HHR Bill Reported Favorably Out of Kentucky Senate Committee

The bill that attempts to legalize historical horse race (HHR) gaming in Kentucky by inserting a one-paragraph definition of “pari-mutuel wagering” into an existing state statute advanced with a favorable recommendation out of the Senate Licensing and Occupations Committee Feb. 4.

SB120 will now be scheduled for a hearing before the full Kentucky Senate.

Proponents testified that Kentucky's racing industry is in danger of economic devastation without the support of HHR to bolster purses, and that defining “pari-mutuel” for the first time within state laws is the appropriate way to make sure the $2.2-billion handle generated from that form of gaming is compliant with the state's constitution.

Opponents testified that the proposed legislative fix remains unconstitutional, that it is harmful to Kentucky culturally and economically, and would actually erode the state's Thoroughbred industry over time because HHR licensees might be inclined to phase out live horse racing in favor of cheaper-to-operate electronic gaming.

The two sides sparred in polite but sometimes barbed fashion for nearly an hour, and when the vote was finally called, Senator Tom Buford presaged the highly likely eventuality of a continued court fight over HHR: “I think we are in certainly a gray area, and I do believe we will see this resolved in the courtroom at some moment in time,” he said prior to casting an “aye” vote.

The setting for Thursday's HHR bill's hearing certainly seemed friendly to supporters: Senator John Schickel, who introduced SB 120 on Tuesday, also chairs the committee that had the authority to report it favorably. The measure also has the backing of Senate President Robert Stivers, and Senate Majority Leader Damon Thayer was in attendance to lend support to those who testified in favor of the bill. That team included Kentucky-based trainer Tom Drury and attorney William Lear, Jr., who is a Keeneland Association trustee and former state legislator.

In fact, representatives of the anti-gambling opposition group The Family Foundation (TFF) acknowledged right off the bat that they were fighting an uphill battle. Martin Cothran, senior policy analyst for TFF, began his testimony by thanking Schickel for being a “good sport” and allowing them to speak out against the measure even though TFF knew the bill had the chairman's obvious support.

But Cothran then launched into a concise deconstruction of why everyone was gathered for the hearing in the first place—because the Supreme Court of Kentucky had twice within the past five months affirmed that HHR gaming did not meet the required legal definition of pari-mutuel wagering, and how five of the state's six HHR licensees were “thumb[ing] their noses at the court” by continuing to operate HHR in spite of that ruling.

“That alone should have doomed their efforts here in Frankfort, where laws are made with the expectation that they are to be followed,” Cothran said.

Cothran also pointed out that it was not–as he said is often misrepresented–TFF that initially challenged the legality of HHR in Kentucky. He noted that back in 2010, it was the racing interests themselves who first petitioned Franklin Circuit Court asking for a declaration that HHR was legal. He said TFF only entered the fray when the group realized there was no other opposition to that initiative.

“[The HHR licensees] were the ones who asked the courts whether what they were doing was on the up-and-up. Well now we have an answer to that question, and they are ignoring it,” Cothran said, adding that the racetracks and the Kentucky Horse Racing Commission are now “pretending that these machines somehow constitute pari-mutuel horse wagering.”

Cothran continued: “Depending on your perspective, that was either very ingenious or preposterous that someone could invent a machine that showed live racing with dead horses. Count us as skeptics on this. And count us as skeptics too that you can assert in an equally preposterous way that you can simply declare, as this bill does, that what is not pari-mutuel wagering by any other definition you can find is, in fact, pari-mutuel wagering.

“Rather than the horse tracks and their allies on the horse racing commission changing their actions to bring them into alignment with the law, we are being asked in this bill to bring the law into alignment with the actions of the tracks—and in doing so making a mockery of the constitution,” Cothran said.

Cothran added that the proper way to make HHR legal is to amend the state's constitution, which currently stipulates that the only permissible forms of gaming are pari-mutuel horse racing, the Kentucky Lottery, and charitable gaming.

But Lear pointed out that a 1931 Kentucky Court of Appeals ruling (Commonwealth v. Kentucky Jockey Club) already exempted the pari-mutuel system of betting on horse races from anti-gambling laws.

Lear then explained that in 2020, when the Supreme Court ruled HHR was not considered legally pari-mutuel, “it extended what you might call an engraved invitation to the Kentucky General Assembly to deal with it,” which he said was exactly what SB 120 would accomplish by including “previously run” races within the newly proposed definition of “pari-mutuel.”

Lear said constitutionally speaking, the bill “applies because it's the first time there's been a statutory definition of pari-mutuel wagering. It has to cover both everything we're doing in live racing today, as well as HHR, and that's what it does. It deals with the issue raised by the Supreme Court of different people betting on different races. It deals with the issue of seed pools, which are really just a pre-funded minus pool.

“There is no way a constitutional amendment would be required to do this kind of gaming,” Lear summed up.

Stan Cave, an attorney who has led TFF's efforts against HHR, disagreed.

“As you look at the bill you're about to vote on, compare the language of that bill to what the Supreme Court said pari-mutuel wagering was,” Cave said. “And then ask yourself the question 'Does the language in the bill satisfy, or is it consistent with the definition of pari-mutuel wagering explained by the Kentucky Supreme Court?' If it's not, it's unconstitutional. It's no giant leap of logic. A six-year-old could do the exercise. The language in the bill does not compare, at all, remotely, in the slightest, with the language that the Supreme Court said constituted pari-mutuel wagering. Thus, this bill is unconstitutional.”

Thayer took umbrage with the way Cothran and Cave framed their arguments.

“I was sworn in [to the Senate] 18 years ago today,” Thayer said. “And I've never seen testimony that insulted an entire industry more than what I've heard here today. This testimony was overtly specious. By that I mean superficially plausible but actually wrong.”

At this point Thayer asked Lear to be granted the floor for a rebuttal. Lear reiterated his points about the 1931 court precedent and then went off on a tangent about how HHR is not a game of chance like a lottery, because HHR incorporates elements of handicapping skill on the part of players.

Schickel politely cut the attorney short when Lear began to list off the various handicapping skill features of HHR before giving Cave a last word prior to the vote.

“I'd just like you to remember: Who's won in the Court of Appeals? Who's won unanimously in the Supreme Court–twice? Who's won unanimously in petitions for rehearing?” Cave asked rhetorically. “TFF. I have no incentive to misrepresent to you what The Jockey Club case says or what the law concerning pari-mutuel wagering is. This bill is unconstitutional. It violates Section 226 of the constitution.”

Lear then interjected: “Mr. Chairman, may I just say, you just heard from the only person in the world that believes TFF won the first decision at the Kentucky Supreme Court.”

Passage appeared to be unanimous among committee members whose votes were audible, although several Senators whose names were called appeared not to respond or did not make audible responses during the roll call.