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Kentucky Supreme Court ruling places future of historical horse racing in doubt

The historical horse racing machines allow bettors to wager on old horse races that are not visible to the bettor.

LOUISVILLE, Ky. — The Kentucky Supreme Court has ruled certain historical horse racing machines are illegal in Kentucky, which now raises questions about the future of the industry in the state.

The Supreme Court ruled 7-0 that the gambling machines do not qualify as pari-mutuel wagering and are thus illegal under Kentucky state law. In its decision, which overturned a 2018 ruling by a Franklin Circuit Court judge, the court argued that unlike people betting on horse races at a track, these machines do not allow the same group of bettors to wager amongst themselves on the same race at the same time.

The historical horse racing machines allow bettors to wager on old horse races that are not visible to the bettor. While casino gambling and slot machines are illegal in Kentucky, the Horse Racing Commission has regulated these historical racing machines, which are often responsible for bringing in purse money for track meets.

"It enables our signature industry to have higher purses, to attract better competition and better horses," State Rep. Jason Nemes, R.-District 33, said.

“Historical horse racing is an important part of Kentucky’s economy that supports jobs and contributes over $21 million to the state budget." Gov. Andy Beshear, D.-Kentucky, said. "We are working with various partners to find a path forward.”

The Supreme Court's ruling is only limited to the gaming system "Exacta," which used to be called "Encore." The system is used at Kentucky Downs, Ellis Park, and in some machines at the Red Mile in Lexington, which is operated by Keeneland Association.

Churchill Downs Inc. said it does not use the Exacta system in any of its facilities in Kentucky, including Derby City Gaming in Louisville.

"We will work within our legal rights and in coordination with Kentucky legislators to ensure the ongoing legal operation of our HRM facilities in Kentucky so that we can continue to provide critical funding for the equine industry and support the citizens in the Commonwealth of Kentucky," Churchill Downs Inc. Vice President of Communications Tonya Abeln wrote in a statement.

"I know there's tens of millions of dollars every year in question now that come to the state because that's the taxes that have been paid, and we're not in a position in Kentucky where we can reduce the tax revenues from sources like gaming," Nemes said.

According to Nemes, there has been discussion about legislative action to address the ruling, but according to Martin Cothran, the senior policy analyst for The Family Foundation of Kentucky, the group that brought the suit, it may take a constitutional amendment.

The Family Foundation is asking all historical racing machines to stop operations until there is more clarity about their legality from the Horse Racing Commission.

"I think it's going to be kind of hard for Churchill and others to maintain that the ruling does not apply to them because the same criteria apply to their machines as apply to the Encore machines," Cothran said.