The manipulation of government

May/June 2018

By Martin Cothran, Senior Policy Analyst for The Family Foundation

If there was a legal effort to blur the lines between the three branches of government (and between the government and the governed) and that threatened the governmental system of checks and balances, you would think state policymakers would be concerned.

But Kentucky’s policy elites have been almost silent about the attempt by gambling interests to undermine these bedrock principles in the cause of so-called “Instant Racing.” Even the media, who normally love controversy have given the court fight little but token coverage.

It’s hard to think that these cornerstones of constitutional government could be crumbling for any other reason than the persuasive influence of a tsunami of gambling industry money and a laissez-faire attitude toward corporate greed— with a little media sympathy thrown in.

The attempt to push through a new form of casino-style gambling that does not meet Kentucky’s strict legal restrictions has been effectively accomplished without a single vote of a state lawmaker and no input from the people.

Even though the court case gambling proponents themselves initiated remains pending, expanded gambling in Kentucky has become a reality under the cloak of “pari-mutuel wagering.”

In pari-mutuel wagering, bets are placed in a wagering pool. How participants bet determines payout odds. Prizes are distributed from the pool of wagers to winning participants. An NCAA Tournament office pool, for example, is a type of pari-mutuel wagering. In pari-mutuel wagering, participants compete, or wager, among themselves. Because of this and the association with horse racing, pari-mutuel wagering has long been excepted from the general gambling prohibitions under Kentucky law. But on July 20, 2010, the Kentucky Horse Racing Commission and the eight race tracks the Commission is charged with regulating filed for a declaration that operations of wagering on “historical” horse races (Instant Racing is one of several types of wagering that come under this label) and new regulations authorizing the games was pari-mutuel wagering.

However, the new regulations appeared to describe the traditional parimutuel wagering described above. But the actual operation of wagering on historical horse races was more mysterious.

After barring all discovery, evidence and witnesses, the Franklin Circuit Court declared the new wagering and the regulations purporting to authorize it to be pari-mutuel wagering. The Kentucky Court of Appeals then reversed this ruling, agreeing with The Family Foundation that they were treated unfairly. Then, in February 2014, the Kentucky Supreme Court sent the case back to the Franklin Circuit Court for evidence and a trial on the question of whether the new gambling was pari-mutuel wagering.

That trial took place in January of this year. During the trial it became clear that the gambling proponents were seeking a judicial change in the law to allow for an expansion of gambling which they have been unable to secure in the General Assembly.

According to proponents, the Racing Commission has the sole discretion to expand gambling in Kentucky, a claim that completely bypasses of the General Assembly and Kentucky voters.

According to their logic, the Racing Commission has carte blanche in labeling any form of gambling it chooses as “pari-mutuel wagering.” The Racing Commission has now approved and the tracks are operating casino-type games in which participants are not wagering among each other. Payout odds are not used. Prizes are predetermined by algorithms, and in many cases, are fixed. The wagering pool is not returned to winning participants. The familiar “Tote Board” in the infields at most tracks which reflects calculations of prizes on horse races is not used even though required by law. In short, the Racing Commission removed the word “mutual” from pari-mutuel to authorize casino-based gambling.

It shows you what a little legal hocus pocus (and the influence of gambling cash) can do.

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