Churchill Downs Boss Believes Grey Games Are Illegal Slot Machines

August 2, 2023
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Bill Carstanjen, chief executive of Churchill Downs, believes the racing industry, as well as the state and its residents, stand to benefit from Kentucky’s decision to ban thousands of so-called grey-market games that are in hundreds of bars and convenience stores.

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Bill Carstanjen, chief executive of Churchill Downs, believes the racing industry, as well as the state and its residents, stand to benefit from Kentucky’s decision to ban thousands of so-called grey-market games that are in hundreds of bars and convenience stores.

Churchill Downs, which operates racetracks and venues that offer historic horseracing machines in Kentucky, supported the passage of House Bill 594 that bans the unregulated devices.

Under HB 594, anyone who manages or owns the supposedly skill-based machines in Kentucky could be subject to a $25,000 fine per device.

“Grey games are essentially slot machines,” Carstanjen told analysts during a second-quarter earnings conference call on Thursday (July 27).

“However, they are unregulated and do not pay state or local taxes and do not follow responsible gaming protocols, including restrictions regarding minors, anti-money laundering policies and procedures and a host of other federal and state laws designed to protect consumers and the community.”

With the ban taking effect on June 30, Carstanjen said, “it is still unclear how much of an impact it will have on our HHR (historic horseracing) venues in Kentucky.”

Carstanjen added that venues across the state will benefit from the ban.

Churchill Downs has invested heavily in HHR facilities in Kentucky, expanding a Derby City facility and opening its sixth property in the fourth quarter, both in Louisville. The company has plans for a seventh facility outside Owensboro.

“We certainly believe that [the ban] will have a positive effect and will be a benefit to the Commonwealth of Kentucky, its citizens and the horse industry as well,” Carstanjen said.

According to the Kentucky Horse Racing Commission, a total of $744.65m was wagered on regulated HHR devices in May, with a total gross win of $66.8m.

HHR machines Kentucky

Prior to Kentucky’s ban taking effect, a state judge signed off on an agreement between Pace-O-Matic and Attorney General Daniel Cameron to disable thousands of so-called skill-based games, while the constitutionality of the ban is challenged in court.

Pace-O-Matic filed a lawsuit shortly after Democratic Governor Andy Beshear signed the ban into law in March, arguing it was unconstitutional.

Pace-O-Matic has 2,500 “Burning Barrel” games in Kentucky, according to media reports. The agreement allows the games to remain in place, but should the court uphold the ban they grey-market machines would need to be removed.

On Thursday (July 27), Franklin Circuit Court Judge Phillip Shepherd held an hour-long meeting with lawyers from both sides, only to schedule another hearing for October 16.

Churchill Downs is also expanding its HHR presence in Virginia, where Pace-O-Matic, the parent company of Queen of Virginia, has also been part of an ongoing effort to overturn a state ban on skill-based games.

The legal drama that has lasted more than two years will finally be decided in a three-day trial that has been tentatively scheduled for December 18–20.

According to a Greenville Circuit Court spokeswoman Tuesday (August 1), the trial will be held in a different courtroom, but she declined to identify which Circuit Court until the dates were confirmed.

Attorneys representing a truck stop owner and the skill-based games industry filed a lawsuit on June 21, 2021, shortly after the Virginia General Assembly voted to ban the machines.

Greenville County Court Judge Louis Lerner issued a temporary order blocking the state from enforcing the ban through an injunction issued in December 2021.

That injunction remains in effect allowing an estimated 14,000 machines to operate without paying taxes or licensing fees and are free from interference from state or local law enforcement.

The lawsuit has been delayed several times due to Republican state Senator Bill Stanley being one of the attorneys involved in the case. Stanley’s status as a sitting lawmaker comes with the privilege of letting him postpone court dates when the legislature is in session in Richmond.

Stanley, who represents truck stop owner and former race car driver Hermie Sadler, said the ban violates free speech by singling out a particular type of game based on their aesthetic resemblance to slot machines.

Lawyers from the office of Attorney General Jason Miyares contend the state is within its right to regulate gambling.

Currently, Churchill Downs operates six of its allotted ten HHR facilities in Virginia, with two other properties under development. Carstanjen also expects to release additional details by the end of September on the company’s planned HHR facility in Salem, New Hampshire.

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