Instant Racing Machines

Instant Racing Machines

AP Photo

Keeneland Applies for Historical Racing

Track plans separate facility to house machines and simulcasting.

The number of historical race gaming machines in operation at Kentucky racetracks would increase substantially if the Kentucky Horse Racing Commission approves requests from Keeneland and The Red Mile harness track.

At its April 2 meeting, the KHRC will consider requests for Keeneland to install 600 historical race machines and for The Red Mile to operate 500 of the terminals.

The tracks' intentions to apply for the historical race licenses were first reported by last month. The license applications come on the heels of the Kentucky General Assembly, which is in the closing days of its 2014 session, failing to act on proposed casino legislation. Keeneland and The Red Mile had previously discussed a joint venture should video lottery gaming or other casino-type gaming ever become legal.

Keeneland's application states it would construct a new 40,000-square-foot facility near its existing Keeneland Entertainment Center that would house the historical race wagering terminals and also be used for simulcasting. Keeneland would shuttle patrons between the new building and the racetrack when live racing is underway.

A Keeneland spokesman told the Lexington Herald-Leader the track estimates about $1 million a day would be generated from historical race wagering, generating about $44 million in annual revenue.

The Red Mile, located in downtown Lexington, proposes to renovate its facility, including a 13,200-square-foot expansion to accommodate historical racing terminals, the Herald-Leader reported. Although The Red Mile is a Standardbred track, it would offer historical race betting on previously run Thoroughbred races because those are the only ones available through the machines at the present time.

In its proposal to the KHRC, The Red Mile states that it has been struggling financially for several years, with its current owners putting about $22 million into the operation. The track said approval of historical horse racing will "prevent The Red Mile from going out of business and permit The Red Mile to continue to support the viability of the Standardbred industry," according to the newspaper.

Historical race wagering is a form of electronic gaming patterned after the Instant Racing concept that originated and was hugely successful at Oaklawn Park in Arkansas. Similar to traditional slot machines, the outcomes of the wagers are based on previously run horse races; the race for each play is superimposed on a small window on the front of the machine.

Because the outcome of the games are based on horse races, historical race wagering has been deemed pari-mutuel wagering, which is legal in Kentucky, while traditional electronic games such as slot machines are prohibited.
Since historical race wagering began at Kentucky Downs in September 2011, and later at Ellis Park, more than $603.3 million had been bet through the machines through February of this year. Of the $38.5 million net track commission from historical race wagering at the two tracks, $5.39 million has gone to purses and $385,207 to the Breeders' Incentive Fund.

Kentucky Downs now has 390 historical race wagering machines, with 187 at Ellis Park. Also at its April 2 meeting, the KHRC will consider a request from Ellis to relocate 50 of its terminals to Kentucky Downs, which use the machines to replace existing terminals.

The state Supreme Court recently ruled that the KHRC had the authority to promulgate regulations for the devices, but it also said the Kentucky Department of Revenue can't tax the form of betting because existing statute pertains only to "live" racing in the state. The case has been sent back to circuit court for discovery. The high court's actions, however, didn't halt existing operations at Ellis Park and Kentucky Downs.

The state budget that is pending before the legislature includes a 1.5% tax on historical racing.