By: Andrew Biggs
Whenever anyone thinks about the culture of Kentucky they immediately think of bourbon, basketball, fried chicken, and horse racing.[1] However, in September of 2020, in Family Trust Foundation v. Kentucky Horse Racing Commission, the Kentucky Supreme Court made a ruling which some called “wrong” and “irresponsible,” warning it would “deal a death blow to Kentucky’s horse industry if not remedied.”[2]
Compared to its neighboring states, Kentucky has relatively strict anti-gambling laws.[3] While Kentucky allows charitable gaming, state lotteries, and pari-mutuel betting, it prohibits sports betting and commercial casinos.[4] In order to scratch the gambling itch of Kentuckians, parties have tried to find the edges of legality between true pari-mutuel betting and commercial casinos.[5] Horse tracks and “racinos” have found particular success in locating this line between permitted and prohibited when they introduced Historical Horse Racing (“HHR”), or Instant Racing, more than a decade ago.[6] Ever eager to delineate the differences between HHR and traditional slot machines, proponents of HHR assert that “it is 100 percent horse racing, but it’s packaged in a way to appeal to a new customer base.”[7]
However, in Family Trust v. KHRC, the Kentucky Supreme Court did not share the same sentiment.[8] The Court believed that the two essential elements of pari-mutuel wagering were that “patrons were wagering amongst themselves and not against the association” and “amounts wagered are placed in one or more designated wagering pools.”[9] The Court went on to hold that “without providing simultaneous access to one historical horse race to the same group of patrons, no pari-mutuel pool can be created among the patrons in which they are wagering among themselves, setting the odds and the payout.”[10] In other words, because single patrons were “wagering on randomly generated historical horse races” and the odds were established by the “off odds” as set at the time the horses left the starting gate, the communal wagering requirement of pari-mutuel wagering was not met.[11]
The horse industry was understandably panicked by this ruling as Kentuckians wagered $2 billion on HHR in the last fiscal year.[12] Following the decision, there were reports of three tracks that would close immediately if relief from the legislature was not received.[13] As a result Governor Andy Beshear signed the bipartisan SB 120 on February 22, 2021, redefining pari-mutuel betting to protect HHR gaming.[14] However, the fight for HHR is far from over as this bill was not without its opponents.[15] The former plaintiff, The Family Foundation, has vowed to continue fighting against a bill which it has called “an unconstitutional millionaire’s stimulus bill.”[16] Furthermore, The Family Foundation is not only calling for the closure of historical racing venues but also to go a step further and to refund “the money that they have unlawfully and illegally taken from their patrons.”[17]
The gambling debate in Kentucky has three main groups: those who want tighten Kentucky’s gambling restrictions, those who believe the restrictions are in the correct place with HHR, and those who want to loosen gambling restrictions. A number of Kentuckians who support gambling in Kentucky see SB 120 as a frustrating hypocrisy in the face of the continued rebuke of their efforts to loosen restrictions.[18] Gambling advocates do make a good point in that if Kentucky does not allow more traditional forms of gambling then Kentuckians will simply take their wagers to one of West Virginia, Ohio, Indiana, Illinois, Missouri, Tennessee, or even off shores through online betting.[19] Seeing this potential revenue flow out of Kentucky’s borders for years has pushed multiple Kentucky lawmakers to fight for legalized gambling for multiple years now,[20] but many of these efforts have been pushed to the side in dealing with the pandemic and the protection of HHR.[21] Regardless of the moral quandaries of legalizing gambling, it is hard to dispute that legalization will help bolster both the state budget and the popularity of Kentucky’s iconic race tracks.[22]
[1] Aaron Renn, Bluegrass, Bourbon, and Basketball, City Journal, https://www.city-journal.org/promising-future-of-lexington-kentucky [https://perma.cc/J38N-DYAS] (last visited Mar. 1, 2021).
[2] Tim Sullivan, Kentucky Supreme Court Reaffirms its Objections to Historical Horse Racing, Louisville Courier Journal (Jan. 21, 2020), https://www.courierjournal.com/story/sports/horses/horse-racing/2021/01/21/kentucky-supreme-court-reaffirms-its-objections-historical-horse-racing/6656602002/ [https://perma.cc/FEM4-FKEC].
[3] State-by-State Gambling Laws, LetsGambleUSA (2021), https://www.letsgambleusa.com/state-gambling-laws/ [https://perma.cc/2XN5-2CH4].
[4] Id.
[5] Ryland Barton, Kentucky Lawmakers Advance Historical Horse Racing Bill, 89.3 WFPL (Feb. 4, 2021), https://wfpl.org/kentucky-lawmakers-advance-historical-horse-racing-bill/ [https://perma.cc/A46B-US7F].
[6] Id.
[7] Miles Bryan, Skill or Chance? States Debate Historical Horse Games, Marketplace (Oct. 2, 2015), https://www.marketplace.org/2015/10/02/skill-or-chance-states-debate-historical-horse-games/ [https://perma.cc/NMD5-HPQT].
[8] Family Tr. Found. of Ky. v. Ky. Horse Racing Comm’n, No. 2018-SC-0630-TG, 2020 WL 5806813 at *1 (Ky. Sept. 24, 2020).
[9] Id. at *3.
[10] Id. at *4.
[11] Id.
[12] Bill Aimed at Legalizing Historical Horse Racing Machines in KY now Heads to Governor’s Desk, WLKY (Feb.11, 2021), https://www.wlky.com/article/bill-aimed-at-legalizing-historical-horse-racing-machines-in-ky-now-heads-to-governors-desk/35485026 [https://perma.cc/53NY-YV92].
[13] Lawrence Smith, Kentucky Lawmakers Predict ‘Calamity’ for Horse Industry if Legislature does not Legalize Historical Racing, WDRB (Jan. 25, 2021), https://www.wdrb.com/news/lawmakers-predict-calamity-for-horse-industry-if-legislature-does-not-legalize-historical-racing/article_d3ed4166-5f59-11eb-b9cc-8bc566cacfea.html.
[14] HHR Bill Signed Into Law by Kentucky Governor, BloodHorse (Feb. 22, 2021), https://www.bloodhorse.com/horse-racing/articles/246343/hhr-bill-signed-into-law-by-kentucky-governor [https://perma.cc/GMV9-CSUH].
[15] Supra note 12.
[16] Martin Cothran, Press Release: SB 120 – The Slots Bill – was an Unconstitutional Millionaire’s Stimulus Bill, The Family Foundation (Feb. 15, 2021), https://www.kentuckyfamily.org/index.php/sb-120-the-slots-bill-was-an-unconstitutional-millionaires-stimulus-bill/ [https://perma.cc/4HBX-8XJ3].
[17] Supra note 13.
[18] @KySportsRadio, Twitter (Feb. 4, 2021, 5:46 PM), https://twitter.com/KySportsRadio/status/1357460565090832385 [https://perma.cc/BL9A-5MCS]; @DrewFranklinKSR, Twitter (Feb. 17, 2021), https://twitter.com/DrewFranklinKSR/status/1362120569496481800 [https://perma.cc/CT7L-XJWJ].
[19] Supra note 3.
[20] See Daniel Desroches, Kentucky’s Sports Betting Bill is Stalled in the House of Representatives. How Come?, Lexington Herald-Leader (Feb. 5, 2020), https://www.kentucky.com/news/politics-government/article239964298.html; Matthew Waters, 2021 Outlook: Kentucky Gov. Beshear Pushing for Sports Betting, Legal Sports Report (Jan. 5, 2021), https://www.legalsportsreport.com/46946/kentucky-sports-betting-2021-outlook/ [https://perma.cc/9FXF-AQR7].
[21] @christopherotts, Twitter (Jan. 26, 2021, 1:00 PM), https://twitter.com/christopherotts/status/1354127109355171841 [https://perma.cc/HM9H-UF7M].
[22] Drew Franklin, Governor, Bipartisan Supporters Push Sports Betting Bill, Kentucky Sports Radio (Feb. 6, 2020), https://kentuckysportsradio.com/main/governor-bipartisan-supporters-push-sports-betting-bill-a-ksr-goes-to-frankfort-special-report/ [https://perma.cc/ELY6-BCMJ]; Bennet Liebman, Pari-mutuels: What Do They Mean and What is at Stake in the 21st Century, 27 Marq. Sports. L Rev. 45, 45-46 (2016) (noting declining popularity of horse racing and pari-mutuel handle).