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State racing commission seeks more regulations on ‘historical race wagering’ despite looming lawsuit

Historical Horse Racing play at Kentucky Downs, the first racetrack in the state to offer it.

Historical Horse Racing play at Kentucky Downs, the first racetrack in the state to offer it.

The Kentucky Horse Racing Commission wants to implement additional regulations on historical racing even though a legal challenge to betting on replays of horse races remains unresolved.

“Is there nothing odd about promulgating regulations … before the case is resolved?” Rep. David Floyd, R-Bardstown, said during a meeting of the Interim Joint Committee on Licensing and Occupations.

Racing commission General Counsel Susan Speckert said that the additional regulations were “imperative” because historical race wagering continues despite the legal challenge.

“We want to make sure … that we are able to effectively regulate it,” she said.

Sen. Dan “Malano” Seum, R-Fairdale, asked Speckert what would happen if the courts ultimately rule historical race wagering is illegal.

“I don’t know the answer to that,” Speckert said, “but we are confident it is legal so we don’t anticipate that occurring.”

She testified that the Kentucky Supreme Court found that the racing commission had the authority to implement rules and directives and approve requests to offer historical horse race wagering, often referred to by the trademarked name Instant Racing.

Kentucky Downs in Franklin became the first Kentucky track to offer historical horse race wagering in September 2011. Ellis Park in Henderson began offering it a year later.

When the Red Mile and Keeneland Racecourse, both in Lexington, began to jointly offer historical horse racing at the Red Mile this fall, track officials described Instant Racing as “parimutuel electronic games that combine the excitement of horse racing with the thrill of electronic wagering and the fun and flash of video graphics.”

Speckert said the courts must still decide whether operating historical horse race wagering machines constitutes parimutuel wagering – and is thus legal under current Kentucky law.

Speckert told the legislative panel that some of the proposed regulations would require legislative action during the 2016 General Assembly. A draft of a proposed bill was distributed to the legislative committee.

One proposed regulation would grant the racing commission the authority to license all individuals and entities involved in historical horse race wagering.

“As you all know, licensing is central to effective regulation,” Speckert said. “Currently, the commission does not have the specific authority to license the entities that manufacture and sell historical horse race wagering equipment.”

The annual licensing fee for the manufacturer could be up to $50,000.

“We are committed to making the licensing process and the fee reasonable,” Speckert said. “We do not want to create barriers to people who want to do business in Kentucky but we need to meet our statutory mandate of protecting the integrity of parimutuel wagering and we need to cover our regulatory costs.”

Racetrack operators are currently bearing the costs of testing the electronic gaming systems that allow players to bet on historical horse races. That’s in addition to tens of thousands of dollars in fees that the commission is charging racetracks that offer historical horse race wagering.

Rep. Larry Clark, D-Louisville, said he was concerned the commission’s plan to rework fees amounted to “a gift” to racetracks.

“They are already making a lot of money,” he said.

Sen. Paul Hornback, R-Shelbyville, said he too was concerned that the proposed plan would reduce the fees the racetracks are currently paying to offer historical horse race wagering.

“We need to keep the fees at where they are right now,” he said, adding that legislators could re-evaluate the situation in 12 months.

Another proposed regulation would give racetracks more flexibility in using revenue generated from historical horse race wagering to increase purses, or money paid to the top five finishers in a horse race. The proposal involves a complex formula on what purses the additional money can go toward based on the breed of horse racing at the tracks that offer historical race wagering.

Speckert stressed that the proposed legislation would have no effect on the pending litigation.

“It does not impact the current litigation in any way,” she said. “To make that intent crystal clear, we included in the bill … that no provision … shall be construed as a recognition or finding concerning whether the operation of wagering on historical horse races constitutes a pari-mutuel form of wagering.”

From Legislative Research Commission

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