KY Regulator Advances CDI-Backed HHR Gaming Rule Change

The Kentucky Horse Racing and Gaming Corporation on May 20 advanced a rule change to allow historical horse racing operators to use approved results located from pari-mutuel racetracks outside the United States in addition to those from U.S. tracks.

The rule change, approved before a special meeting of the KHRGC in Lexington, now will be presented for public comment and then go before the state's Legislative Research Commission for potential approval.

The HHR rule change was backed by Churchill Downs Inc., which operates the games at numerous tracks and off-track gaming parlors throughout the state. CDI also owns Exacta Systems, an HHR technology provider.

HHR devices resemble slot machines but winning results are based on previously run horse races and payouts are pari-mutuel. They have generated massive profits for track operators and fueled purse growth.

According to CDI's senior vice president of operations, Justin Paul, only data from after 1992 or 1993 is beneficial for the operations of the games. He added that using results with larger fields, which have decreased in U.S. Thoroughbred racing, allows them to generate superior games that allow them to be competitive with traditional slot machines, which are operational in neighboring states. He said the rule change also had the support of Kentucky Downs.

Equibase, North America's Thoroughbred industry official record and data keeper, opposed the rule change. Equibase last provided a "data dump" for HHR devices in 2020, according to Kyle McDoniel, president and CEO of Equibase.

"We believe this proposed amendment is not necessary, and that this matter will be best addressed by working this issue out by agreement among the affected parties," he said.

McDoniel said the contract with HHR companies is "less than a million dollars." The prior data exchange came before CDI acquired Exacta Systems.

CDI also owns Blood Research Information Services and TwinSpires, both of which have large databases, but with information provided by Equibase field personnel from official race charts and other information.

Paul downplayed finances as the key consideration.

"So we're talking about making sure we have new data available so that our innovative products can keep up," he said.

Multiple commissioners expressed frustrations, referencing a lack of recent communication between CDI and Equibase, and limited details being presented during an earlier KHRGC Rules Committee meeting, which was the first to hear discussions about the proposed change.

Commissioner Bill May was not in attendance at Tuesday's meeting, but a statement from him was read.

"Going forward, we need to seriously consider the implications of one of our licensees owning an HHR manufacturer," he commented. "Nothing in any of the materials provided suggests that the current situation requires immediate action, yet the issue is on the agenda of a special meeting. I worry that sometimes our actions are motivated by the desire to serve our licensees, as opposed to the public. As this issue moves through the regulatory process, I hope it receives a more patient and thorough consideration than we have given it."

Only one commissioner, Kerry Harvey, appeared to vote in opposition.

"I can't judge whether Equibase is right or whether Churchill Downs is right. And the thing that was missing was some sort of independent analysis that would allow me to make a considered judgment about which of these statements we heard today was correct," he said.

(Editor's Note: Equibase is a partnership between subsidiaries of The Jockey Club and the Thoroughbred Racing Associations of North America. BloodHorse is owned by The Jockey Club Information Systems and the Thoroughbred Owners and Breeders Association.)