media. All rights reserved.