Churchill Downs opened its Derby City Gaming parlor in Louisville, Kentucky, in September, and each day since then the state has been fining the company $1,000 for housing faulty machines.

Churchill Downs Derby City Gaming

Don’t call them slot machines. But Churchill Downs’ Derby City is facing a nearly six-figure fine for faulty historical racing terminals. (Image: Derby City Gaming)

Derby City, a $65 million gaming venue located at the former Trackside training facility some five miles east of the famed home of the Kentucky Derby, offers guests 900 historical racing terminals. But the Kentucky Horse Racing Commission (KHRC) says the operating system of the devices has a major flaw that allows bettors to place parimutuel wagers on races that featured scratched horses (horses that didn’t actually run).

Churchill Downs explains that patrons didn’t lose any money, as bettors weren’t given the option to select the horse that scratched. But Kentucky law mandates that races where a horse scratches cannot be included in the terminals.

As the KHRC letter acknowledges, no patrons were harmed because they were only given the option to wager on horses that ran in the race,” Churchill Downs said in a statement. “We are working collaboratively with the KHRC and our development partner to correct this technical matter. Derby City Gaming will continue operating as normal.”

Opened September 10, the daily $1,000 fine now totals more than $90,000. Derby City and parent company Churchill Downs won’t likely be losing much sleep over the fine, as the KHRC reports that the venue generated gross gambling revenue of $49.8 million last month, with net win totaling $4.8 million.

History of Historical Racing

Also known as “instant racing,” historical racing machines use previously run horse races to offer an endless array of parimutuel betting.

The identity of the track, horses, jockeys, and trainers are concealed, and bettors make their picks based on an accompanying skill graph and statistical info display on each anonymous horse. Bettors can also simply allow the machine to make instant picks.

The machines then display the outcome of the race and determine payouts.

Critics say historical racing machines are nothing more than cleverly disguised slots. But the horse racing community say they’re vital to the industry’s future, as interest in the sport continues to decline and track attendances diminish across the country.

A general manager of the Oaklawn Park racetrack in Hot Springs, Arkansas, first conceived instant racing machines. In 1999, Arkansas became the first state to legalize the devices.

Growing Business

Kentucky and Virginia, traditionally conservative states that remain free of casinos, both recently legalized historical horse racing devices.

In Virginia, the closed Colonial Downs horse racetrack is being given new life through the terminals. A group of investors agreed to purchase and reopen the shuttered facility on condition that the gaming machines be permitted, which the state authorized in April.

Derby City isn’t the only historical racing venue in the Bluegrass State. Kentucky Downs has 750 terminals, Keeneland has 900, and Ellis Park has 180.

Churchill Downs and Keeneland recently won state approval to build a $150 million racetrack and gaming parlor near the Tennessee border that will include 1,500 machines.