Games Are NOT
Pari-Mutuel
In 2014, the Kentucky Supreme Court made clear that "any wagering on horse racing in Kentucky must be based on a pari-mutuel system. In other words, the Commission has no authority to license an operation for wagering on horse racing that is not utilizing a form of pari-mutuel wagering."
The Court looked to the federal Interstate Horseracing Act and Commonwealth v. Kentucky Jockey Club (Ky. 1931) to determine the meaning of pari-mutuel wagering and interpreted the KY Horse Racing Commission's regulations in a manner consistent with those.
Here are a few of the reasons why these "historical horse racing" slot games are not pari-mutuel:
1) No two players are ever wagering on the same uncertain event.
In 2010, the Kentucky Supreme Court recognized that "wager" is defined as “something risked or staked on an uncertain event.”
But during the January 2018 bench trial, in the Franklin Circuit Court, one of the witnesses for the race tracks and KY Horse Racing Commission, Mr. Robert F. "Skip" Lannert, testified that no two players of these games are ever wagering on the same uncertain event:
Mr. Cave: Once the device randomly selects those previously three previously run races, is any other patron or wagerer wagering on that same group of 3 races?
Mr. Lannert: Not that I’m aware.
Mr. Cave: Do you know of any circumstance whereby two patrons would be wagering on that randomly selected three previously run races?
Mr. Lannert: Theoretically, it’s possible but I think it’s . . . um . . . next to . . . next to impossible. In theory, it could happen – but it’s very unlikely.
2) No mutuel, i.e., reciprocal, wagering exists.
The plain meaning of words makes clear that mutuality, or reciprocity, is an essential part of pari-mutuel wagering. In fact, pari-mutuel is French for "bet" - "reciprocal".
If that's not convincing enough, the Horseracing Act requires that "participants are wagering with each other" and KY Jockey Club explains that "the effect of [pari-mutuel wagering] is that all who buy pools on a given race bet as among themselves".
But Richard LaBrocca, another witness for the race tracks and KY Horse Racing Commission, testified that the wagering was not mutuel, i.e., reciprocal:
Mr. Cave: So, is it your testimony that players can be placing wagers that have nothing to do with another player’s prize or outcome of another player’s prize and those players would be wagering among themselves simply because their wager goes into a pool with another player’s losses?
Mr. LaBrocca: That’s correct. Nothing states - states - that it has to be - nothing defines ‘amongst’ in these rules and nothing states that one player can’t influence another without reciprocal influence.
Mr. Cave: What’s the last thing you said? Without what kind of influence?
Mr. LaBrocca: Reciprocal.
Mr. Cave: OK. Let me hear that answer again, please.
Mr. LaBrocca: Nothing in these requirements states that one player -- nothing in these requirements states that one player has to make an impact on another without reciprocal - reciprocal influence from the player being affected by the first one.
Mr. Cave: So, is it - is it your testimony that to be in pari-mutuel wagering, there is no reciprocal influence required?
Mr. LaBrocca: No, I’m saying that there is no requirement for that. To be pari-mutuel wagering, there are other requirements, that is not the sole, sole item. So, what I’m saying is that there’s nothing that states that “amongst” has to be influenced any player, all players, every player - it just simply says “among” the players.
Mr. Cave: Let me ask my question a little better. It is your testimony here today that patrons to be wagering among themselves, a reciprocal influence is not required.
Mr. LaBrocca: That’s correct. Since we are so fond of hypotheticals, if we had your example for Monday, Tuesday, Wednesday and on Wednesday only one player placed a wager and only one player, for that entire day, was available to win the pool and won the pool, should that condition exist, we basically would be invalidating horse racing in its entirety for every exotic wager that has any type of carryover. If that does not hold true, many of our historic horse racing exotic wagers today would have the same type of problem we are talking about here, I believe, and if that’s not the case, these, exotic wagers are tried and true and have been offered for decades.
Additionally...
The historical slot gaming machines use fixed, predetermined mathematical formulas in place of pari-mutuel payout odds to determine the amount of prizes. Determination of each separate and ditinct prize, if any, to be paid from carried over losses, is a function of a string of binary numbers, converted to decimal, overlaid on a pay table, which determines the prize amount, if any, to be paid from a pool of carried over losses. That is NOT pari-mutuel.
A more complete explanation of the machines' shortcomings can be found in The Family Foundation's brief.