Court finds Kentucky Downs' historical horse racing is pari-mutuel in design, permitted under state law

Franklin Circuit Court Judge Thomas Wingate has upheld the legality of Kentucky Downs’ historical horse racing operation, determining that the track’s innovative electronic gaming terminals based on the results of previously-run horse races is pari-mutuel in nature and permitted under Kentucky law.

The ruling handed down Wednesday came more than nine months after Judge Wingate oversaw a trial stemming from a lawsuit testing the validity of the Kentucky regulations allowing for historical horse racing and the legality of the systems used for wagering. The Family Foundation of Kentucky claimed that the regulations were invalid and that the system used at Kentucky Downs, the Exacta System, was illegal.

The Kentucky Supreme Court previously upheld Judge Wingate’s earlier ruling that the regulations allowing for wagering on historical horse races were valid under Kentucky’s horse-racing statutes. The ruling issued Wednesday related to the Family Foundation’s claim that the system currently used by Kentucky Downs was illegal because it was not pari-mutuel in nature. The provider Exacta Systems designs and produces the terminals and wagering system used at Kentucky Downs, Ellis Park and The Red Mile.

Pari-mutuel wagering is the linchpin of horse racing in America. Under the betting system, originally devised in France, players bet against each other rather than against the house, as is often the case in fixed-odds gambling or the random generation of winning numbers in true slot machines or lotteries. Under the pari-mutuel system, all bets of a particular type are placed together in a pool, with taxes and the cut to the racetrack and horsemen taken off the top before payoffs are calculated by sharing the pool among all winning bets.

In an Opinion and Order entered Oct. 24, 2018, Judge Wingate found that the Exacta System is a “pari-mutuel system of wagering” that is authorized under Kentucky statute and which has been approved by the Kentucky Horse Racing Commission. The Court determined that the core elements of pari-mutuel wagering were all met: participants are wagering among themselves and not against the racing association, that wagers are placed in one or more designated wagering pools and that the net pool is returned to winning patrons.

As a result, the Court held that the Exacta System, as with other pari-mutuel wagering authorized by the racing commission, is not prohibited by other Kentucky gambling statutes.

“Obviously we are very pleased with the Court’s well-reasoned and detailed ruling,” said Kentucky Downs president Corey Johnsen. “Judge Wingate carefully considered the facts and found that Exacta Systems and our historical horse racing is pari-mutuel and complies with Kentucky law.

“In the world of horse racing, Kentucky often sets the pace. This is an important ruling for the future of pari-mutuel wagering on historical horse racing. I’m sure other states are watching this situation closely, and the ruling is really great news.

“Horse racing originally offered win, place, show and the Daily Double on track. Then we developed simulcasting, followed by advance-deposit wagering that permitted players to bet from anywhere. It took 15 to 20 years for each of those innovations to fully develop. I believe that historical horse racing is the next important innovation for our industry.”

Kentucky Downs in September of 2011 became the first track in the state to institute historical horse racing as a means to enhance race purses for owners by providing a different type of wagering experience for guests. Today Kentucky Downs’ five-date meet offers the highest average daily purses in the world outside of Japan, paying out $2 million a day to horse owners in 2018.

Kentucky Downs’ success with historical horse racing has allowed the track, through an arrangement with its horsemen, to transfer millions of dollars to the purse accounts of other tracks in the state, the biggest beneficiary being Ellis Park. The funding has allowed Ellis Park in Henderson to offer its highest purses in history and markedly upgrade its racing product, which in turn has kept horses and jobs in Kentucky over the summer. Historical horse racing has provided millions of dollars in tax revenue and has turned Kentucky Downs into a major year-round attraction throughout the region.

Kentucky Downs has used parimutuel revenue generated through historical horse racing to turn its race meet into one of the top in the country, offering $2 million a day in purses in 2018. Kentucky Downs photos

About Kentucky Downs

Located near the Kentucky-Tennessee border off Interstate 65, the year-round entertainment center offers live racing on its unique 1 5/16-mile European-style turf course with its five-date meet in 2019 being Aug. 31 and Sept. 5, 7, 8 and 12. Simulcasting is available seven days a week, as well as pari-mutuel wagering on Historical Horse Racing, charitable gaming, dining and other events. Racing has been conducted at the facility since 1990, when it was called Dueling Grounds.

Address: 5629 Nashville Road, P.O. Box 405, Franklin, KY 42135

Website: www.KentuckyDowns.com

Phone: 270.586.7778

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