The Kentucky Horse Racing Commission paved the way Tuesday for more gambling at state racetracks.
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.
"I'm happy that today this commission has the opportunity to take an action that I hope everybody will agree is in the best interests of the horse racing industry in Kentucky," Bob Beck, racing commission chairman, said before the vote. "The product is not a panacea ... but is a tool that tracks and horsemen can use to generate additional purse money."
Beck said that, after months of research at the behest of Gov. Steve Beshear, the commission has concluded that wagering on "historic races" is a pari-mutuel wagering product and that the commission has the authority to regulate it.
Kentucky racetracks, which have lobbied for a way to expand their gambling options, see this kind of wagering as a potential alternative to video slots.
But the tracks say this type of electronic gambling, in which players bet against one another rather than the house, will not be as lucrative for them or for state coffers as slots.
The games would be subject to existing pari-mutuel tax rates of 1.5 percent to 3.5 percent, depending on daily handle at the track.
"It's been very beneficial to Arkansas, there's no doubt about that. But ours is a different market; ours is a more mature gaming market," said Bob Elliston, president of Turfway Park. "We're willing to give it a shot. ... I think every bit helps."
Rick Hiles, president of the Kentucky Horsemen's Benevolent and Protective Association, said horse trainers are supportive.
"This keeps us from drowning for a while. It's a baby step hopefully to help us be competitive with other states," he said.
Tracks and horsemen's groups will have to negotiate exactly how the revenue from the electronic games will be split. Those agreements would be part of racetracks' applications to the racing commission.
The games could be operated year-round at each location.
"It'd be hard to say" how much it might boost purses "because you just don't know how this is going to go over," Hiles said. "We're hopeful. Maybe to get a 10 percent raise or something would be helpful."
According to Lisa Underwood, racing commission executive director, the electronic games could be placed at existing racetracks: Keeneland and The Red Mile in Lexington, Churchill Downs in Louisville, Turfway Park in Florence, Kentucky Downs in Franklin, Ellis Park in Henderson, Players Bluegrass Downs in Paducah and Thunder Ridge in Prestonsburg. Churchill Downs also has the option to put them at its Sports Spectrum facility in Louisville, Underwood said, but no other off-track betting parlors could at this time, she said.
The regulations will not be implemented as emergency regulations but instead will go through the normal approval process, which means the General Assembly will have a chance to review the regulations and could block them.
In an effort to forestall anticipated legal challenges, the eight tracks, with the racing commission and the Department of Revenue, filed Tuesday in Franklin Circuit Court a petition for declaration rights, asking the court to rule whether it is legal to implement the games.
Martin Cothran, senior policy analyst for The Family Foundation of Kentucky, which opposes expanded gambling, said his group will fight Instant Racing in the legislature.
Cothran called the regulatory change a back-door attempt to introduce casino-style gambling into the state.
"Casino gambling is unconstitutional in our state," Cothran said. "Instant Racing is simply another form of casino gambling, and it is therefore unconstitutional."
The commission will seek public comment through the end of September, and a public hearing will be at 10 a.m. Sept. 29 at The Red Mile.
Keeneland's president, Nick Nicholson, said he anticipates there will be only one Instant Racing facility in Lexington, as has been proposed in the past.
"Our preference would be one, in a cooperative way with The Red Mile, launched at a very modest way, in town," Nicholson said.
Beshear said at a Capitol news conference he applauded the commission's decision and called the move "an important step toward helping our state's endangered horse industry."
But Beshear, who has pushed for video-lottery terminals or slot machines at the tracks, said, "No one should see today's action as 'the answer' to the challenges facing Kentucky's horse industry."
Beshear said that he supported the legal action taken by the horse commission and the state Department of Revenue to see whether Instant Racing is constitutional and that he hoped the courts will act quickly.
Beck, the racing commission chairman, said the court could take at least six months to rule on the petition.
In Instant Racing, bets are made on randomly selected horse races from a database of tens of thousands of actual races with 10 horses. Although bettors have some past performance data beforehand, they won't know the identity of the horses or the track until after the bet is made. Bets are pooled, just like in live pari-mutuel racing, and payouts are made based on the amount wagered. Patrons bet on the first three finishers of the race.
In January, Attorney General Jack Conway's office issued an opinion stating that, with a few minor regulatory changes, such betting could be legal in Kentucky.
During the General Assembly earlier this year, state Sen. Damon Thayer, R-Georgetown, filed a bill to allow tracks to install the games and to adjust the pari-mutuel tax rate, but the bill ran into opposition from anti-gambling groups, and it never came to a vote in the full Senate.
Thayer said Tuesday he continues to support Instant Racing but hopes the revenue generated can be put into purses and breeders' incentives, as his bill would have.
Donald Cole, executive director of the Kentucky League on Alcohol and Gambling Problems, said his group opposes Instant Racing.
"Instant Racing just opens the door to more gambling and more problems," Cole said.
He said Beshear is ignoring the legislature: "If the state is going to have it, it should not bypass the legislature."