Director, Commonwealth Policy Center

Opponents of expanded gambling in Kentucky have been battling Instant Racing (brand name) for over four years.  On one side are the opponents including individuals, the Family Foundation of Kentucky and the Kentucky Council on Alcohol and Gambling Problems and their lone lawyer, Stan Cave.  On the other side is the Horse Racing Commission, the Kentucky Department of Revenue, the tracks and others with a cadre of eleven lawyers.

In early 2011 the Kentucky Racing Commission passed regulations allowing the installation of slot like Instant Racing machines at Kentucky tracks.  There was no referendum or legislative action to allow this.  The Constitution allows for only horse racing (subsequent regulations indicated the racing should be live) and the Lottery.  This took place in 1892, long before the advent of electronic machines, even before the invention of mechanical slot machines.  The proponents claimed that Instant Racing was pari-mutuel, and therefore legal.

On August 23, 2011 track president Corey Johnson proclaimed the opening of the machines at Kentucky Downs (a tiny track in southern Kentucky with only five to eight race days per year) an historic expansion of gambling in Kentucky.  The gambling began on September 1 at 10:00 a.m. with 200 machines.  The opponents also regarded the event as historic because it was the most blatant offense against the rule of law since the corruption of the Legislature during the FBI investigation called Boptrot, leading to indictments of 23 legislators and lobbyists.  The proponents argued that the racing was as live as any TV broadcast of a race, or as a simulcast.  Note that the simulcast is of a “live” race whereas the Instant Race can be as much as 20 years old with many of the horses now dead.  During the first 8 months $82 million was wagered on the machines and $5.7 million lost.  Of this only $286,000 went into Kentucky’s General Fund, one of the worst deals on gambling taxation in history, but such is the case with most illegal gambling.

Remarkably, the Racing Commission asked the Franklin Circuit Court to rule on the legality of the machines.  The Family Foundation asked to join the suit and was allowed to, but without discovery because the judge ruled that there was no issue of fact in the case.  Meanwhile, The Family Foundation asked for an injunction to stop the gambling while the courts considered the case.  The Judge decided not to halt the gambling because there was no significant harm being done.  Tell that to the Spouses of the gamblers! 

A progressive blog, on May 13, 2013 revealed that the judge’s opinion was largely written by a court clerk, who has since become a legal expert on gambling and corporate affairs for a Kentucky firm that handles legal matters for some of the tracks.  She also became a member of KEEP, the lobbying arm of the tracks, of which Corey Johnson was conveniently the Chairman.  Neither her office nor KEEP would reveal when she became a member.  Isn’t that a cozy arrangement?  But there is more!  When the Family Foundation filed an open records request with the Horse Racing Commission, it was turned down.  The Attorney General refused to enforce the open records law because of a conflict of interest.  His father sits on the Racing Commission.  So conflict of interest now trumps the law.

The Family Foundation appealed the case to the Circuit Court of Appeals on the basis that Instant Racing is not pari-mutuel and the denial of discovery to the Family Foundation.  The Appeals Court did not decide the legal issue, but did remand the case to the Franklin Circuit Court for retrial allowing the Family Foundation discovery.

In another surprising move the Racing Commission, appealed to the Supreme Court for a summary judgment in their favor.  Even more surprising the Supreme Court granted a hearing.  After both sides presented their briefs, oral arguments were heard on August 21, 2013.  After several more months the Supreme court also remanded the case to Franklin Circuit Court for retrial with discovery. 

Meanwhile Ellis Park added the machines, although less successfully than Kentucky Downs which has Nashville all to itself.  Ellis Park has a competing casino across the Ohio River.  The two tracks, Keeneland and the harness track, The Red Mile, are trying to work out a partnership to open an Instant Racing parlor about a quarter mile from the University of Kentucky campus.  Can you say false IDs?  Keeneland also bought a harness track and has received permission to move it to the Corbin area where it could prey on Knoxville.  It is to become a small quarter horse track with a dozen race days and 700 Instant Racing machines. (Janet Patton, “Keeneland gets OK to take control of Thunder Ridge,” Lexington Herald-Leader, December 3, 2014, p. A7.)

While all this was going on Kentucky Downs added another 75 machines.  The Racing Commission, the Department of Revenue and the tracks and their 11 lawyers were impeding the efforts at discovery of Stan Cave, and refusing to answer some key questions.  The machines roll having brought in $382 million in bets by August 2013, and may surpass $700 million this year.

The Supreme Court did give the state some problems since the Supreme Court in its opinion said the Revenue Cabinet could not collect the pari-mutuel tax on the machines because they had not yet been declared legal.  Despite attempts, the Legislature has not yet passed legislation to tax the machines which may not be legal.

The Family Foundation may still win the case, but only after the tracks have made hundreds of millions, and more Kentuckians have become impoverished.  The Legislature has no will to protect its citizens from the predators.

(Many facts in this review were the result of conversations with Kent Ostrander, Director of the Family Foundation of Kentucky.)