Kentucky lawmakers | Horse Racing Free Tips

by Sara Gordon and Katie Petrunyak

Many of the nearly 250 people attending the Kentucky Thoroughbred Farm Managers Club's (KTFMC) monthly meeting, held Tuesday evening at the Keeneland sales pavilion, were unfamiliar with the unregulated and untaxed gaming machines known as “gray machines.”

The risk these gray machines pose to historical horse racing (HHR) gaming and the state's horse racing industry as a whole were the main topic of the meeting that included a discussion and Q and A session of Central Kentucky legislators. In a panel moderated by the Kentucky Equine Education Project (KEEP)'s executive director Will Glasscock, Senator Amanda Mays Bledsoe (Republican, Lexington), Representative Matt Koch (Republican, Paris), Senator Damon Thayer (Republican, Georgetown) and Senator Reginald Thomas (Democrat, Lexington, minority caucus chair) shared their opposition toward the expansion of gray machines in Kentucky.

“We have not forgotten what the legislature did for us in 2021,” Keeneland President and CEO Shannon Arvin recalled of the passing of SB 120, which continued the operation of HHR gaming, in her opening comments for the meeting. “We have to pay attention to what goes on in Frankfort. We can't just live in our own little world.”

The lawmakers on the panel introduced the growing issue of gray machines, which resemble slot machines but do not qualify as a legalized form of gaming in Kentucky as there is no oversight to their use. These machines, which are marketed as games of skill, are typically located in establishments such as gas stations, convenience stores and bars.

“They are illegal casino games,” explained Sen. Thayer, the Senate Majority Floor Leader. “The proprietors have a business model where they come into a state where there's a gray area in the law, they pay a lawyer to get a friendly opinion that says, 'Yeah, they're really legal.' And then they come in and try to get integrated in local communities.”

The meeting's legislators noted how there is currently no exact count of how many machines are in Kentucky because the machines are not required to be registered or tracked, but it is believed that there are already thousands in use and that their numbers are growing in every county across the Commonwealth.

Rep. Koch explained how the expansion of gray machines poses a major threat to the horse racing industry. While the majority of the revenue from these machines go to out-of-state gaming companies, revenue from HHR goes to support the state's signature industry: horse racing. He said that if gray machines remain, they could cripple the industry and decimate the jobs within it.

“It's going to end HHR. I don't think that's the type of gambling that Kentucky wants to see,” said Rep. Koch.

The panelists explained how these gray machines could also affect the communities they reside in, particularly when it comes to their impact on youth. Since the machines are unregulated, the lack of supervision creates the opportunity for minors to participate.

“You don't want to introduce [teenagers] to gaming at that age. That invites other sorts of bad actions. Keep them away from gaming and illegal activities, because one illegal activity begets another,” said Sen. Thomas.

Thayer said that other states are also working to confront the issues of gray machines. In Virginia, they have been the focus of 150 lawsuits, and in Pennsylvania, they were initially legalized but are now facing issues concerning a legal and regulatory gray area.

During the Q and A, attendees asked for further details regarding where gray machines come from and the entities behind them.

Legislators described how Pace-O-Matic and Prominent Technologies first brought the machines to Kentucky in 2021. The issue of their existence in the state was brought to the floor last year, where the legislature nearly outlawed them, but the House and Senate ultimately could not agree on the bill, so the effort fell short.

Representative Killian Timoney, the sponsor of last year's bill, was present at Tuesday's meeting and said that he will be filing similar legislation this week. Once submitted, it could take up to two to three weeks for a decision to be made as it moves through the legislative system.

The panel emphasized that now is the time for industry participants to reach out to their senators and representatives to help sway votes towards banning the use of gray machines in Kentucky.

“If you want to preserve this industry and see it continue to grow, you need to be ready to reach out,” said Rep. Thayer. “If it doesn't happen now, it will be harder next year as [gray machines] continue to expand like a bad virus.”

Glasscock shared details about the upcoming KEEP Day at the Capitol, set for this Thursday, Feb. 23, which provides members of Kentucky's equine industry and community an opportunity to share with legislators in Frankfort the importance of horses to their districts and to the state's economy. (Click here for more).

“We are on the ropes with this one,” said Rep. Timoney. “I don't know if you all can afford to not send someone to KEEP Day. The horse industry needs to be well-represented on Thursday. It's a signature industry and we need to protect it.

Koch further encouraged industry members to keep the conversation going with their representatives and senators–not only in their districts but across the entire state–concerning the importance of HHR, its impact on racing, breeding and sales and its overall significance to the state's economy.

“We need to spread a positive message of HHR. We're two years into this and it's doing great things for Kentucky. [We need to] reinforce to legislators not to strip that away.”

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Two days after Keeneland Association and Red Mile announced they would be shutting their joint historical horse racing (HHR) venture at the Lexington harness racino while imploring the Kentucky legislature to provide “more clarity” regarding the disputed legal status of HHR, Vince Gabbert, Keeneland's vice president and chief operating officer, was called upon during the Jan. 26 Kentucky Thoroughbred Development Fund (KTDF) teleconference to explain why that decision was made in the absence of any formal order from state officials to cease HHR, which is ongoing at other licensed locations despite an apparent dead-end to the case in the courts.

“We did, as you can imagine, some significant research and going back and forth to ensure that we were making the right decision as it relates to our joint entities between us and Red Mile,” Gabbard said. “I will tell you that we feel like we took a very conservative approach.

“But I think in every way possible we've seen the measures that we took over the weekend have helped bring the urgency even more to the forefront than what we had so that the legislature understands the impact that not only racing, but HHR has on the economy in the commonwealth,” Gabbert continued. “And hopefully, we will see a legislative remedy in the next couple of weeks.”

The KTDF, which is funded by three-quarters of 1% of all money wagered on both live Thoroughbred races and HHR gaming, plus 2% of all money wagered on Thoroughbred races via inter-track wagering and whole-card simulcasting, has had a rough go of trying to supplement purses at Kentucky's five Thoroughbred racetracks over the past year.

The COVID-19 pandemic first wreaked havoc with Kentucky's ability to generate purses derived from gaming revenue last March, and the effects are still causing major ripples because of spectator-free race meets and capacity limitations at gaming facilities.

Then last week, on Jan. 21, the Kentucky Supreme Court denied a petition for rehearing its 7-0 Sept. 24 judgment that told a lower court to re-examine the legality of historical horse race (HHR) gaming in the commonwealth.

Although the Supreme Court case only involves HHR machines made by Exacta Systems, whose machines are approved for use at Red Mile, Kentucky Downs and Ellis Park, the gaming systems operate in broadly the same manner throughout Kentucky, meaning that a precedent established for one version is likely to affect all forms of HHR gaming.

The racing industry's urgent focus is now on Kentucky lawmakers to legalize HHR, but roadblocks loom in the form of conservative resistance to the expansion of gambling in the state and the fact that the legislature only meets for 30 days in odd-numbered years, with the 2021 session scheduled to end Mar. 30.

The articulation of Keeneland's position and the political leverage it could possibly generate came several hours after a dire Tuesday morning announcement by Ellis Park that its racino could go out of business without the legalization of HHR.

“Without the revenue associated with HHR, there is no realistic path forward for Ellis Park,” Ellis general manager Jeffery Inman said in a statement released to Kentucky's Eyewitness News. “Were we to rely only on racing and simulcast revenue, we could not even keep this 99-year-old facility maintained, let alone provide the financial investment necessary to prepare for and conduct a world-class live race meet. Without HHR support, purses would drop dramatically, resulting in a greatly diminished live racing product. In short, the loss of HHR revenue at Ellis Park would likely threaten the very survival of one of Kentucky's iconic racing venues.”

It's also been nearly four months now since Churchill Downs Inc., (CDI), the gaming corporation that owns the tracks and HHR licenses associated with Churchill Downs Racetrack and Turfway Park, has already halted reconstruction on its demolished Turfway grandstand, vowing not to continue the planned rebuild until HHR's legality gets sorted out.

As Bill Landes III, the chairman of the KTDF advisory committee, glumly put it during Tuesday's meeting, “As if we all don't know, we could use some remediation of HHR.”

But outside of writing letters seeking help to elected and appointed officials in Kentucky (which the KTDF board voted unanimously to do), there were no other concrete ideas proposed to put HHR back on firmer legal footing.

KTDF board member J. David Richardson suggested emphasizing in those letters that “our perspective is a bit unique in that we actually delve into what [HHR revenue] means to Kentucky racing, probably more deeply than virtually any group, I think.”

Richardson said it was important “to let people know that the stewardship of these monies are very closely monitored by this committee and by our staff and are really appropriately used.

“This isn't 'funny money,'” Richardson summed up. “I think it's important to reiterate every now and then how closely we follow every dime.”

To that end, the KTDF voted unanimously to forward approval recommendations to the Kentucky Horse Racing Commission for $2,061,900 in KTDF funds for Keeneland's spring meet and a range of $4.3 to $4.9 million for the Churchill Downs meet that spans April-June.

Gabbert said that Keeneland's “goal, from an overall purse standpoint, would be to be on par with where we were in spring of 2019.” He did not cite specific dollar amounts.

Ben Huffman, who serves in the dual capacities of racing secretary at Keeneland and the director of racing at Churchill, said that for Keeneland, “I'm kind of putting on the finishing touches of the condition book; actually may go to the printer with it in about 10 days or so. But the maiden special weights will be $79,000. And the 'non-winners of two' allowance race will be $81,000 at Keeneland this spring.”

As for Churchill's levels, Huffman said, “we haven't even met here collectively about spring purses yet,” but that he expects those figures to be available by mid-February.

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