Kentucky lawmakers pass bill to preserve historical horse race wagering

Published 9:39 pm Thursday, February 11, 2021

Kentucky’s horse industry won a high-stakes showdown Thursday night when lawmakers gave final passage to a bill aimed at securing the legal status of wagering on historical racing machines.

The House voted 55-38 to send the measure to Gov. Andy Beshear, who previously endorsed the bill intended to preserve a lucrative revenue source tapped into by the state’s racetracks. The Democratic governor welcomed the House action sending the bill to his desk, calling the measure a crucial step to ensure the state’s signature thoroughbred industry remains strong.

The slots-style ventures proliferated in the past decade and tracks reinvested some of the revenue to make Kentucky’s horse racing circuit more competitive with casino-backed tracks in other states.

But historical horse racing operations were jeopardized by a court ruling last year.

The bill seeks to fix flaws that led Kentucky’s Supreme Court to rule at least some forms of wagering on historical horse racing don’t meet pari-mutuel wagering standards. The measure would insert such operations into the definition of pari-mutuel wagering.

Fallout from the court ruling began recently when one of the state’s historical racing venues, operated jointly by Keeneland and Red Mile in Lexington, closed temporarily.

Historical racing machines allow people to bet on randomly generated, past horse races. The games typically show video of condensed horse races. The state’s racing industry pumped millions of dollars into developing historical horse racing parlors, and bettors in Kentucky wagered more than $2 billion on the machines in the past fiscal year.

During the nearly three-hour House debate, Republican Rep. Matthew Koch said historical racing has been “a shot in the arm for this industry.” The bill’s supporters warned the loss of that revenue would cripple the equine sector, eliminate jobs and hurt businesses servicing the industry.

“Let me remind you, that while Kentucky is the best place to raise a horse, it is not the only place that you can raise a horse,” Koch said. “And we have to fight to keep that here.”

The debate turned emotional at times, as supporters talked about the horse industry’s deep roots and economic importance in Kentucky. Meanwhile, opponents objected to the bill on moral grounds.

Critics denounced the bill as a bailout for tracks that forged ahead with opening historical wagering parlors despite lingering questions about the legality of the machines. They portrayed the issue as a deep-pocketed racing industry reaping profits off people lured to gamble on the machines.

“It will continue to increase heartache and tragedy and inflict a lot of suffering and pain upon people if we pass this bill,” said Republican Rep. David Hale.

The Family Foundation, a conservative group that fought a long legal battle against historical horse wagering, said “money and political power” had prevailed in the legislative showdown. But the group warned that the slots-style machines will eventually overshadow racing operations.

“We have said all along that this bill would not save the horse industry, but would replace it. Horses are fast, but mechanized gambling is faster and more profitable,” foundation spokesman Martin Cothran said in a statement.

Meanwhile, some lawmakers continued to call for a higher tax rate on historical racing operations. They say the tax rate is too low for an industry reaping huge revenues from the ventures.

The governor said Thursday night that racetracks had offered commitments for “enacting a more fair and equitable tax structure” during the current legislative session.

“This is what can happen when we stop fighting and work together,” Beshear said in a statement.

Horse industry leaders from several tracks also weighed in on the tax issue Thursday night. In a statement, they promised to “work constructively to revise and raise the tax structure on historical racing machines, including consideration of a fair and equitable graduated tax structure.”

Rep. Joni Jenkins, the top-ranking House Democrat, said she expected the industry to follow through on efforts to adjust the “shameful tax rate” on historical race wagering.

“I am going to take at their word, the horse racing industry, that acknowledges that this needs to be looked at,” she said.