The Kentucky Derby is known as “the most exciting two minutes in sports”. The mint juleps, derby hats, firework shows, and of course the main race itself all contribute to this excitement, but the real thrill for many is found in betting on the race. Horse racing and the wagers placed on it not only define Kentucky culture, but also provide a powerful engine of economic growth. The Commonwealth is home to five major horse racing tracks, and the Kentucky horse industry alone provides over sixty-thousand jobs and brings in $5.2 billion annually.
Despite the current success and celebration of horse racing in Kentucky, there is a strong opposition to an expansion of gambling. This opposition is found mostly within the Kentucky General Assembly, rather than the general public and the market for gambling. It was found that 78% of adult Kentuckians gamble, both legally and illegally. In addition to that, 66% of Kentuckians support a change in state law to expand gambling through a legalization of sports betting. So, what’s keeping Kentucky from going all in on gambling?
Progressive Era Prohibitions in Kentucky
In order to understand why Kentucky has lagged behind its neighboring states in expanding gambling, we need to go back and examine the Commonwealth’s complicated history with the matter. In 1875, Colonel Meriwether Lewis Clark opened the Churchill Downs horse racing track in Louisville, drawing in tens of thousands of attendants to place wagers on their horse of choice. Just a few decades later though, Kentucky and the rest of the nation became swept up into the prohibitionist “progressive movement” of the 1890s to the 1920s, which set its sights on crushing the markets for alcohol, drugs, and gambling.
The Kentucky General Assembly gathered in 1890 for a convention to draft and ratify the state’s 4th constitution, which is still in use today. Within the final draft of the constitution, there is a section that targets the practice of gambling, reading, “Lotteries and gift enterprises are forbidden”. All pool houses and poker games faced the threat of legal punishment because of this provision, while betting on horse racing was largely exempt by its classification as a “game of skill” rather than a “game of chance” or a “gift enterprise”. In the 1900s, the progressive mayor of Louisville, Robert W. Bingham, made it a priority to execute this provision of the Kentucky Constitution, instituting a swift police crackdown on gambling. Bingham’s administration authorized the police raiding of countless pool rooms, poker games, and lottery operations.
The mayor and city council then went after horse racing bets through an ordinance banning the practice of bookmaking in 1908, involving a determination of odds and taking of bets, primarily used at Churchill Downs. Matt Winn, the manager of Churchill Downs at the time, found a way to get around this prohibitionist attack on horse racing by implementing the pari mutuel wagering system in which the odds are not fixed and you are betting against other betters in a pool of funds rather than a bookmaker. Horse racing did not yet escape the threat of a gambling crackdown, though. By the 1920s, Kentucky was just one of three states that allowed legal bets at race tracks, and in 1924, the Kentucky General Assembly was gearing up to reduce that to two states. The bill to outlaw pari mutuel wagering easily passed in the state house, but fell short of passage in the Senate by just a few votes.
Historical Horse Racing Machines and the State of Gambling in Kentucky
As the prohibitionist progressive era came and went, attitudes towards gambling slowly started to change. Amendments to the Kentucky Constitution were passed allowing for a state lottery and certain charitable exceptions, and innovations were made in the horse race gambling industry. In the early 2010s, a device known as a historical horse racing (HHR) machine was introduced to Kentucky. HHR machines are very similar to slot machines except the bets are placed on past horse races under somewhat of a pari mutuel betting system. This loophole in the law allowing for expanded gambling, however, did not come without its share of challenges and opposition.
The use of HHR machines was unanimously deemed unconstitutional by the Kentucky Supreme Court in 2020, leading to the introduction of a bill in the Kentucky General Assembly to amend the definition of pari mutuel wagering to include historical races. The bill was passed and signed by Governor Andy Beshear, but the vote of 55 to 38 in the Kentucky House and 22 to 15 in the Senate shows a divided Republican caucus, indicating a difficult road ahead for gambling expansions through constitutional amendments, as it takes 3/5ths of each house and a majority vote of the people of Kentucky to change the Constitution. Legislators in opposition derided HHR machines as “slot machines” that tear apart families and cause “many heartbreaks”. This passionate opposition by socially conservative legislators is likely to be even more fierce when it comes to gambling outside of the horse racing tracks.
Along with horse racing, Kentuckians love their basketball. Our state’s background in gambling via horse races and our passion for college sports all pointed towards a legalization of sports betting following the 2018 Supreme Court decision striking down the federal ban on the practice. However, bills introduced to legalize sports betting in Kentucky continue to go nowhere in the Kentucky General Assembly. An estimated $2 billion is wagered illegally on sports in Kentucky each year. In addition to that, many Kentuckians, especially those that live near the state’s borders, simply drive over to a neighboring state to place a bet on a sporting event, as five of the seven states bordering Kentucky have already legalized sports betting.
The ban on sports betting is nonsensical. It doesn’t end the practice of sports betting, it merely assures that the state of Kentucky won’t reap the benefits of greater tax revenues and economic output. Legalizing and taxing sports betting has led to states raking in tens of millions of dollars in new tax revenues. New Jersey has the largest sports betting market in the nation, and it brought in $49.4 million in new sports betting tax revenue in 2020. And while the tax rates vary in each state, Kentucky’s neighboring states bring in between $5 to 20 million in annual sports betting tax revenues.
Going All in on Legalizing Gambling
One consistent opponent to all proposed expansions of gambling in the Commonwealth is The Family Foundation, a socially conservative public policy organization that plays an active part in stalling gambling legislation and combating favorable court decisions for gambling. The Family Foundation, along with many other socially conservative interest groups and legislators, assert that an expansion of gambling would perpetuate poverty, addiction, and crime. The prohibitionists of the progressive era often made the same argument. Despite the good intentions of both groups, the reality is that a ban on gambling is counteractive, as it exacerbates the very societal ills it aims to heal through its prohibition, all while limiting the potential economic benefits and infringing upon individual liberties.
There are at least 9,000 Kentuckians dealing with the great burden of gambling addiction. It truly is an addiction that requires treatment, as many gambling addicts face the effects of insomnia, headaches, and chills upon withdrawal, similar to the experiences of alcoholics and drug addicts. Furthermore, approximately half of all gambling addicts commit crimes, typically involving theft or fraud to continue feeding the gambling addiction.
Opponents of gambling expansion might point to these concerning statistics to justify the prohibition, but with the ease in which people can gamble illegally online or simply travel to another state in which gambling is legal, it hardly does anything to address the real issue at hand: aid for gambling addicts. More than half of all Kentuckians believe that a portion of gambling revenue should be set aside to fund addicted gambling services and educational prevention programs. Under our current system in Kentucky this doesn’t exist, even though thirty-nine other states with legalized gambling have implemented this helpful measure in addressing addiction. By pushing prohibition instead of legalization and regulation, Kentucky wouldn’t be accomplishing anything other than a decrease in competitiveness with other states and a preservation of the status quo of addiction without aid.
Gambling is a vital part of Kentucky’s economy and culture. Whether it be through live horse races, historical horse racing machines, or another form of gambling not yet legalized, the benefits that are brought from gambling through tourism, jobs, and tax revenues are undeniable. Sooner or later, the Kentucky General Assembly will have to join the people of Kentucky in embracing the Commonwealth’s connection to gambling and finally take a chance on legalizing all gambling.
Photo: Heather Gill
Louisville Political Review 