FRANKFORT — The Kentucky Court of Appeals heard oral arguments Wednesday on the legality of wagers on previously run horse races.
The Kentucky Horse Racing Commission has allowed betting on such races, known as instant racing, since last September, when Kentucky Downs in Franklin opened a gambling parlor that has already attracted $67.5 million in wagers.
But The Family Foundation, a conservative advocacy group that opposes expanded gambling, argued that such bets are illegal because they are not truly pari-mutuel and the races are not live.
The Family Foundation is challenging a December 2010 Franklin Circuit Court ruling that the racing commission had the authority to allow the bets.
On Wednesday, Family Foundation attorney Stan Cave asked the Appeals Court's three-judge panel to throw out the previous ruling or, failing a dismissal, send the case back to Franklin Circuit Court for a retrial with discovery.
Senior Judge Joseph E. Lambert asked what information Cave wanted.
"How are the odds set on an instant racing wager? If a patron is not wagering against anyone else, how can odds change?" Cave said.
"The tracks said the medium is the message: What they want you to look at is a video lottery terminal and say that medium is a horse race. .... A picture of a thing is not the thing."
The judges expressed confusion about the question of what is "live" racing and what makes a bet "pari-mutuel."
Lambert asked, "How many players does it take to make a bet pari-mutuel?"
"At least two," Cave said.
Presiding Judge Sara Combs asked: What about statutes that specify it's pari-mutuel if players are not betting against the "house"?
Even those statutes specify players are wagering against each other, Cave said.
Judge Janet Stumbo expressed frustration that so little explanation for how instant racing works is spelled out in the court records, saying they were not really sure what they were talking about.
Attorney Peter Ervin, representing the racing commission, said the issue at stake is whether the commission has the authority to allow the bets, not the specifics of the games themselves, which could be part of a separate challenge.
The games are based on "a legitimate horse race," Ervin said.
Lambert replied, "It's a far cry from what they're going to be doing in two weeks at the Kentucky Derby. That's a real live horse race, and this is not."
But Ervin said there is no requirement in state statutes that the race be live. He pointed out that players now often are betting on races being run in other states, and with carryovers, bettors often are looking to win money bet on races run the day before.
"This is merely a different form of an exotic wager," Ervin said.
However, the live aspect could prove a significant hitch for the Revenue Cabinet, which separately argued that state tax laws should apply because an instant racing race is no different from watching a basketball game on tape-delay.
Keeneland trustee Bill Lear, who was the attorney on behalf of Kentucky's eight racetracks, pointed out that the bets are connected through a "tote" machine, just like bets at the track, even if the machines are dressed up to look and feel like slot machines.
Judge Combs said that the court will issue an opinion in four to six weeks. An appeal to the state Supreme Court is likely no matter who wins.
Family Foundation spokesman Kent Ostrander, speaking outside the court afterward, said his group is confident there will be a favorable outcome.
"The other side colluded with the government to create this myth that this is pari-mutuel and live. It's not," Ostrander said.
The tracks have already seen substantial income from instant racing: Kentucky Downs, which will have 350 machines working by Derby Day, on May 5, netted more than $1 million for March alone. Ellis Park in Henderson is expected to have its instant racing machines operating in early June. Other tracks have said they will wait on the court's ruling before applying for instant racing.
But without other forms of expanded gambling, the tracks say, they have little choice but to use the only options available to them.