Judge OKs Instant Racing games; decision will be appealed

Franklin Circuit Judge Thomas D. Wingate ruled Wednesday that new state regulations to allow betting on previously run races, such as the Instant Racing games, are legal.

The ruling, requested by the state and eight racetracks, means the tracks can use the new form of electronic gambling to boost purse revenue, something they have long sought.

Martin Cothran, a spokesman for the conservative advocacy group The Family Foundation, which argued the regulations were illegal, said Wednesday that the group plans to appeal the ruling to the Kentucky Supreme Court.

Gov. Steve Beshear, who has pushed for expanded gambling, hailed the ruling.

"We are very pleased with the court's decision," Beshear said. "We feel strongly that the Kentucky Horse Racing Commission has the statutory authority to regulate historical horse racing, and we expect revenue produced from these games will help support our trademark racing industry."

In July, the racing commission approved the regulations to allow bets on "historical races," or races that had already been run. Oaklawn Park in Arkansas pioneered betting on videos of anonymous races with its Instant Racing games, which have generated millions for purses there.

Tracks and racing industry representatives also said Wednesday they were happy with the judge's findings. All existing racetracks joined the racing commission and the state revenue department in petitioning for the declaration of rights on whether the regulations were legal.

"We're extremely pleased with the ruling," said Patrick Neely, spokesman for the Kentucky Equine Education Project, which has lobbied for expanded gambling.

"We believed from the outset that we were on firm legal footing," he said. Instant Racing "has been tremendously successful for Arkansas and helped the Arkansas racing and breeding programs. And now we'll see if it can do the same thing for Kentucky racing and breeding."

Tracks takingwait-and-see approach

Vince Gabbert, spokesman for Keeneland in Lexington, said the ruling was as expected. Gabbert said it's still too far down the road to say when or where the track might put in the machines, but "we would intend to, yes."

Northern Kentucky's Turfway Park, which is part-owned by Keeneland, is also considering installing them to help offset riverboat and casino gambling on its doorstep.

"We are evaluating what the installation of these machines at Turfway Park would mean while continuing to monitor the legal process should there be appeals to the judge's ruling," Bob Elliston, president of Turfway Park, said in a statement.

Kentucky tracks say they need expanded gambling to help them compete with states such as Indiana and Pennsylvania that use slots or casino revenue to boost purses and breeders' incentive funds. Instant Racing is not considered to be as potentially lucrative as other forms of expanded gambling.

Churchill Downs in Louisville declined to comment on Wednesday's ruling. CEO Bob Evans said earlier this year that even with a favorable ruling, "we still have considerable concerns about the competitiveness of these machines in locations like Louisville where full-fledged casinos exist in the market."

But Kentucky Downs president Corey Johnsen said earlier this month that the Franklin track is ready to pursue licensing approval for the games and put the machines in quickly.

"As soon as possible," Johnsen said. "We are at a tremendous competitive disadvantage. This is the perfect solution to our short-term problem."

The Family Foundation, which opposes expanded gambling, intervened in the case, contending that the commission's efforts amounted to a back-door method of giving electronic gambling to racetracks, something about which state legislators have been conflicted.

In his ruling, Judge Wingate declined "to address whether pari-mutuel wagering on historical horse races would or would not ultimately be beneficial to the horse industry and the commonwealth."

Details of ruling

Focusing just on the legal questions, Wingate found:

■ The regulations are a valid and lawful exercise of the racing commission's statutory authority to regulate pari-mutuel wagering on horse racing;

■ The licensed operation of pari-mutuel wagering on historical horse races does not contravene statutory prohibitions on gambling;

■ The Department of Revenue's determination that revenue generated by wagering on historical horse races is subject to the pari-mutuel tax is valid and lawful.

Wingate ruled that historical horse races are horse races, not just videos of horse races, and that wagering on them is pari-mutuel — two points contested by opponents of expanded gambling who had sought to block the games.

The Family Foundation argued that historical horse racing games are essentially electronic slot machines, but Wingate disagreed, finding the machines are not illegal gambling devices.

He found irrelevant The Family Foundation's argument that bets on historical races are not truly pooled because bettors are viewing different races.

"The structure of the pooling system is not the determinative factor of a pari-mutuel system," the ruling said. Instead, the game's anonymity preserves the necessary integrity and the system is pari-mutuel "because the patrons are not wagering against the Racing Association (or track)."

Debate is not over

Wingate's ruling is unlikely to be the final word: Opponents have made it clear they will fight the regulations in the court and in the General Assembly.

"We have said from the beginning that this is a public policy issue and needs to be dealt with by elected lawmakers, not a court," Cothran, of The Family Foundation, said Wednesday.

He said there appear to be enough votes on the legislative review panel, which meets next in January, to find the regulations deficient.

"We don't think elected lawmakers are going to be nearly as impressed as the court with the argument that videos are live racing," Cothran said.

However, unless the governor agrees with the legislators, the panel's ruling would not be enough to block implementation. To do that, legislators would have to pass a bill against such gambling if Beshear goes forward with the regulations.

House Speaker Greg Stumbo, D-Prestonsburg, said Wednesday that it is unlikely that the legislature's Administrative Regulation Review subcommittee would tackle the changes this legislative session, which begins Tuesday.

"I don't think they will implement the thing until it has exhausted its ... appellate avenues," Stumbo said. "I don't think we'll do anything on it because it's got to run its course in the courts."

Stumbo also said that legislation relating to the expansion of gambling at the state's racetracks this legislative session is unlikely. Efforts to pass legislation to expand gambling to allow video lottery terminals, or VLTs, have been killed in the Republican-controlled Senate in past years.

The Republicans added to their majority in the Senate after November's election, Stumbo said. Until the makeup of the Senate changes, it's unlikely that any measure that would expand gambling would pass, he said.

Sen. Damon Thayer, R-Georgetown, earlier this year sponsored a bill to legalize Instant Racing. Thayer also requested the opinion by the attorney general last year that started the ball rolling toward new regulations.

Thayer said Wednesday that he's glad the horse industry has finally shown interest in Instant Racing but that without legislation he thinks tracks won't be eager to move on it.

"I doubt any racetrack will start installing Instant Racing machines just yet," Thayer said. But, he said, they'll have to look for someone else to sponsor a bill.

"I pushed that issue as far as I could last session and took a beating on it from both sides," Thayer said. "I'm done with that issue."

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