KHRC petitions Supreme Court to revisit historical racing machines ruling

LEXINGTON, Ky. -- The Kentucky Horse Racing Commission and three tracks in the state have joined together to petition the state Supreme Court to revisit a ruling issued late last month that invalidated a type of gambling machine in wide use at state tracks.

The petition, which was filed on Wednesday, according to a copy of the suit, argues that the Kentucky Supreme Court had earlier determined in 2014 that the state’s definition of pari-mutuel wagering included several terms that the Supreme Court contested in its Sept. 24 ruling invalidating the devices. Specifically, the petition says that the 2014 ruling determined that tracks could “seed” pari-mutuel pools with money prior to the pools opening, and that the definition of pari-mutuel is not restricted to a “single event,” two provisions that the Supreme Court contested in its most recent rulings.

The Sept. 24 ruling has put in jeopardy a major source of revenue for the tracks, which have continued to operate the machines since the ruling was issued. The ruling directed a lower court, the Fifth Circuit Court, to re-issue an opinion on the legality of the machines consistent with its own ruling, and racing officials in the state have said that the machines will not have to be shut off until that ruling is issued, and only if it contains an explicit ban on the types of machines currently operating in the state.

In the petition, the commission and the tracks – Ellis Park, Kentucky Downs, and Keeneland – said that the machines currently in use in the state were designed to meet the definition of pari-mutuel wagering laid out by the Supreme Court in 2014. Since the machines came into widespread use in the state, the commission has contracted with a third party to certify that the machines meet the state’s legal definition of pari-mutuel wagering, and lower courts had earlier dismissed challenges to the operation of the devices.

“Now, however, the court has dismissed 10 years of litigation as well as the careful consideration of the seven justices on this court in 2014 and offered an opinion based on a brand new definition of pari-mutuel wagering not found anywhere in any statute, regulation, or case law,” the petition states.

The petition goes on to state that racetracks in Kentucky “have invested hundreds of millions of dollars in reliance on the court’s express approval of the definition found in the regulations, only to have the court now reverse course.”

A manufacturer of the machines, Encore Racing, has said that it has already filed plans with the commission that would alter the devices’ operations so that it complies with the latest Supreme Court ruling. The ruling was based on a challenge by the Family Foundation of Kentucky, a conservative, anti-gambling group, and it applied to a type of machine manufactured by Encore at the time the challenge was filed in 2014.

The machines have generated hundreds of million of dollars in revenue for racetracks since they were first installed at Kentucky Downs in 2012. In addition, subsidies generated by the machines have led to a doubling of purses in the state since 2012. The KHRC first approved regulations authorizing the operation of the devices in 2010.

Even if the courts invalidate the operation of the machines, Kentucky tracks are confident that the legislature will address the legality of the machines in 2021, according to officials. However, a legislative fix could be difficult to craft without authorizing a wider expansion of gambling, and some legislators from conservative districts may be reluctant to vote in support of a bill that explicitly authorizes devices that resemble slot machines, which are banned by the state constitution.

The legislature is scheduled to begin its 2021 session on Jan. 5.