Virginia Equine Alliance opposes cap on number of historical racing machines

Leaders of racing organizations in Virginia are asking their members to submit comments to the Virginia Racing Commission taking issue with a proposed cap on the number of slot-machine-like devices that will be allowed in the state in advance of a July 31 meeting to discuss draft regulations governing the machines.

The Virginia Equine Alliance, a consortium of racing and breeding interests created several years ago, posted a notice on its website saying a statewide cap of 3,000 of the devices “is not sufficient to grow and sustain the native horse industry for the long term.” The notice urged members to email comments to the commission.

The statewide cap of 3,000 machines was included in draft regulations posted by the Virginia Racing Commission on July 10 to invite public comment and discussion. The regulations will be the sole subject of the meeting July 31.

“We’re doing this because of the governor’s directive that we get input from all of the stakeholders” affected by the operation of the machines, said David Lermond, the executive director of the commission. “The local communities, the horsemen, the breeders, all the people the governor said he wanted involved.”

Earlier this year, the state’s legislature passed a bill authorizing the devices at Colonial Downs, which last held live racing in 2013, and at as many as 10 licensed offtrack-betting locations operated by the track. Prior to the legislature convening, a Chicago-based group calling itself Revolutionary Racing reached a deal with Colonial’s owner, Jacobs Entertainment, to buy the track, contingent on the legislative authorization of the machines.

Virginia Gov. Ralph Northam signed the bill into law in late April, but he attached a statement to his signature that called for the racing commission to place “reasonable limitations on the proliferation” of gambling in the state and engage with local communities where the devices might be sited. The governor left it up to the racing commission to determine the limitations.

Lermond said the commission arrived at the 3,000-device cap “in consultation with the governor’s office.”

The draft regulations are expected to go through multiple phases of rewrites as the commission attempts to satisfy a requirement in the legislation that rules governing the devices be adopted as emergency regulations no later than the end of the year. Colonial’s new owners have said they intend to start live racing in 2019.

The devices, called historical horseracing machines, use previously run races to generate payouts to customers but play like slot machines. They are currently in operation in a number of states, where they have generated tens of millions of dollars for track owners. In Kentucky, there are approximately 1,775 machines in operation at three sites, and in the first 11 months of the state’s fiscal year this year, they have generated $77.3 million in gross revenue from nearly a billion dollars in handle.

The notice on the website of the Virginia Equine Alliance states that the “regulations as currently drafted will not get our industry the financial support we need to truly succeed over the long term. … We should have regulations that give the Virginia Racing Commission the discretion to allow for future growth to take place, based on independent market studies.”

Jeb Hannum, the executive director of the VEA, did not respond to a phone call.

In a prepared statement in response to emailed questions about the draft regulations, a spokesman for Revolutionary Racing said that the group “is in the process of evaluating” the regulations.

“We look forward to working with the Virginia Racing Commission to develop a final set of rules that advances the industry and serves the Commonwealth,” the statement said.

The VEA has said that it struck a deal with Revolutionary Racing on the amount of revenue that horsemen and breeders will derive from the devices, but they have declined to provide details about the agreement.

In a release issued earlier this year announcing the close of the transaction to buy the track, Revolutionary said that its partnership spent “in excess of $20 million” for the acquisition but did not provide an exact figure. The partnership has declined to discuss how the transaction was structured.

Revolutionary Racing has not yet applied for a racing license in the state, according to Lermond. The draft regulations require that licenses be issued to the company operating the racetrack and to the individual OTB locations before licenses can be considered for the operation of historical horseracing machines at specific locations, including Colonial.