WHY RELY ON A NON-LAWYER?
On July 20, 2010, the Commission had passed regulations which it claimed made the machines legal, despite no change of law in Kentucky's General Assembly.
The Commission, charged with ensuring the integrity of horse racing and protecting the public, and the Racetracks were well aware that no other state had ever found "historical horse racing" slot gaming to be lawful absent a change of law.
Given their shaky legal ground, Kentucky’s Commission and Racetracks sought the court's determination of whether licensing and operating the machines was legal. On the same day the regulations were passed, an "agreed case" was filed.
However, irregularities in the process raise the question:
"Why rely on a non-lawyer's 'legal analysis'?"
#1 No Legal Education
The Kentucky Horse Racing Commission licensed the slot gaming machines, the Racetracks operated the slot gaming machines, and the Franklin Circuit Court redefined "pari-mutuel" on the basis of the "legal" opinions of Richard LaBrocca, an out-of-state gambling consultant.
He is not a lawyer. He does not have any legal education. The Kentucky Horse Racing Commission, Racetracks, and Franklin Circuit Court relied heavily upon his "legal opinions" despite his lack of qualification.
#2 If the Commission Approves...
It was not clear from the January 2018 trial whether the Commission was relying on LaBrocca or LaBrocca was relying on the Commission in trying to say that Exacta Gaming was pari-mutuel wagering.
During testimony, LaBrocca stated that the "wagering that has been approved by the commission defines what the wager is… these are pari-mutuel because the definition of wager is fluid to the types of wagers the Racing Commission can approve."
He also admitted:
I do not know exactly what the authority - how far the authority goes for the Commission – but the Commission has the authority to approve exotic wagers. I don’t know where those boundaries are and, in this case, the Commission has approved the Encore/Exacta 3 race method and the math models of exotic wagers. Since pari-mutuel wagering is using the word wager, I’m assuming that when you’re asking the questions about how wagers work or pari-mutuel wagering we’re talking about what the Commission has approved.
#3 GLI Reached Different Decision in Wyoming
On September 23, 2015, the Wyoming Attorney General declared that this first version of "historical horse racing" slot gaming, known as “Instant Racing” was not pari-mutuel wagering under Wyoming law and thus unlawful.
Fascinating is the fact that the Wyoming Attorney General retained Gaming Labratories International, Inc. as its consultant as well. But in Kentucky, a different conclusion was reached.
The qualified Wyoming Attorney General's legal opinion was based on the random multipliers, random wild symbols, random bonus rounds, and even random race outcomes running in the background (unknown to players) that were being used with the videos in prize determinations.
#4 GLI Contract & Payments
LaBrocca's employer, Gaming Laboratories International, LLC, was paid $860,849.67 by certain venders of the slot gaming machines and Racetracks... with virtually no oversight from the Kentucky Horse Racing Commission.
Yet, this was the witness relied upon by Kentucky's Horse Racing Commission and the Franklin Circuit Court.
The Kentucky Center for Investigative Reporting (KyCIR) exposed several concerning facts about the relationships between the Commission, Racetracks, and GLI. Its April 30, 2019 investigative report was titled, "Kentucky Horse Tracks Paid For Their Own Video Gambling Regulations".
The investigative report pointed to an October 28, 2018 letter from the Kentucky Auditor of Public Accounts, which conducted a review of certain contracts for services between the Commission and GLI.
Chris Hunt, general counsel for the state auditor’s office, told KyCIR that the commission’s actions were “out of the ordinary.” The Commission should have been providing oversight, but Hunt explained that the “commission here kind of stepped aside and had the vendors work directly with the race tracks."
According to KyCIR, the Commission allowed the Racetracks to fund and oversee LaBrocca's work.
Michael Fagan, a former assistant U.S. Attorney in the Eastern District of Missouri, found the relationship between the Commission and the Racetracks it is charged with regulating to be problematic.
Having specialized in gambling cases, he observed that “The industry that is supposed to be regulated is buying its own regulator.”
There were also issues raised with the Commission unlawfully passing expenses to the Racetracks for LaBrocca's assistance in drafting new regulations. They were ordered to refund the money, but were unable to provide KyCIR with any documentation of doing so. Hunt, the attorney at the Auditor's office, was surprised and said it "sounds bizarre to me, frankly."
Another issue raised was the initial contract and how GLI was chosen.