KY Supreme Court Hears Instant Racing Case

Justices to consider arguments in case involving form of electronic gambling.

Proponents and opponents of historical race wagering, also called Instant Racing, expressed optimism that their respective sides will prevail following a lengthy hearing before the Kentucky Supreme Court Aug. 21.

At issue is whether a lower court erred by not allowing attorneys for the Family Foundation of Kentucky to conduct pre-trial discovery as part of that organization's challenge to the Kentucky Horse Racing Commission's approval of historical race wagering at the state's tracks.

The Aug. 21 hearing resulted from a June 2012 Court of Appeals ruling in favor of the Family Foundation's appeal of a previous ruling by Franklin Circuit Court Judge Thomas Wingate upholding the legality of historical race wagering. The appeals court agreed that Wingate's court abused its discretion by not allowing discovery by Family Foundation attorneys in the case.

A form of electronic gaming conceived by Oaklawn Park in Arkansas, Instant Racing is now being conducted at Kentucky Downs and Ellis Park. The machines resemble traditional video lottery terminals, with the outcome of each spin determined by the results of previously run horse races.

About three to four seconds of the race is shown on a small screen on the front of the machine before each spin ends. The Family Foundation contends the machines are illegal because electronic forms of gaming are precluded in Kentucky under state statute.

Draft regulations governing Instant Racing were approved by the KHRC based on a determination by the state Attorney General's office that it constituted "pari-mutuel" wagering as defined within laws regulating betting on horse racing in the state.

Attorneys for the state's racetracks, the KHRC, and the state Revenue Department, among others, then filed suit seeking a declaratory judgment affirming the legality of Instant Racing. The Family Foundation was later permitted to intervene in that suit.

While the pre-trial discovery ruling was the reason for the arguments before the state's highest court, it was obvious that the overall merits of historical race wagering were also on trial. Included among the areas of query were whether the KHRC had the right to promulgate the regulations, how the tracks can be licensed to operate the machines, and the taxation issues.

Attorneys Bill Lear and Bill Hoskins, together representing seven of the eight tracks involved in the suit, contended that the issue before the court is whether the KHRC had the authority to draft regulations pertaining to historical race wagering and not the legality of the games the themselves.

Lear, a Keeneland trustee, said today's pari-mutuel landscape is not the same as it was when state statutes were drafted regulating wagering on horse racing, but that overall wagering formats, including exotic wagers, still fall under the definition.

"That's what is known as pari-mutuel wagering today," Lear said. "This is not your grandfather's racing, but this is legitimate."

Stan Cave, representing the Family Foundation, challenged the assertion that Instant Racing is a pari-mutuel wagering endeavor.

"We all know this is a slot machine. They're betting no one is willing to say so," Cave said.

Cave also contended that his client was denied discovery in the litigation because "the political party not in favor was denied" a chance to ask questions.

"All they wanted from this charade was the ability to wave a court order," Cave said, referring to the notion that with a favorable court ruling racetracks could defend themselves from criminal prosecution.

That position drew a sharp rebuke from Supreme Court Justice Lisabeth Hughes Abramson, who said: "When we decide this case, it has nothing to do with anything other than legal issues."

At least one justice questioned why the Family Foundation had intervened in the declaratory judgment filed by the KHRC and racetracks and had not filed a challenge on its own.

Cave said there was a question of whether a court would accept the Family Foundation had sufficient "standing" to bring its own case. Later, he said, based on his experience judges like to have similar suits all brought together under one umbrella case.

Both parties said they were satisfied with their day in court before the state's top justices.

"They were very engaged judges and a case that was thoroughly briefed by all," said Hoskins. "I think the depth of the inquiry was remarkable. I truly believe that the question of the regulation is relatively answered by past precedent. It is a question of the regulation and looking at the statute."

"Honestly, I think we have a good chance of winning here today," Cave said. "I feel very good about the way the arguments went today and I think the court understood the issues. I would anticipate a favorable ruling. It was an easy question (for the Court of Appeals favorable ruling), and I have every reason to believe they will see it our way."

Neither party was willing to anticipate future action, depending upon the Supreme Court decision.

Cave said he did not know if the Family Foundation would consider filing a new suit challenging the actual games themselves since they were not operational when the existing litigation was filed.

Neither Hoskins nor Cave said they knew whether there would be any statute of limitations that would preclude a lawsuit challenging the legality of the historical race wagering machines.