Conway: Regulation changes would allow slots-like gambling at tracks

By Janet Patton - jpatton1@herald-leader.com

A few regulatory tweaks are all that's needed to bring expanded gambling to Kentucky racetracks, Attorney General Jack Conway opined Wednesday.

Conway's office said the Kentucky Horse Racing Commission and Gov. Steve Beshear could change existing administrative regulations that govern pari-mutuel betting to allow "Instant Racing," an electronic hybrid of pari-mutuel racing and slot machines.

The game uses thousands of previously run races to generate an electronic type of betting very similar to slot machines.

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The commission unanimously approved, without discussion, regulatory changes that will allow electronic gambling on previously run horse races, including the game known as "Instant Racing."
Pioneered by Oaklawn Park in Arkansas, Instant Racing has generated millions of dollars in taxes and purses for Arkansas racing.
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The Kentucky Horse Racing Commission last month unanimously approved regulatory changes to allow instant racing. In an effort to forestall anticipated legal challenges, the commission, along with the eight tracks in the state and the state Department of Revenue, asked Franklin Circuit Court to rule on the legality of implementing the games.
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Still, Beshear and horse industry officials remain skeptical of the idea, which Republican Sen. Damon Thayer of Georgetown has pushed as an alternative to traditional video lottery terminals, or slot machines.

"I have asked the Kentucky Horse Racing Commission to look closely at this opinion to see if there are opportunities for our horse racing industry," Beshear said Wednesday.

He said Instant Racing would produce less revenue for the horse industry than video lottery terminals, which he said continue to be "the best solution for our struggling signature industry."

House Speaker Greg Stumbo, D-Prestonsburg and a former attorney general, said he agreed with Conway's legal analysis but said he doesn't think the governor should sign an emergency order that would allow Instant Racing machines. Such a move would set a bad precedent, he said.

"If the governor could allow Instant Racing, than why couldn't the governor allow slot machines at race tracks?" said Stumbo, who this week will re-file his bill to allow video lottery terminals at racetracks under the lottery laws.

Bob Beck, chairman of the Kentucky Horse Racing Commission, said the group will have to dig deeper into the issue, which the commission hasn't previously discussed.

Kentucky racetracks, which have lobbied for VLTs, also gave Conway's opinion a lukewarm response Wednesday.

"We're certainly open to discussing any sincere proposal to help Kentucky's signature industry address the significant challenges confronting us," said Jay Blanton, Keeneland spokesman.

Bob Elliston, president of Turfway Park in Northern Kentucky, said there are many questions about Instant Racing, which has not been widely adopted by racetracks.

"We exist in a mature casino gaming marketplace, and we would want to be confident that these machines are competitive with the casino gaming market already in place in Northern Kentucky/Greater Cincinnati," Elliston said. "Further, we don't have an understanding of the financial model associated with Instant Racing — How much do the machines cost? What is the takeout? What are the breakdowns for purses, taxes, winning tickets, etc.? What kind of changes to physical plants would be required to install these machines?"

Representatives of Churchill Downs and Ellis Park could not be reached for comment.

Conway's office, which issued the opinion Tuesday at Thayer's request, wouldn't comment, saying the opinion speaks for itself.

Thayer said Wednesday that Beshear and the racing commission should consider acting quickly to allow Instant Racing. "If what we're interested in doing is generating purse money for Kentucky races, Instant Racing could be a viable short-term option," he said.

Thayer said he's drafted a bill to allow Instant Racing but isn't planning on filing it because statutory changes don't appear to be needed.

Instant Racing was developed at Oaklawn Park in Arkansas, which now has 350 machines that have generated more than $17.6 million for purses since 2000.

Players bet on randomly selected unknown races based on general handicapping and performance data. The bets are pooled but each player is betting on a different race and the payouts vary with the timing of the bet, according to AmTote, which developed the game with RaceTech.

The betting pool issue might pose the biggest sticking point for Kentucky racing, which doesn't appear to allow pooling bets on different races.

"While Instant Racing may involve a type of pooled betting, it is not the pari-mutuel betting contemplated by Kentucky's administrative regulations," according to the opinion.

Conway's opinion also said existing administrative regulations promulgated by the racing authority would need to be changed because they refer only to live racing.

Instant Racing also deviates from the present system because it uses a "seed pool" to replenish the minimum in the "win" pool after a payout, rather than relying on the racetrack owner to fund a "minus pool."

"To the extent Instant Racing is not permissible in Kentucky, it is because Instant Racing does not constitute pari-mutuel wagering under the current administrative regulations," the opinion reads.

Rep. David Osborne, R-Prospect, a Thoroughbred owner and breeder, said the horse industry needs help but Instant Racing will not solve all of racing's problems.

The industry needs a long-term solution that will generate more money — such as video lottery terminals at the state's race tracks, he said.

"I don't think there is any great objection to Instant Racing," Osborne said. "It's at best a band aid."