'Potentially Devastating For Kentucky's Racing Industry': Supreme Court Ruling Puts Historical Horse Racing In Jeopardy - Horse Racing News | Paulick Report

‘Potentially Devastating For Kentucky’s Racing Industry’: Supreme Court Ruling Puts Historical Horse Racing In Jeopardy

A Kentucky Supreme Court ruling issued Thursday reversed a 2018 court decision that had determined historical horse racing machines developed by Encore (now known as Exacta Systems) were a permitted type of pari-mutuel racing in the state, calling into question the future of a significant component of funding for horse racing purses in the state.

A civil suit brought in 2018 by the Family Trust Foundation of Kentucky against the Kentucky Horse Racing Commission, Kentucky Department of Revenue, and the various racing associations in Kentucky, had claimed Encore historical racing machines weren't permissible under Kentucky's definition of pari-mutuel wagering. The Franklin Circuit Court determined the Encore system did qualify as pari-mutuel wagering because money bet through historical racing terminals went into a collected pool from which patrons were paid out.

The state supreme court disagreed, pointing out that Encore racing customers are not betting on a single race simultaneously, and that after a pool is paid out completely it must be refreshed by the wagering authority. These details, according to the opinion, run counter to the legal definition that pari-mutuel wagering takes place with money generated only by patrons betting against each other on a single event.

“We acknowledge the importance and significance of this industry to the Commonwealth,” the state supreme court opinion read. “We appreciate the numerable economic pressures that impact it. If a change, however, in the long-accepted definition of pari-mutuel wagering is to be made, that change must be made by the people of this Commonwealth through their duly elected legislators, not by an appointed administrative body and not by the judiciary.”

Exacta Systems (formerly Encore) machines are currently used at Keeneland, Red Mile, Kentucky Downs, and Ellis Park in Kentucky. Ainsworth Game Technology historic horse racing games – which also claim to be pari-mutuel – are used at the Derby City Gaming facility in Louisville owned by Churchill Downs.

More than $2.2 billion was wagered on historical horse racing at four Kentucky racetrack facilities in the 2019-'20 fiscal year that ended in June, with gross commissions of $188.9 million. Nearly $15.6 million went into the Thoroughbred Development Fund, $1.8 million for the Standardbred Development Fund, $650,000 for the Equine Industry Program, $320,000 to Equine Drug Research, $320,000 to the Higher Education Fund and $15.2 million to the Kentucky General Fund.

“Historical horse racing is an important part of Kentucky's economy that supports jobs and contributes over $21 million to the state budget,” said Gov. Andy Beshear. “We are working with various partners to find a path forward.”

Damon Thayer, majority floor leader of the Kentucky Senate and a former racing industry executive, said: “Today's decision by the Kentucky Supreme Court was wrong, irresponsible and potentially devastating for Kentucky's racing industry. I encourage Kentucky's race tracks to explore all legal remedies so that thousands of people don't lose their jobs in the middle of a pandemic.”

A statement from Exacta said: “Exacta appreciates the clarity surrounding HHR in Kentucky, and we are excited to present our system solution that complies with today's ruling to the KHRC in the coming days.”

Churchill Downs Inc., which saw its share price fall by 9.74% on Thursday after the Supreme Court ruling, issued the following statement after the markets closed:

“We will work within our legal rights and in coordination with Kentucky legislators to ensure the ongoing legal operation of our HRM facilities in Kentucky so that we can continue to provide critical funding for the equine industry and support the citizens in the Commonwealth of Kentucky.

“Although CDI does not use the Exacta system in question at any of our HRM facilities, we appreciate Kentucky Governor Andy Beshear's support of the industry in his statement regarding Historical Horse Racing today.”

Read the Supreme Court opinion here.

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