Churchill Downs Won’t Allow Prediction Markets Access to Kentucky Derby

• Company says prediction markets need its consent to offer Derby event contracts
• Gaming firm hasn’t agreed to provide that authorization and doesn’t appear willing to

When the Kentucky Derby takes place on Saturday, May 2, don’t expect to see event contracts tied to “the run for the roses” on prediction markets. Churchill Downs (NASDAQ: CHDN) won’t allow it.

The gaming company reported fourth-quarter results earlier this week and on the subsequent conference call with analysts, CEO Bill Carstanjen said the first leg of the Triple Crown and Churchill Downs’ marquee annual event won’t be made available to prediction markets. Some of the reasoning boils down to regulatory issues.

We operate under a different legal paradigm than other sports offerings in the United States. Pari-mutuel wagering on horse racing is conducted under the Interstate Horse Racing Act, which is a federal umbrella statute that essentially gives us a series of rights,” said Carstanjen in response to a question from Macquarie analyst Chad Beynon.

The Churchill Downs chief executive officer likened those rights to intellectual property. In that case, the holder of the intellectual property calls the shots when it comes to sharing related content.

Prediction Markets Would Likely Love Kentucky Derby Access

It’s admittedly speculative at this juncture, but if the Super Bowl is any indication, prediction market operators would probably love to hang markets on the Derby and perhaps the bulk of Derby Week races, including The Oaks.

Don’t count on Churchill Downs playing ball with yes/no exchanges anytime soon. Carstanjen said prediction markets aren’t part of wagering on horse racing and he expects that won’t change “any time in the future.”

“So to take wagers across any form, whether it be a sports wagering platform, another horse racing platform such as an advance deposit wagering or a prediction markets platform, you need our express consent,” the CEO said on the call. “You can’t just do it without that. So we haven’t agreed to provide our content to prediction markets. We feel like we have plenty of distribution, and we like the terms of our distribution. So that’s our focus for delivering access to our content to the customer base out there.”

Bullish Kentucky Derby Week Outlook

Betting on the Derby and the related weekly slate broke records in each of the past several years with earnings before interest, taxes, depreciation, and amortization (EBITDA) following suit or coming close to doing so.

Churchill Downs said Derby trends are impressing and the operator is forecasting EBITDA growth of $15 million to $20 million this year. There are some changes to this year’s Derby Week lineup that could make the event all the more alluring to prediction markets, but they won’t be able to get in on the action.

“Management announced that it will be adding a race on the Sunday prior to the Derby (4/26), which will be the first Sunday race during Derby Week in over 15 years,” wrote Truist Securities analyst Barry Jonas in a note to clients. “Derby week will now consist of 7 live race dates across eight calendar days. Further, the Kentucky Oaks race will move to primetime (now 8-9PM), management noted that the Oaks is the fourth highest betting race in the US and expects to see benefit from the national primetime slot.”