As a whole, the horse racing industry is becoming less popular among gamblers in the Bluegrass State.
However, that isn’t necessarily bad for Kentuckians excited about the prospect of gambling expansion. According to a University of Louisville professor, that decline is precisely why Kentucky sports betting is on the way.
Dr. Thomas Lambert is an assistant professor at the University of Louisville College of Business in the equine industry program. In other words, this man knows horse racing.
Lambert’s most recent research studied the cross-section of economics and gambling. His latest paper, “US Gambling Stagnation: Will New Gambling Forms Make a Difference,” was published in Critical Gambling Studies last January.
His research cited a relative decline in the US gambling market, most likely due to stagnant growth in disposable income.
While local politicians are championing sports betting to boost tax revenue and the state’s gambling industry, Lambert is more reserved.
Horse Racing Not as Popular as It Used to Be
Sure, everyone gets excited about the Triple Crown races. But in Kentucky, horse racing betting isn’t as popular as it once was.
Lambert believes the dip in popularity is because Kentuckians now have more betting options than before.
“The betting per race is OK, but in the aggregate horse racing is not doing well,” Lambert told Gaming Today. “We’ve only got about half the number of races being run now. Actually, a little bit less than half now [compared to] 1989. And as I keep pointing out, and other people know this as well, the lottery, the casinos that have popped up in so many different states over the years, and now we’ve got sports gambling … It’s just really hurt horse racing, even simulcasting.”
The bill that legalized sports betting gave the state’s nine horse tracks the right to host retail sportsbooks. Furthermore, the Kentucky Horse Racing Commission will oversee the new industry.
One line of thought is that these sportsbooks will help get people to the tracks. As a result, horse racing betting will increase.
However, Lambert didn’t see that help New Jersey horse tracks. Thus, he feels it’s unlikely to spark a revival in Kentucky.
“The two target markets don’t really seem to mix,” said Lambert. “Monmouth tried to give people discounts on pari-mutuel wagering for horse racing if they bet so much on a sports bet. That worked at first, but after a while, you can look at the numbers. They went in different directions and horse racing gambling has basically stayed the same.”
Horse Racing Lobby Wanted Sports Betting to Help Offset Racing Decline
When asked if the Horse Racing Commission was the right choice for sports betting regulatory duties, Lambert said it was the only choice.
“Had they not done that, sports gambling probably would not have passed the legislature,” he told Gaming Today.
The industry has a demographic problem that sports betting could help fix. According to Lambert, the average horse bettor is between middle-aged and senior citizens.
By contrast, the sports betting market trends younger. The tracks could fix the popularity problem by attracting newer horse bettors through the allure of brick-and-mortar sportsbooks. But this might not be possible.
On the other hand, if they can control the sports betting industry, they can offset any potential financial losses from horse betting.
A Lesson Learned From the 1988 Lottery Fight
Horse racing was the only legal betting option for most of Kentucky’s gambling history. The first gambling expansion came in 1988 when the public passed a ballot initiative to create a state lottery.
Unlike the current situation, the horse racing industry opposed the expansion and fought vehemently against the lottery’s creation. The tracks aligned with fundamentalist Christians who were opposed to gambling.
Ultimately, the fight failed, and the Kentucky Lottery started accepting wagers in 1989.
“Politics makes for strange bedfellows,” said Lambert. “After that though, I think Churchill Downs and the other racetracks in this state learned a lesson. Here in Louisville, when Caesars opened up a casino in Southern Indiana in the late ‘90s, Churchill Downs, rather than resisting, just said ‘OK, we’re going to have to learn how to compete.’ And thanks to these historical horse racing machines, they found a way to get a lot of people back from over there to here.”
Historical horse racing machines are essentially Kentucky’s version of a slot machine. But instead of payouts based on randomness, illegal under Kentucky law, these machines pay based on results of past races.
There is no visible difference between a typical slot machine and a historical horse racing machine. These machines, introduced in 2011, comprise most of the state’s gambling revenue.
Economic Conditions Could Cap the Kentucky Gambling Market
When Gov. Andy Beshear signed HB 551 into law, he touted an estimated $23 million in new annual tax revenue.
While Lambert didn’t push back on the numbers, his enthusiasm for Kentucky sports betting is more reserved.
He does think there will be a bump in revenue numbers from sports bettors that would normally travel to neighboring states to place bets. But it might not be as huge of a jump as some believe.
“My research has shown that there are only so many entertainment dollars to go around,” Lambert told Gaming Today. “And disposable income in this century, it’s grown. But the growth rate has been lousy compared to the last two decades of the previous century. And gambling has become more and more competitive. You’re seeing more mergers within the industry.”