Derby City Gaming patron Steven Denny Jr. 1-30-19

Steven Denny Jr., of Louisville, plays the slot-like machines at Derby City Gaming on Jan. 30, 2019. 

LOUISVILLE, Ky. (WDRB) – A technical flaw with the historical horse racing machines at Louisville’s new Derby City Gaming facility has cost Churchill Downs Inc. $112,000 so far, and the company continues to rack up fines of $1,000 per day as it works to fix the issue.

Churchill Downs cut the Kentucky Horse Racing Commission a $112,000 check last month to settle fines the company owed for each day of operation from Sept. 10, when the $65 million facility on Poplar Level Road opened to the public, through Dec. 31, according to documents obtained in an open records request.

The Louisville-based company will have to pay another $30,000 or so in fines each month until state regulators conclude their investigation and the problem is fixed, according to a Jan. 17 letter from the commission.

While the terminals at Derby City Gaming look and feel like slot machines, they actually offer wagering on previously run horse races, as casino gambling is illegal in Kentucky.

The problem is that, when patrons put money into the machines, the pool of races on which they wager has included ones in which a horse scratched, or withdrew from the race before it began.

While conceding a technical violation of the regulations, Churchill Downs insists that no patron has been placed at a disadvantage because of the issue.

“This has no impact on wagers or payouts at Derby City Gaming because no wagers have ever been taken on horses which did not run in a race,” the company said in a statement Tuesday.

The commission said in October that it has "no evidence that any patron has suffered monetary loss as a result of the regulatory violation." Three months later, it has yet to complete its review.

In a letter to Churchill Downs dated Jan. 17, the commission said it continues to investigate “whether any patrons have wagered on the system to their detriment.”

Marc Guilfoil, the racing commission’s executive director, said there is no timeline for the review.

“Obviously it’s a thorough investigation, and we are going to leave no stone unturned,” Guilfoil told WDRB on Tuesday. He declined to comment further.

Kevin Flanery, president of Churchill Downs Racetrack, said in an interview last week that the company is working with the state and independent testers to address the issue.

While he was not specific, Flanery said a resolution is coming soon.

“We found a fix – it’s being tested, so we will have that resolved completely here shortly,” he said.

The flaw has been the only blemish so far in what Flanery described as a “very successful” launch of Derby City Gaming, the state’s fourth location with slot-like historical racing machines.

As WDRB reported Sunday, publicly available figures suggest the new gambling option in Louisville has drawn business from Horseshoe Southern Indiana, the full-fledged casino across the Ohio River in Harrison County, Indiana.

The $1,000 in daily fines pale in comparison to Churchill Downs’ revenue from Derby City Gaming.

From Sept. 10 through Dec. 31, Churchill Downs took in $14.6 million in after-tax “commission” from the $179 million bet on the machines, according to figures published by the racing commission. That’s an average of about $131,000 per day.

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Reach reporter Chris Otts at 502-585-0822, cotts@wdrb.com, on Twitter or on Facebook. Copyright 2019 WDRB News. All rights reserved.

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Chris Otts reports for WDRB.com about business and economic topics, higher education and local / state government. He joined WDRB News in 2013 after seven years with The Courier-Journal. Got a tip? Chris is at 502-585-0822 and cotts@wdrb.com.