FRANKFORT — The Kentucky Supreme Court on Wednesday heard arguments on the legality of gambling on taped horse races, which two state tracks have added in lieu of casinos or slots.
The Family Foundation, a conservative advocacy group, has challenged that form of gambling, known as "historical racing" or "instant racing."
The wagers were approved by the Kentucky Horse Racing Commission in July 2010 to allow tracks to compete with states that allow "racinos" to shore up purses and breeders' incentives with expanded gambling revenue.
Hundreds of instant racing terminals have been installed at Kentucky Downs in Franklin and at Ellis Park in Henderson; combined, more than $382 million has been wagered since September 2011.
Attorneys for both the Family Foundation and the racetracks expressed confidence after Wednesday's hearing that they will win the case — but the outcome likely won't be known for months.
Instant racing has been in the courts since 2010, when state officials and the eight racetracks immediately asked Franklin Circuit Court to rule on whether they acted legally. The Family Foundation was allowed to intervene in that case, but Franklin Circuit Judge Thomas Wingate did not allow discovery — the gathering of evidence such as depositions — on how historical wagering games work.
That, Family Foundation attorney Stan Cave said Wednesday, set a dangerous precedent.
"All they wanted from this charade was the ability to waive a court order," Cave said.
The justices bristled at that argument.
Justice Lisabeth Hughes Abramson told Cave that both circuit judges and the state Supreme Court justices rule on the law without regard for the political leanings of the parties involved.
At Wednesday's hearing, the justices did not delve deeply into how historical wagering works.
Instead they asked both sides to state their cases about whether the issue should be narrowly decided on whether the racing commission has the legal authority to promulgate regulations allowing this kind of betting, whether the tracks can legally get licenses to operate the terminals, and whether the state Revenue Department can tax the bets.
In historical wagering, bettors play on electronic terminals that mimic video slot machines. Whether they win or lose is determined by picking the winning horse from a short video of a previously run race. Bettors get slices of information about the race, but major identifying factors — such as the name of the horse, the jockey, the trainer or the track — are hidden.
Cave said that the races are no more live than portraits of past justices hanging on the walls of the Capitol are actually the justices, and that the races are not pari-mutuel because bettors are not gambling on the same races.
But the tracks and the state contend the games fall within the same regulatory framework as "exotic" wagers at the racetrack, such as Pick Six, in which bettors at different tracks try to win a jackpot that can carry over from one day to the next.
Keeneland trustee Bill Lear, a lawyer representing his track, Turfway Park and Bluegrass Downs, said that the racing commission's "plenary power" means it can regulate instant racing. And the statute has built in flexibility to accommodate the evolving wagering landscape, from exotics to instant racing, Lear said.
"That's what is known as pari-mutuel wagering today," Lear said. "This is not your grandfather's racing ... but this is legitimate."
Racing commission attorney Peter Ervin said that the Family Foundation's argument for discovery "is a red herring" because the statute specifies the betting must be pari-mutuel.
An attorney for the Revenue Department, Laura Marie Ferguson, argued that the state can tax such bets because the outcome is unknown until after the race is run, just as with races watched at the track or via simulcasting from other locations.
Other Kentucky racetracks have held off on investing in instant racing until the courts rule. Although the Franklin Circuit Court found it legal, the Kentucky Court of Appeals ruled that discovery should have been allowed. The case could be sent back to Wingate's court if the Family Foundation prevails; if the tracks win, the foundation could attempt to contest the regulations, licenses and games individually.