Call to Order and Roll Call
The 4th meeting of the Interim Joint Committee on Licensing and Occupations was held on Friday, September 12, 2014, at 10:00 AM, at Keeneland Race Course. Representative Dennis Keene, Co-Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator John Schickel, Co-Chair; Representative Dennis Keene, Co-Chair; Senators Tom Buford, Denise Harper Angel, Jimmy Higdon, Morgan McGarvey, R.J. Palmer II, Dan "Malano" Seum, and Damon Thayer; Representatives Julie Raque Adams, Denver Butler, Larry Clark, Jeffery Donohue, David Floyd, Joni L. Jenkins, Reginald Meeks, Charles Miller, Brad Montell, David Osborne, Darryl T. Owens, Ruth Ann Palumbo, Arnold Simpson, and Susan Westrom.
Guests: Vince Gabbert, Vice President/COO, Keeneland Race Course; John T. Ward, Jr., Executive Director, Mary Scollay, D.V.M., Equine Medical Director, Jamie Eads, Director of Incentives and Development, Kentucky Horse Racing Commission; Brad Cummings, President/CEO, EquiLottery.
LRC Staff: Tom Hewlett, Bryce Amburgey, Jasmine Williams, Michel Sanderson, and Susan Cunningham.
Approval of minutes for August 12, 2014 meeting
A motion to approve the minutes of the August 12, 2014 meeting was made by Representative Miller and seconded by Representative Palumbo. The motion carried by voice vote.
Representative Keene spoke about the passing of Charlann Carroll, wife of Senator Julian Carroll, and recognized Senator Schickel for remarks. Senator Schickel described his first contact with then-Governor Carroll while working as a police officer, called to the scene of the Beverly Hills Supper Club fire. Senator Schickel called for a moment of silence in memory of Mrs. Carroll.
Vince Gabbert, Vice President and Chief Operating Office of Keeneland Race Course, welcomed the committee to the race track. Four days into the September yearling sales, business has been consistent and very strong. In the fall of 2015, Keeneland will host the Breeders Cup. Construction is underway for a temporary luxury Chalet. Twenty-six million dollars in purse money is awarded during the two day event. The economic impact for not only Keeneland but the entire community is expected to be significant. Like the World Equestrian games, there will be a festival-type atmosphere with events in downtown Lexington. Keeneland will ask the legislature to reenact a statute that was used during the Breeders Cup event in Louisville to exempt the pari-mutuel tax for the two days of the event.
Kentucky Horse Racing Commission
John Ward, Jr., Executive Director of the Kentucky Horse Racing Commission, said it is the commission’s responsibility to make sure that the Breeders Cup events are held to the highest standard. The status of racing in Kentucky has declined in recent years; however, historical racing is improving and Kentucky bettors support the racing industry.
In response to a question from Representative Clark, Mr. Ward said the historical racing environment is very healthy. It was found that local management does a better job of promoting the racing than outside marketing companies.
Jamie Eads, Director of Incentives and Development, said in 1978 the Thoroughbred Development Fund was established to encourage owners to buy from Kentucky markets, breed to Kentucky stallions, board in Kentucky, and race on Kentucky racetracks.
The official breeding registrar is the Kentucky Thoroughbred Owners and Breeders Association. In 2013, $5.8 million was paid from the fund to supplemental purses at Kentucky tracks. So far this year a little over $3 million has been paid. In September $2.4 million is being paid at Kentucky Downs and $250,000 at Churchill Downs. A committee consisting of five members is appointed annually to advise KHRC on how the fund should be split for purses. In 2014, legislation amended the statutes to include allowance optional claiming races for a price of not less than $25,000. The intent was to provide another opportunity for horses to race in Kentucky. Also enacted in 2014 was legislation transferring $1 million from the Kentucky Equine Drug Research Council to the Kentucky Thoroughbred Development Fund to enhance purses.
The Kentucky Standardbred Development Fund was established in 1976 and the KHRC is the official registrar. This program is a mirror of the Thoroughbred fund with a goal of encouraging owners to buy Kentucky horses, breed Kentucky stallions, and race Kentucky foaled horses on Kentucky racetracks. In 2013, the advisory panel for the Standardbred fund recognized a need to amend regulations due to short fields. A new regulation was filed and approved in December of 2013 allowing foals of a stallion or a mare that stood in the state for 180 consecutive days to be eligible for purses.
Mary Scollay, D.V.M., Equine Medical Director, KHRC, said that one aspect of the commission’s regulatory duties is to monitor for emerging threats to the integrity of the sport. Cobalt is a method of blood doping that enhances the performance of a horse by increasing oxygen delivered into the body. Cobalt is a trace mineral that is a component of B vitamins. Cobalt is present in the body naturally; however, because it is not synthesized by the body it would have to be ingested or injected to be in the animal. Because this mineral needs to be in the body, regulation is necessary. After studying post race samples from 900 horses, a pattern was developed to establish the normal level and what an enhanced Cobalt level might resemble. Research is ongoing to determine 1) the normal range of Cobalt in a racehorse, 2) the effect of legitimate vitamin and mineral supplements (vitamin B injections) on Cobalt concentrations, and 3) the concentration and detections periods associated with administering consistent blood doping. Cobalt toxicity can cause thyroid disease, heart disease, and death. Kentucky is part of an international collaboration to address this issue. A regulatory threshold for Cobalt will be recommended to the Racing Medication and Testing Consortium (RMTC) at its October 13 meeting.
In response to a question from Representative Osborne, Dr. Scollay said it is her opinion that individual racing jurisdictions should not establish thresholds without the consensus of the RMTC based on research.
Senator Thayer commented that he appreciated the work that Jamie Eads and Dr. Scollay were doing at the racing commission.
EquiLottery
Brad Cummings, President and CEO, EquiLottery, LLC said that in July, 2014, his company introduced a new concept in lottery gaming called EquiLottery, “The Greatest 2 Dollars in Sports.” Twenty-seven states and racing interests worldwide have been in touch with the company expressing interest.
EquiLottery will be sold through lottery terminals. It will require software integration but no modification to existing lottery machines. EquiLottery has formed a relationship with the three major lottery vendors in the United States and with the Tote systems used for pari-mutuel wagering at tracks. The game will consist of quick pick only, on one race per day. Profit margins are in line with other lottery products, and there is potential to add approximately 15 percent new players to the lottery customer base. Gaming Laboratories International provided a revenue analysis estimating the game would generate $25 million in the first year through the Kentucky Lottery. By adding a multi-state split the amount of profit increases by $30 million annually. Calculating ten states playing the Kentucky Derby in lottery terminals, a projected $97 million would be added to the handle.
EquiLottery has opined that the game would be an extension of the intent expressed in KRS 154A.065, relating to the contests involving horses that may be a basis for a lottery. The statute provides that “The corporation may utilize horse racing or contests involving horses for any purpose including, but not limited to, advertising, promoting, conducting a lottery, or as a basis for a lottery, after obtaining the necessary permission from the horse racing track or sponsoring authority involved.” The major difference between Powerball and Mega Millions is that the EquiLottery pari-mutuel pool is at a race track.
EquiLottery players purchase a $2 ticket. The money from the purchase is split with $1 going to the Kentucky Lottery pool and $1 to the EquiLottery pool. Part of the Kentucky Lottery dollar goes into a supplemental pool, paid into only by EquiLottery players and paid out only to EquiLottery players. The other dollar goes to the race track where the race is taking place and is applied as an exotic wager. A winning player receives a percentage from the supplemental pool and from the payout from the exotic wager. The EquiLottery race of the day is the last race on the card.
This is a new lottery game that will draw new lottery players and appeal to existing lottery players. There are two international models that have proven successful. France has used this type of lottery since 1956 and attributes its horse racing viability to the lottery. EquiLottery will make more money available to the CAP, KTG and KEES grant and scholarship programs. LaFleur’s Magazine, a major lottery publication, commented that this product is generating a great deal of interest. It is estimated that the first year handle will increase over $30 million. Three thousand lottery terminals statewide will offer the game to a new group of players. Major stallion farms in Kentucky, the five major thoroughbred race tracks, the Kentucky Thoroughbred Owners and Breeders Association, and the Horsemen’s Benevolent and Protective Association support the program.
In response to a question from Representative Clark, Mr. Cummings said there is no projection on the impact this program would have on the Kentucky Lottery game of Keno.
In response to a question from Senator Seum, Mr. Cummings said there will be a multi-tiered system. There will be one race per day offered to those who purchase a ticket. The player will ask for an EquiLottery ticket of the day. The ticket will note where the race is running and where to watch the race. The ticket will be a quick pick that lists the numbers and names of the horses.
In response to a question from Representative Meeks, Mr. Cummings said that on Monday and Tuesday there are no live races in Kentucky, so there is a possibility that other states would have races for play. Additionally, other marquee races such as the Belmont, Preakness, or the Breeders Cup would provide an opportunity for EquiLottery play. EquiLottery has visited California, New Mexico, and West Virginia to explore the potential for going on-line in those states. EquiLottery could go live at the 2015 Keeneland meet.
In response to a question from Senator Buford, Mr. Cummings said because the lottery is a game of chance and not of skill, EquiLottery tickets are quick picks. Players do not pick the horses that they play; the selection is totally random. The race will be the last race of each day.
In response to a question from Representative Osborne, Mr. Cummings said EquiLottery would like to re-engage conversations with Kentucky Lottery Corporation after this meeting.
In response to a question from Representative Owens, Mr. Cummings said on days where there is no racing at a Kentucky track, generally either Monday and Tuesday, or Monday, Tuesday, and Wednesday, EquiLottery would like to contract with racetracks outside Kentucky that have racing on those days.
In response to a question form Representative Floyd, Mr. Cummings said on the rare occasion when a race is run out-of-state, the Kentucky Lottery would still get $1; however, the other $1 goes to the track in the state where the race is being run.
In response to a question from Senator McGarvey, Mr. Cummings said the $2 ticket could be connected to any exotic wager of three numbers of more: a trifecta, a superfecta, a pick six, or a super high five. This creates a larger return. Payouts are determined by a combination of the money won on the quick pick and the amount of money in the supplemental pool. Ticket numbers are randomly generated regardless of the odds.
In response to a question from Senator Thayer, Mr. Cummings said it is the belief of EquiLottery, after legal research, that the Kentucky Lottery Corporation has the authority to implement this game. EquiLottery believes this game is no different than PowerBall and Mega Millions. Senator Thayer commented that a letter from the co-chairs to the Kentucky Lottery Corporation to encourage their cooperation may be in order if the corporation does not communicate with EquiLottery in 30 days.
In response to Representative Palumbo, Mr. Cummings said EquiLottery has met with Kentucky Lottery about twice in the last two years, the last time in September of 2013, which was about when Keno went online.
Representative Keene announced that the next committee meeting will be at 10 AM on October 10, 2014, at Chrisman Mills Winery in Jessamine County.
There being no further business, the meeting was adjourned at 11:21 AM.