N.D. State Legislature Looks At Legalizing ‘Historic Horse Racing’ Machines

My column for Wednesday’s Forum takes a look at a gambling bill quietly making its way through the North Dakota legislature. Senate Bill 2221 would legalize so-called historic horse racing in the state.

It’s an odd deal, but not a new one. State lawmakers have previously denied similar bills.

Historic horse racing works like this:

Slot machine-like terminals allow players to bet on previously run horse races.

Huh?

Yep.

The idea is to basically allow slot machines under the guise of pari-mutuel betting. The machines and whether or not somebody wins is tenuously based on the results of previously run horse races, but really they allow anybody who knows how to push buttons and use a slot machine the opportunity to play.

Historic horse racing machine.

It’s been a lengthy debate in the gaming world whether or not historic horse racing, also known as instant racing, is a game of skill or one of chance.

A blog in Arkansas described the machines like this:

The instant horse racing machines resemble slot machines, with animations and music. Bettors are wagering on past races, but the horse names are unknown before they place their bets. The machines only show the last few seconds of the race, and payouts are instant. Racing officials say gamblers aren’t betting against the house, but a pool of other gamblers.

A National Public Radio story in 2015 told the story of Wyoming’s battle over historic horse racing. The state first legalized the betting in 2003 before it was ruled illegal by the state supreme court a couple of years later because it was deemed “a slot machine that attempts to mimic traditional pari-mutuel betting.” The state has gone back and forth and now historic horse racing has been found OK in Wyoming.

The online story reads in part:

If you want to bet on a horse race in Laramie, Wyoming, you go to Wyoming Downs, a little gambling parlor on the edge of town. Lu Schellhaas is a regular there, and on this day, she’s on a hot streak: up to $750 from a $10 bet.

“So this is when I should go home,” she said. “But no, I am going to hit the button again!”

Schellhaas is playing Wyoming Downs’ most popular attraction: a historical horse racing machine. These games have the lights and sounds of a classic casino-style slot machine. But while slots determine whether you win at random, historical racing machines are tied to the outcome of a past horse race. Before you hit the big bet button, you’re shown a display of horse racing stats, and you’re supposed to use those stats to pick your three cherries, or dancing cowboys, or whatever variables the machine uses.

The reason this is legal is that it’s considered a game of skill. Slots are considered a game of chance. So, you might think it’s safe to assume a winning player like Schellhaas knows a bit about horse racing, right? Well, not really. 

“I don’t know a thing,” Schellhaas said after another high-yield push of the button. “You don’t really need to.”

And there’s the rub. You don’t really need to know anything about horse racing, handicapping or placing bets to play these machines.

Here’s an instructional video on historical horse racing:

But by deeming the machines pari-mutuel betting, it lets states like North Dakota allow the machines outside Indian reservations. Games of chance are not allowed in North Dakota (Rep. Al Carlson’s state-run casino bill notwithstanding), but games of skill (betting on horse races) are. To be clear, in this case I’m hearing there is interest from tribal gaming officials to have historical horse racing at their casinos.

There’s another important sidebar to this. By deeming these machines as pari-mutuel betting instead of casino gambling (as slot machines are), SB 2221 would place control of historic horse racing under the auspices of the North Dakota Racing Commission, which oversees horse racing in the state. Gambling is overseen by the attorney general.

So, in the end, the bulk of the proceeds from historic horse racing machines would go to funds administered by the racing commission. In other words, this is a way to pipe money into the horse-racing industry — to give money to breeders and to pump up purses in a major way. Other states like Kentucky and Wyoming have used historic horse racing machines in exactly this manner — to prop up failing horse racing industries. Given the issues of the North Dakota Horse Park in Fargo since its inception, and the on-again/off-again racing schedule, the state’s equine industry clearly has issues.

This is not a small issue. The fiscal note attached to SB 2221 says it’s expected there’ll be $100 million wagered on historic horse racing in 2018, $250 million in 2019 and $200 million in 2020 and 2021. Those numbers are based on Wyoming’s wagering on the machines. North Dakota would allow up to 10 historic horse racing sites statewide.

North Dakota’s Charitable Gaming Association is nervous about SB 2221, believing historical horse racing could cut into money going to some 350 charities around the state. I’ve been told Lien Racing of Fargo expects to build bingo hall-sized venues in Fargo and other cities with hundreds of these machines, if the bill becomes law.

The charitable gaming association asked for two amendments on the bill, which would then garner their support: 1) remove the 10-site limit and 2) put historic horse racing under the auspices of the attorney general, just like other gaming in the state.

Stay tuned. There is a committee hearing on SB 2221 on Wednesday.