04/02/2014 3:52PM

Kentucky commission approves Keeneland, Red Mile applications for Instant Racing machines

Image courtesy of Keeneland
An artist's rendering of the Keeneland Event Center, a 40,000-square-foot facility that will open next year and house Instant Racing machines and simulcasting.

LEXINGTON, Ky. – The Kentucky Horse Racing Commission on Wednesday unanimously approved applications by both Keeneland and the Red Mile to operate hundreds of slot machine-like devices at separate facilities at their Lexington locations.

At Keeneland, the devices, called Instant Racing machines, will be housed in a new 40,000-square-foot building just northeast of the Keene Barn, Keeneland officials said. The facility, which is scheduled to open in the summer of 2015, also will be used for all of Keeneland’s dark-day simulcasting and offer food and beverage service. Parking will be available on a new blacktop lot adjacent to the building, according to plans submitted to the commission.

Keeneland’s application asked for permission to operate 600 of the devices, which use the results of previously run horse races to generate payouts for games that are nearly identical to those offered on slot machines. The machines have been installed at two other tracks in the state, Kentucky Downs and Ellis Park, after first being installed at Oaklawn Park more than a decade ago.

Earlier this year, a Kentucky Supreme Court judge ruled that a lower court had not properly conducted a hearing in a case challenging the legality of the machines. The court is expected to re-hear the case later this year, which could result in the machines being ruled illegal. Any ruling by the lower court is likely to be appealed.

Vince Gabbert, the chief operating officer of Keeneland, said track officials were confident that the courts would not strike down the legality of the machines. “That should not be a tough hurdle to overcome,” he said after the commission approved the application.

The group challenging the legality of the machines, the Family Foundation of Kentucky, contends that the machines are so nearly indistinguishable from slot machines that they should not be considered legal under the Kentucky constitution, which bans all forms of wagering but pari-mutuel betting and the state lottery.

Gabbert said Keeneland estimates the machines will handle approximately $1 million a day, which would generate approximately $30 million in commissions annually. Keeneland would retain the vast majority of that figure, while breeders, horsemen, and some racing-related state agencies would also receive cuts.

“We have to take every opportunity to do what’s good for our sport,” Gabbert said.

Marty Maline, the executive director of the Kentucky Horsemen’s Benevolent and Protective Association, said after the meeting that horsemen did not yet have an agreement with Keeneland over the horsemen’s cut of the revenue. “We’re excited,” Maline said. “We think this is going to be a tremendous market.”

Since first being installed in 2011 at Kentucky Downs, which is about a one-hour drive from Nashville, Tenn., the machines at Kentucky Downs and Ellis Park have attracted approximately $600 million in bets and have generated $39 million in revenue for the two tracks, according to KHRC figures. Horsemen have received $5.4 million in purse subsidies.

The machines have attracted far more in bets at Kentucky Downs than at Ellis Park, which is in a market that includes two nearby casinos in Evansville, Ind., just over the river from the track. While Keeneland’s facility will have the benefit of being located just outside a small city, it also will compete with the Red Mile facility, which is located just southeast of downtown Lexington. Red Mile plans to open its 500-machine parlor in the summer of 2015 as well. 

If Keeneland’s plans for the facility remain on schedule – and if legal challenges do not scuttle or delay the plans – the iconic Bluegrass racetrack will open its gambling parlor exactly 20 years after a former Keeneland president, James E. “Ted” Bassett, gave a speech in front of the Kentucky legislature vowing that the track would not support casino gambling at Kentucky tracks based on a “mythical armada” of competition from riverboats in surrounding states.

Since then, gambling has rapidly expanded in those neighboring states, while the Kentucky legislature has failed to show any widespread support for giving racetracks the authority to operate slot machines.