Kentucky's Court of Appeals, in a 2-to-1 decision, has vacated and remanded a December 2010 Franklin Circuit Court decision permitting Kentucky racetracks to conduct wagering on historical races, also known as Instant Racing. The machines were originally created for Oaklawn Park in Hot Springs, Ark., and are considered a pari-mutuel alternative to VLTs or slot machines in states that have not authorized expanded gambling. Kentucky Downs in Franklin is the only Kentucky racetrack to install the machines to date, though Ellis Park in Henderson had previously been given permission by the Kentucky Horse Racing Commission to proceed with Instant Racing.
The decision was rendered today by Judges Joseph E. Lambert and Janet L. Stumbo, who found that the lower court erred in not permitting the Family Foundation – which filed suit to block Instant Racing – discovery during the trial to explore how the payoffs for Instant Racing were computed.
“We agree that the parties had a right to develop proof and to present evidence to establish that the wagers made by patrons at electronic gaming machines do or do not meet the definition of pari-mutuel wagering on a horse race,” the majority opinion states. “These are complex questions, and the parties are entitled to ample discovery in an effort to present the evidence. We conclude that the request for discovery by Family Foundation was relevant and necessary to the court's determination and that the court's denial of discovery constituted an abuse of discretion.
“By virtue of the absence of any discovery, the record before us is without a meaningful evidentiary basis to support the judgment of the trial court. Appellate review is thus impossible. As such, we are unable to address the merits of the remaining issues. Accordingly, the judgment of the Franklin Circuit Court is vacated and this cause remanded for further proceedings not inconsistent herewith.”
Judge Sara Walter Combs wrote a dissenting opinion, examining specifics of the Family Foundation complaint. Her belief is that “historic races clearly fall within the scope and rules of pari-mutuel betting” because money from bettors is being pooled.
“In summary,” Combs wrote, “I would affirm the ruling of the Franklin Circuit Court that the historic racing regulations are a legitimate exercise of the authority of the Kentucky Horse Racing Commission and that they constitute pari-mutuel wagering.”
According to statistics provided by the Kentucky Horse Racing Commission, $15.7 million was wagered on Instant Racing at Kentucky Downs in May, with $14.4 million returned to the public in winning bets. Total commissions were $1,285,991, with Kentucky Downs receiving $1,050,348 in net commissions. Fourteen percent of the net track commission, or $147,048 go into the purse fund, and $10,503 (1% of net) to a breeders incentive fund.
From Sept. 1, 2011, through May 31, 2012, a total of $97.7 million has been wagered on Instant Racing in Kentucky. From that amount, net track commission totaled $6,782,578, with purses receiving $949,561 and the breeders incentive fund $67,825. Wagering has increased every month since the machines were first installed at Kentucky Downs in September, with the exception of April, when wagering dropped by about $850,000 from March levels.
The court did not order the machines now in operation at Kentucky Downs to be shut down.
Kentucky Downs issued the following statement in the wake of the Court of Appeals opinion: “Today's ruling in no way changes the position of Kentucky Downs that pari-mutuel wagering on historical racing fully complies with the law. Kentucky Downs will continue to operate Instant Racing under the regulatory authority of the Kentucky Horse Racing Commission whose regulations remain in full force and effect.
“At a time when the Kentucky horse industry is at a competitive disadvantage with other racing states, Instant Racing has generated nearly $2 million for purses and breeders' awards. As Kentucky Downs continues to operate Instant Racing, we take very seriously our role in improving the economy and creating jobs and look forward to our race meeting in September when we will offer record purses and breeders' awards.”
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