02/20/2014 1:30PM

Kentucky court rules legality of instant racing still an open issue

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LEXINGTON, Ky. – A lower court will need to determine whether Instant Racing machines are legal under Kentucky’s laws, the state’s Supreme Court said in a multi-faceted ruling released on Thursday.

Although the Supreme Court ruled that the Kentucky Horse Racing Commission had the authority to approve rules governing the machines, the court also said that “whether the licensed operation of wagering on [Instant Racing machines] … violates the gambling provisions of the Kentucky Penal Code is an issue that depends upon facts not in the record,” sending the case back to the circuit court for review.

The unanimous ruling does little to clear up an issue that has been wending its way through Kentucky’s courts for more than three years. The Family Foundation of Kentucky, a conservative group opposed to the expansion of gambling, challenged the legality of the machines late in 2010 shortly after the Kentucky Horse Racing Commission passed rules allowing tracks to install and operate the devices.

The ruling likely will mean that the circuit court will need to consider the arguments posed by the Family Foundation against the legality of the machines, after an earlier ruling that the group had not been granted enough time to present evidence to an earlier court. That process will likely take months.

The court also ruled that Kentucky does not have the authority to collect a pari-mutuel tax on wagers made through the machines, saying that the tax can only be assessed under state law on a live horse race. The state currently assesses a 1.5 percent tax on the betting, with nearly two-thirds of the tax being returned to the racing industry. A spokesperson for the Kentucky Finance Department could not immediately comment on how that part of the ruling would affect the state’s collection of the tax.

Two Kentucky tracks, Ellis Park and Kentucky Downs, have installed the devices. The machines use the results of horse races run in the past to generate random numbers that determine payouts to players, and they closely resemble slot machines. Last year, Kentucky Downs, located just north of the Tennessee border, used revenue from the machines to distribute $900,000 a day in purses during its five-day meet.

Dick Brown, a spokesman for the racing commission, said in a statement that the portion of the ruling validating the commission’s authority to pass rules for the devices “is an important victory for the commonwealth and the future of the horse industry in Kentucky.”

Instant Racing machines have not been installed in other Kentucky tracks for a variety of reasons. Turfway Park, which is owned by a company with a casino just over the Ohio River in Cincinnati, has said that they will not consider installation of the machines until the legal review has been completed. Keeneland has also said that it wants the legality of the machines to be firmly established by the courts.

Churchill Downs, meanwhile, has declined to install the devices because it believes the machines are not competitive with slot machines at casinos in Indiana and Ohio, and because operation of the devices would weaken its lobbying efforts to get authorization to open a casino.