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Additionally, the only kind of slot machines allowed are electronic video slot machines. Therefore, you will not find any mechanical slots that have traditional reels - only video screens According to the terms of the compact between the state and the tribes, however, the minimum and maximum payouts are regulated as follows: video poker and video blackjack - 83% to 98%, slot machines - 80% to 95%, keno - 75% to 95%.

In a unanimous decision announced Thursday that could result in a large cuts to purses in the state, the Kentucky Supreme Court ruled that Historical Horse Racing (HHR) Machines do not qualify as pari-mutuel wagering and are therefore illegal under state law.

The decision directly covered only one form of the machines, the Encore or Exacta system, but it appears that it will be applied to all forms and brands of HHR.

The plaintiff in the case was the Family Trust Foundation of Kentucky, a conservative group which describes itself as a foundation that “has stood as a continual bulwark for families and the values that make families strong.” The Family Trust Foundation appealed after losing its fight against the HHR machines in a lower court, the Franklin Circuit Court.

Majority Floor Leader and racing advocate Damon Thayer was quick to lash out at the court.

“It is a devastating decision made by a Kentucky Supreme Court that continues to deliver bad decisions,” he said. “It’s wrong. It’s irresponsible. If not remedied, this could be a devastating blow to Kentucky’s racing and breeding industries.”

Because casinos and slot machines are illegal in Kentucky, the HHR machines, which resemble traditional slot machines, were only allowed after receiving a green light from the Kentucky Racing Commission which authorized them on the basis of them being a form of pari-mutuel gambling. The Kentucky Supreme Court disagreed. In an opinion written by Laurance VanMeter, whose brother Tom is a Kentucky-based bloodstock agent, the court said it found that the machines do not meet the legal definition of pari-mutuel wagering because customers were not wagering “on the same discrete, finite events.”

“Because we hold that the Encore system does not create a wagering pool among patrons such that they are wagering among themselves as required for pari-mutuel wagering, the trial court misapplied the applicable regulation as a matter of law,” read the ruling.

WDRB.com’s report on the ruling included a quote from Kentucky Governor Andy Beshear, who said: “Historical horse racing is an important part of Kentucky’s economy that supports jobs and contributes over $21 million to the state budget. We are working with various partners to find a path forward.”

It was not immediately clear what steps would follow the ruling and when, but should the tracks be forced to shut down the HHR machines, it would be a huge blow to the industry. With the machines soaring in popularity, the state’s tracks have been able to substantially bump up their purses in recent years.

Starting out at Kentucky Downs in 2011, the machines are now either at every Kentucky track or one of their satellite facilities. In July alone, the machines across the state handled $270 million, which resulted in gross commissions of 22,722,679. During the fiscal year that ended in June, the gross commissions on $2.2 billion in handle was $188.9 million, of which $15,577,748 went to the Kentucky Thoroughbred Development Fund.

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“This decision is obviously devastating for everyone and is something that no one was expecting,” said Kentucky Equine Education Project Executive Vice President Elizabeth Jensen. “Several racetracks have made significant investments based on the success of Historical Horse Racing over the last few years. I think this blind sided pretty much everyone. It’s hard at the moment for everyone to get their arms around the long-term impact of this. Immediately, you have the hundreds of people working at HHR facilities that will be losing their jobs. The amount of money going to the purses will also be lost.”

Spokespersons for Kentucky Downs and Keeneland issued only brief comments Thursday, both saying they are evaluating the court decision.

Churchill Downs Vice President of Corporate Communications Tonya Abeln issued a statement making it clear that the racing and gaming company was exploring its options.

“CDI does not use the Exacta system in any of its HRMs in any facility in Kentucky,” she said in an email response. “We will work within our legal rights and in coordination with Kentucky legislators to ensure the ongoing legal operation of our HRM facilities in Kentucky so that we can continue to provide critical funding for the equine industry and support the citizens in the Commonwealth of Kentucky. Although CDI does not use the Exacta system in question at any of our HRM facilities, we appreciate Kentucky Governor Andy Beshear’s support of the industry in his statement regarding Historical Horse Racing today.”

Should the tracks be ordered to shut off the machines, it is not clear when that would happen.

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With the highest court in the state having ruled against the HHR machines, the racing commission and the racing and breeding industries will likely have to look outside of the court system if they are to find a path to the keep the machines going. One avenue could be to craft and have legislation passed that would permit their use. In its ruling, the Court hinted at just that.

“If a change, however, in the long-accepted definition of pari-mutuel wagering is to be made, that change must be made by the people of this Commonwealth through their duly-elected legislators, not by an appointed administrative body and not by the judiciary,” the ruling read.

Jensen said it was too early for racing interests to have crafted a new plan of attack.

“What can we do? What can be done? Those are the questions of the day,” she said. “We are still researching that. We are working with the tracks, talking to legislators and people in Frankfort to try to figure out where do we go from here. I don’t think anybody has that answer yet.”

FRANKFORT, Ky. (CN) — An educational nonprofit organization argued before the Kentucky Supreme Court on Friday that historical horse racing slot machines are illegal under state law because they do not qualify as pari-mutuel betting.

Kentucky law allows for gambling only on horse racing, and the state has no casinos, but the Kentucky Horse Racing Commission authorized tracks to install historic race gaming machines in 2010 after determining they constitute pari-mutuel betting — a system in which all bets are placed in a collective pool before winners are paid.

The machines were challenged by the Family Trust Foundation of Kentucky in 2014, and after the state Supreme Court remanded the case for a four-day bench trial in Franklin County Circuit Court in 2018, the machines were ruled to be in compliance with state law.

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Historical racing slot machines base a player’s odds of winning on three randomly selected historic races, which are usually shown on a screen at the top of the machine.

Bets from multiple players are thrown together in a payout pool from which all the players’ winnings are paid.

This pool system is what makes the machines legal under Kentucky law, but the Family Trust Foundation has consistently argued that the lack of “reciprocal wagering” invalidates the circuit court’s ruling.

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Based on expert testimony provided at the bench trial, the foundation claims that because no two players are ever wagering on the same three historical races, bets are essentially independent and have no reciprocal effect on any others, which means the machines fall outside the definition of pari-mutuel gaming.

The Kentucky Horse Racing Commission also rested its case on evidence produced during the bench trial, and said in its brief with the court that “facts matter.”

“After years of extensive discovery and following a four-day bench trial, the Franklin Circuit Court found that because each element of the definition was factually satisfied, ‘the Exacta System is a ‘parimutuel system of wagering’ … authorized under the provisions of KRS Chapter 230,’” the commission said.

Attorney Stan Cave argued on behalf of the Family Trust Foundation and asked the court to “bring certainty” to the issue of historic horse racing machines after a circuitous decade-long legal journey.

“What has happened here,” Cave said, “is just plain wrong on every level.”

The attorney bemoaned the fact that the machines have been added to horse racing tracks across the state with “no legislative action … no voter approval and no executive order.”

Justice Laurance VanMeter asked Cave about the circuit court’s decision to allow wagering on separate events, such as the random races chosen by the historic gaming machines.

“I’m not sure where he came up with that,” the attorney said.

“It’s just a fiction to say it’s betting on a race,” he added. “It’s like saying everyone who takes a shower is showering together because the water runs into the same sewer.”

Deputy Chief Justice Lisabeth Hughes asked Cave if his client challenges the findings of fact made by the circuit court after the bench trial.

The attorney said he only disputed the finding of facts insofar as the judge misapplied the relevant law to the findings at trial.

“The wagering is pari-serial,” Cave said. “A player follows a player follows a player. But it is not pari-mutuel.”

Justice Michelle Keller asked Cave whether the legislature’s 10-year silence on the issue has any bearing on the legality of the machines.

“If the general assembly wants to legalize gaming, such as slot-type gaming, then the assembly should act to authorize it,” the attorney answered.

Attorney Jay Ingle argued on behalf of Kentucky Downs LLC and several other racetracks that use the Exacta Gaming system and told the court that the legislature’s lack of action “speaks volumes.”

“If the legislature thought this was bad policy … it would have said so,” the attorney said.

Ingle claimed his opposition’s arguments were an attempt to relitigate the circuit court’s decision and told the court it has “heard all these same arguments before.”

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The attorney seized on the fact that his opposing counsel did not dispute the findings of fact made after the bench trial and told the court that every expert witness – including the foundation’s – agreed that having multiple bettors placing bets on different events in the same pool is legal under Kentucky law.

Attorney Jennifer Wolsing, arguing on behalf of the Kentucky Horse Racing Commission, told the court that any alteration of the definition of pari-mutuel wagering would fundamentally alter the way bets are taken in live racing as well as the machines.

Wolsing said eliminating carryover pools like the ones used by the machines would also eliminate “exotic” betting that has risen in popularity and often involves pools with no winners that are carried over to the following day of races.

In his rebuttal, Cave disputed the notion that his client wants to alter or add words to the definition of the rule.

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“Nothing could be further from the truth,” he told the court.

The justices peppered all of the attorneys with questions throughout their arguments and recognized the decision would not be an easy one.

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“This is a difficult puzzle,” Keller admitted during Cave’s rebuttal.

No timetable has been set for the court’s decision.