Churchill Downs Inc. files lawsuit involving New Jersey online casino

Churchill Downs Inc., the giant racetrack and casino company, has alleged in a lawsuit that it was bamboozled by a New Jersey real estate developer as the company pursued a deal to operate an internet gambling platform in the state.

The lawsuit, filed in Jefferson Circuit Court on Feb. 3, opens a window into previously undisclosed efforts by Churchill to enter the online casino market in New Jersey, which last year legalized online casino gambling. Under New Jersey law, online gambling operations are restricted to bricks-and-mortar casinos in the state, requiring outside operators like Churchill to reach a deal with an in-state casino operation if they want to enter the market.

Churchill has bought three standalone casinos over the past three years and launched an online gambling site as part of its efforts to expand beyond racing. The online site, called luckity.com, uses the results of horse races for payouts on games designed to look like casino games, and its returns have been below projections.

According to the lawsuit, Churchill paid $2.5 million in earnest money to a company owned by Nicholas Ribis in early August of last year to obtain the right to operate the internet operation of Showboat casino in Atlantic City if Ribis’s company was able to buy the property from Caesars Entertainment Corp. Churchill said in the suit the amount was refundable if Ribis’s company, called NLR, did not reach a definitive agreement to buy the casino by Oct. 15.

The lawsuit states that Ribis was unable to reach the agreement by Oct. 15, but that throughout November and December he “repeatedly represented to CDI both in e-mail conversations and in phone conversations . . . that a deal between NLR and Caesars was ‘very close,’ that lawyers were putting the ‘final touches’ on the purchase and sale agreement, that final documents were expected ‘this AM’ or ‘tomorrow,’ and that an agreement would be signed ‘late today or tomorrow,’ ” the lawsuit says. Officials of Caesars told Churchill officials they had no plans to sell the property to Ribis or his company in January, the suit states. At that point, Churchill demanded that Ribis return the $2.5 million.

“Ribis acknowledged that he owed CDI $2,500,000, but refused to commit to pay it at CDI’s request,” the suit states.

The suit is seeking the $2.5 million payment, “compensatory damages,” interest, and litigation costs.