The Kentucky Senate approved April 1 a bill that would allow fixed-odds wagering on horse racing at licensed state racetracks and would prohibit any restriction on the number of mares a stallion can breed in a calendar year.
The bill (HB904) has been sent to Gov. Andy Beshear for his signature, but his office has not indicated whether he intends to sign it.
The bill, which also covers a wide range of gambling issues related to sports wagering and fantasy sports contests, gives the Kentucky Horse Racing Gaming Corporation the authority to license and regulate fixed-odds wagering and sets up a special supplemental purse fund from the revenue it generates.
Wagering on horse racing in Kentucky is now only pari-mutuel, the traditional form for the sport in which gamblers bet against each other and odds are determined based on how much is wagered on a specific bet—for example, win, place, or show—compared with the total money in the wagering pool.
Many experts believe fixed-odds wagering on racing has the potential to attract new and younger fans to the sport because it's the same type of wagering offered on sports betting platforms. Legal sports betting in the United States has skyrocketed since a 2018 U.S. Supreme Court decision that allowed states to offer fixed-odds wagering on sports. Fixed-odds wagering on horse racing has been adopted in New Jersey, Colorado, and West Virginia, but Kentucky would be the most significant racing state to allow it.
If the governor signs the bill into law, the state would then collect a 9.75% excise tax on the adjusted gross fixed-odds wagering total for wagers made at a licensed racetrack and a 14.25% takeout on wagers made online via websites or mobile apps. The adjusted gross fixed-odds wagering total is the total amount wagered minus what is paid to the winners and all excise taxes paid per federal law.
All state taxes and fees from fixed-odds wagering will be put in a "purse stabilization fund" that will be used to supplement purses at live horse racing meets annually at an amount not to exceed 10% of the fund.
Blocking future efforts to cap mares bred
The provision of this bill that prohibits any restriction on the number of mares bred to a stallion was added in early March by House Speaker David Osborne, a Thoroughbred owner/breeder. The addition followed The Jockey Club chairman, Everett Dobson, telling those attending the National Horsemen's Benevolent and Protective Association Conference of plans to meet with stallion farms and other industry leaders to see if consensus could be reached on stallion cap rules. The Jockey Club is concerned about increased inbreeding.
"As we think about the health of Thoroughbred breed, we must not ignore the alarming increase in the co-efficient of inbreeding. A few years ago, The Jockey club attempted to impose a cap on the number of mares that an individual stallion could breed," Dobson said at the conference. "Under my leadership, we are going to revisit that question, and this time we will involve the stallion farms and other breed registries around the world to help us find a solution. Our discussions must be science-based with an understanding of the economic realities we live in. And when there appears to be a collision between the science and the economics, I hope we find solutions that serve to improve the Thoroughbred breed."
In May 2020, The Jockey Club implemented a cap of 140 mares per year to address what it saw as a concerning decline in the genetic diversity of North America's population and after soliciting comments from industry participants about this issue. The rule was to start with stallions that were born in 2020. By February 2021, the rule was challenged by a lawsuit supported by Spendthrift Farm, Ashford Stud, and Three Chimneys Farm. A year later, Osborne filed an amendment that would have prevented any restriction on mares bred in Kentucky and within a week of this legislation being filed, The Jockey Club withdrew the mares cap rule and the lawsuit was soon withdrawn. Osborne's legislation was returned to the Rules Committee and allowed to expire without being considered by the full House.
Hill 'n' Dale Farms at Xalapa president John Sikura believes Kentucky lawmakers' efforts toward codifying the mare cap prohibition just underscore how poorly the issue was handled by The Jockey Club.
"As a critic of the large institutions, I think they do not have an organized framework, nor the mandate, nor the authority to do a lot of things they do," he said. "Between the Breeders' Cup and The Jockey Club, they are tone deaf. They are reactionary and ad hoc. This is a good example of a plan that was not thoroughly vetted and a process not thoroughly thought out. I think it is checkmate now."
Regarding the breed registry's effectiveness going forward, Sikura referred to the law as "a legal castration of The Jockey Club."
"They are a paper tiger. The king is naked," he said.
The bill does leave one door open for the number of mares bred to be restricted. A restriction would only be recognized in Kentucky if a limitation is first adopted and implemented by unanimous consent by members of the International Stud Book Committee. The ISBC was initially formed in 1976 and has representatives from all the major breeding countries worldwide.
"During the legislative process, The Jockey Club was given the opportunity to review the Resolution," a representative of The Jockey Club said in a statement. "We support it. We have been advocating for the kind of science-based, industrywide approach that the statutory change and the accompanying Resolution envision on a national and international level."
HB904 does state that if "any registrar" violates a provision of the state law, then the horse(s) affected will be registered with an entity identified by the KHRGC to be the registrar of any horse bred, foaled, and residing in the state. Additionally, any owner or breeder who believes they suffered economic damage by such a violation would be entitled to recover treble damages in addition to actual damages, if held up by a court.
The bill does not name the entity that would fill the role as a Kentucky-only registrar but it does recognize Kentucky Thoroughbred Owners and Breeders as "the sole official registrar of the Kentucky Thoroughbred development fund for the purposes of registering Kentucky Thoroughbred stallions and Kentucky-bred Thoroughbreds in accordance with the terms of this section and any administrative regulations promulgated by the Kentucky Horse Racing and Gaming Corporation."
Also, in the bill where it instructs a horse's certified foal certificate to be stamped as a registered Kentucky-bred once registered, legislators have specifically struck the qualifier "The Jockey Club" from the description of the certified certificate showing the Thoroughbred is duly qualified.
BloodHorse reached out to Spendthrift, Ashford Stud, and Lane's End seeking comment about the potential impact if the bill becomes law and all declined to offer comment.
