Selected Virginia Stallion Season Auction Offerings To Benefit Kentucky HHR Lobbying Efforts

The developing situation regarding the status of historical horse racing (HHR) in Kentucky has created an “all hands on deck” scenario within the state's racing industry to ensure the crucial revenue source remains in place.

That call has been heard outside the state as well. The Virginia Thoroughbred Association will feature a group of offerings during its upcoming stallion season auction where the full proceeds will benefit the Kentucky Equine Education Project's lobbying efforts toward restoring HHR in the state and putting it on firmer legal ground.

The auction, set to take place Wednesday, Feb. 10, features four seasons donated thus far by Kentucky stallion operations where the money will go toward the KEEP Alliance, a branch of KEEP specifically dedicated to lobbying, grassroots campaigns, and otherwise raising awareness among key people and groups about the importance of HHR in Kentucky.

As of Friday morning, the seasons benefitting the KEEP Alliance come from Airdrie Stud's Complexity, Spendthrift Farm's Goldencents, Gun Runner of Three Chimneys, and Not This Time of Taylor Made Stallions. Farms are welcome to donate further seasons to benefit the KEEP Alliance prior to the auction.

VTA executive director Debbie Easter said the seasons were added to the auction in recent weeks, helping push the total number of different stallions on offer near 220 from 11 different states.

“Obviously, it's a good cause,” Easter said. “Everybody gets too regionalized sometimes, and it's important for us to work together to help each other. This is an important thing for Kentucky, and helping keeping things going along is important. Horse people working together always do better than working apart, so we're trying to move the needle a little bit.”

Virginia's Thoroughbred economy is familiar with the benefits HHR can have on a program.

Gov. Ralph Northam signed an HHR bill into law in 2018, which set into motion the re-opening of Colonial Downs and significant funding sources to fuel purses and incentive programs on and off the racetrack. The Virginia-Certified program paid out a record $1.77 million in awards in 2020, and Easter said HHR revenues have just started to kick into that pool, leaving even more room for growth in the future.

“We certainly know how important HHR is going to be to us,” Easter said, “and we've certainly seen what it's done for Kentucky, and they can't afford to lose that.”

While Virginia has been able to show positive growth with the help of HHR, it's widely accepted that Kentucky's Thoroughbred market is the tide that lifts and sinks the other regional-market boats in North America.

Even the largest foal-producing jurisdictions outside of the Bluegrass State are supported heavily by Kentucky stallions, and its starting gates are filled by Kentucky-breds. A weakened Kentucky racing industry would have ripple effects on the state's breeding program, and the rest of North America would feel the aftershock whether they race or breed in the state or not.

“Debbie was very enthusiastic about helping us,” said Elizabeth Jensen, KEEP's executive vice president. “I think everybody realizes as goes Kentucky, so goes the rest of the country's racing industry, so we need to keep it strong and vibrant here. We're happy that our counterparts in Virginia are willing to help us out and support us.”

Beyond the season donations, Jensen said Kentucky's major stallion operations have supportive of the advocacy measures to preserve HHR in the state. She noted that farms including Ashford Stud and WinStar Farm have made cash donations, and many stallion stations have sent out emails to their client lists urging them to take action.

“Preserving historical horse racing has to be the entire industry in Kentucky's priority right now,” Jensen said. “If we lose that, we lose 1,400 jobs overnight, and losing those purses and the horses that we're getting at Ellis Park and Kentucky Downs during summer racing, and just the whole racing circuit in Kentucky will be severely impacted if we don't get this done.”

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Bill To Legalize HHR In Kentucky Passes Committee Unanimously, On To Senate Floor

Senate Bill 120, which would expand Kentucky's definition of parimutuel wagering to include historical horse racing (HHR), passed the state's Senate Committee on Licensing and Occupations unanimously Thursday morning. The committee, led by bill sponsor Sen. John Schickel (R-District 11), heard testimony from representatives of the horse racing industry as well as The Family Foundation, which has long opposed HHR.

Trainer Tommy Drury provided the committee with perspective on the “trickle down” impact of the horse racing industry, beyond the people it employs directly and to the vendors who provide hay, grain, and other services to his barn.

Drury also pointed out that even with purses fueled by HHR, some Kentucky tracks are already struggling. He pointed out that for a given set of maiden conditions, the purse at Turfway is $32,000 while the same conditions at Oaklawn match a purse of $82,000.

In fact, Drury, who bases in Kentucky year-round, said he could afford to continue training while providing a consistent base for his family in part because Churchill Downs Inc., purchased Turfway Park and increased purses from where they had been — a move he credits to the income from HHR.

But predictably, The Family Foundation cast doubt on racing's portrayal of the HHR issue. The state supreme court ruled last fall that the Exacta Systems machines installed at Keeneland and Red Mile did match the legal definition of parimutuel wagering, and ruled Jan. 21 it would not rehear the case as requested by the tracks. Family Foundation spokesman Martin Cothran was critical of the tracks' decision to keep HHR running between the ruling in the fall and the appeal in January.

“They were the ones who asked the court if what they were doing was on the up and up,” he said. “Now we have that answer, and they've been ignoring it.”

Contrary to the usual terminology used by the racing industry, Cothran referred to the HHR machines as “slots” and pointed to CDI executives as beneficiaries of the games moreso than their employees.

“This company is associated in the minds of many people with a horse race which is considered by many to be the most exciting two minutes in sports and of which many of us, as Kentuckians, are quite proud,” said Cothran. “But in fact, this company has moved further and further away from racing, becoming an ever-more lucrative, multi-billion dollar casino corporation. Its stock is also publicly traded, which means it is owned by shareholders, many of whom live outside of the state.

“In 2019, 76.7% of this company's employees were hourly and the median compensation was $23,670 … and that calculation includes the compensation of the company's opulent executive cast. The CEO's total compensation in 2019 was $10,601,294 — 447 times the median compensation to gain entry. We wonder what that comes to as an hourly wage, and how it compares to the wages the company pays the grooms and the hotwalkers it is using to represent the industry.”

The primary question that seemed to concern committee members was whether the legislature could pass a law allowing historical horse racing to become part of the legal definition of parimutuel wagering, or if that would require an amendment to the state's constitution, which states that only lottery, charitable gaming, and parimutuel wagering are permitted. Racing supporters believe a legislative fix is sufficient, while The Family Foundation believes it requires constitutional amendment.

Schickel stated during the hearing he did not favor a constitutional amendment to address the question, as he does not want to open the door for casino gaming in Kentucky. While giving 'aye' votes, several committee members admitted they weren't sure which side was correct and suspected the issue would continue to be contested in court.

The bill will now move to the floor of the state senate. The Lexington Herald-Leader reported Thursday that it's generally expected to succeed there, but the state house of representatives is another question. The current bill does nothing to change the structure of tax revenue from HHR, which was one concern cited by critics. Besides that issue, there remain a number of socially conservative areas of the state which do not benefit from the racing industry as greatly or directly that are likely uncomfortable with additional gaming in the state.

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HHR Bill Reported Favorably Out of Kentucky Senate Committee

The bill that attempts to legalize historical horse race (HHR) gaming in Kentucky by inserting a one-paragraph definition of “pari-mutuel wagering” into an existing state statute advanced with a favorable recommendation out of the Senate Licensing and Occupations Committee Feb. 4.

SB120 will now be scheduled for a hearing before the full Kentucky Senate.

Proponents testified that Kentucky's racing industry is in danger of economic devastation without the support of HHR to bolster purses, and that defining “pari-mutuel” for the first time within state laws is the appropriate way to make sure the $2.2-billion handle generated from that form of gaming is compliant with the state's constitution.

Opponents testified that the proposed legislative fix remains unconstitutional, that it is harmful to Kentucky culturally and economically, and would actually erode the state's Thoroughbred industry over time because HHR licensees might be inclined to phase out live horse racing in favor of cheaper-to-operate electronic gaming.

The two sides sparred in polite but sometimes barbed fashion for nearly an hour, and when the vote was finally called, Senator Tom Buford presaged the highly likely eventuality of a continued court fight over HHR: “I think we are in certainly a gray area, and I do believe we will see this resolved in the courtroom at some moment in time,” he said prior to casting an “aye” vote.

The setting for Thursday's HHR bill's hearing certainly seemed friendly to supporters: Senator John Schickel, who introduced SB 120 on Tuesday, also chairs the committee that had the authority to report it favorably. The measure also has the backing of Senate President Robert Stivers, and Senate Majority Leader Damon Thayer was in attendance to lend support to those who testified in favor of the bill. That team included Kentucky-based trainer Tom Drury and attorney William Lear, Jr., who is a Keeneland Association trustee and former state legislator.

In fact, representatives of the anti-gambling opposition group The Family Foundation (TFF) acknowledged right off the bat that they were fighting an uphill battle. Martin Cothran, senior policy analyst for TFF, began his testimony by thanking Schickel for being a “good sport” and allowing them to speak out against the measure even though TFF knew the bill had the chairman's obvious support.

But Cothran then launched into a concise deconstruction of why everyone was gathered for the hearing in the first place—because the Supreme Court of Kentucky had twice within the past five months affirmed that HHR gaming did not meet the required legal definition of pari-mutuel wagering, and how five of the state's six HHR licensees were “thumb[ing] their noses at the court” by continuing to operate HHR in spite of that ruling.

“That alone should have doomed their efforts here in Frankfort, where laws are made with the expectation that they are to be followed,” Cothran said.

Cothran also pointed out that it was not–as he said is often misrepresented–TFF that initially challenged the legality of HHR in Kentucky. He noted that back in 2010, it was the racing interests themselves who first petitioned Franklin Circuit Court asking for a declaration that HHR was legal. He said TFF only entered the fray when the group realized there was no other opposition to that initiative.

“[The HHR licensees] were the ones who asked the courts whether what they were doing was on the up-and-up. Well now we have an answer to that question, and they are ignoring it,” Cothran said, adding that the racetracks and the Kentucky Horse Racing Commission are now “pretending that these machines somehow constitute pari-mutuel horse wagering.”

Cothran continued: “Depending on your perspective, that was either very ingenious or preposterous that someone could invent a machine that showed live racing with dead horses. Count us as skeptics on this. And count us as skeptics too that you can assert in an equally preposterous way that you can simply declare, as this bill does, that what is not pari-mutuel wagering by any other definition you can find is, in fact, pari-mutuel wagering.

“Rather than the horse tracks and their allies on the horse racing commission changing their actions to bring them into alignment with the law, we are being asked in this bill to bring the law into alignment with the actions of the tracks—and in doing so making a mockery of the constitution,” Cothran said.

Cothran added that the proper way to make HHR legal is to amend the state's constitution, which currently stipulates that the only permissible forms of gaming are pari-mutuel horse racing, the Kentucky Lottery, and charitable gaming.

But Lear pointed out that a 1931 Kentucky Court of Appeals ruling (Commonwealth v. Kentucky Jockey Club) already exempted the pari-mutuel system of betting on horse races from anti-gambling laws.

Lear then explained that in 2020, when the Supreme Court ruled HHR was not considered legally pari-mutuel, “it extended what you might call an engraved invitation to the Kentucky General Assembly to deal with it,” which he said was exactly what SB 120 would accomplish by including “previously run” races within the newly proposed definition of “pari-mutuel.”

Lear said constitutionally speaking, the bill “applies because it's the first time there's been a statutory definition of pari-mutuel wagering. It has to cover both everything we're doing in live racing today, as well as HHR, and that's what it does. It deals with the issue raised by the Supreme Court of different people betting on different races. It deals with the issue of seed pools, which are really just a pre-funded minus pool.

“There is no way a constitutional amendment would be required to do this kind of gaming,” Lear summed up.

Stan Cave, an attorney who has led TFF's efforts against HHR, disagreed.

“As you look at the bill you're about to vote on, compare the language of that bill to what the Supreme Court said pari-mutuel wagering was,” Cave said. “And then ask yourself the question 'Does the language in the bill satisfy, or is it consistent with the definition of pari-mutuel wagering explained by the Kentucky Supreme Court?' If it's not, it's unconstitutional. It's no giant leap of logic. A six-year-old could do the exercise. The language in the bill does not compare, at all, remotely, in the slightest, with the language that the Supreme Court said constituted pari-mutuel wagering. Thus, this bill is unconstitutional.”

Thayer took umbrage with the way Cothran and Cave framed their arguments.

“I was sworn in [to the Senate] 18 years ago today,” Thayer said. “And I've never seen testimony that insulted an entire industry more than what I've heard here today. This testimony was overtly specious. By that I mean superficially plausible but actually wrong.”

At this point Thayer asked Lear to be granted the floor for a rebuttal. Lear reiterated his points about the 1931 court precedent and then went off on a tangent about how HHR is not a game of chance like a lottery, because HHR incorporates elements of handicapping skill on the part of players.

Schickel politely cut the attorney short when Lear began to list off the various handicapping skill features of HHR before giving Cave a last word prior to the vote.

“I'd just like you to remember: Who's won in the Court of Appeals? Who's won unanimously in the Supreme Court–twice? Who's won unanimously in petitions for rehearing?” Cave asked rhetorically. “TFF. I have no incentive to misrepresent to you what The Jockey Club case says or what the law concerning pari-mutuel wagering is. This bill is unconstitutional. It violates Section 226 of the constitution.”

Lear then interjected: “Mr. Chairman, may I just say, you just heard from the only person in the world that believes TFF won the first decision at the Kentucky Supreme Court.”

Passage appeared to be unanimous among committee members whose votes were audible, although several Senators whose names were called appeared not to respond or did not make audible responses during the roll call.

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Kentucky Senators Introduce Historical Horse Racing Bill ‘To Preserve The Status Quo’

The Kentucky Equine Education Project (KEEP), Kentucky's equine economic advocate, applauds Senator John Schickel and Senate President Robert Stivers for introducing Senate Bill 120 today, which will keep historical horse racing in Kentucky and ensure the future of our signature equine industry.

In response to the Supreme Court's ruling on historical horse racing, the legislation will define pari-mutuel wagering to be consistent with how the Kentucky Horse Racing Commission has regulated live racing for decades and historical horse racing for the last ten years. The legislation also reaffirms that only pari-mutuel wagering on simulcasts of live racing can occur at simulcast facilities. In effect, this maintains the status quo that Kentucky has known for the last decade, ensuring HHR venues can continue or resume operations that are so beneficial to the horse industry and statewide economy.

KEEP issued the following statement regarding the legislation:

“We applaud Sen. Schickel for championing Senate Bill 120, which will keep historical horse racing in Kentucky and protect critical jobs, economic investment and state revenue at a time when they are needed most. We also thank Senate President Stivers for his support as a co-sponsor of this important legislation. The Kentucky Supreme Court gave the General Assembly clear direction to preserve the status quo, and SB 120 gives us a path forward.

“Historical horse racing is an integral part of Kentucky's signature equine industry and our economy as a whole and has helped position Kentucky as a worldwide leader in racing. With real jobs and investment on the line, we urge the members of the Senate Licensing and Occupations Committee to promptly move this legislation forward so that the commonwealth can continue to benefit from historical horse racing, now and in the years to come.”

KEEP is joined by a broad coalition of industry, business and economic development groups in support of the bill and has been encouraging Kentuckians to contact their elected officials regarding the legislation. SB 120 is set to be heard in the Senate Licensing and Occupations Committee at 11 a.m. on Thursday, Feb. 4.

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