Racing Commission Approves Machines Prohibited In Sports Betting Bill

The Minnesota Racing Commission voted on April 1 to allow historical horse racing machines at Minnesota’s two horse racing tracks.

The commission voted 5-1 to permit 500 HHR machines each at Canterbury Park in Shakopee and Running Aces in Columbus. The decision allows tracks to begin installing the machines on May 21.

During the meeting, representatives from the two tracks, among others, testified about the struggles of the Minnesota horse racing industry. Officials said HHR machines would provide a financial lifeline necessary for their survival.

The commission also heard from representatives from the state’s Native American tribes, which have exclusivity over gambling in the state. The tribes and some lawmakers have argued that HHR machines are essentially slot machines and, thus, are prohibited by state law.

Proponents say tracks need revenue from HHR machines

The horse racing facilities feel outside the debate about legalizing Minnesota sports betting. One bill being considered in the Minnesota Legislature would specifically ban HHR machines at the tracks.

HHR terminals allow users to bet on randomized races drawn from a database containing completed races from other states. Users receive handicap information about the horses, but it is anonymized, and specific information on the race is not made available.

These machines look and act like slot machines, despite the difference in how winners are chosen.

Supporters argue that because wagers involve the outcomes of actual horse races and payouts are based on pari-mutuel pools, the racing commission has the authority to approve HHR machines.

HHR machines are currently legal in six states. The racetracks’ application to the commission to add the machines pointed to case studies showing that HHR machines in Virginia and Wyoming helped purse sizes grow over 100% between 2018 and 2022. HHR terminals in Kentucky led to a 78% increase in purses.

One study showed how numerous factors led to a drastic decline in races and total purses at the tracks in 2023. The number of thoroughbred races was down 25%, and total purses decreased by just over 32% last year. A big contributor to the decline was the end of a cooperative marketing agreement with the Shakopee Mdewakanton Sioux Community (operators of Mystic Lake Casino Resort) that gave the tracks nearly $9 million annually the previous three years.

Regulating agency says HHR machines are gambling devices

Opponents of HHR say the machines are no different than slot machines or video poker machines. Games of chance by law aren’t allowed anywhere in the state but at tribal casinos.

In a March 1 letter to the commission from the Minnesota Alcohol and Gambling Enforcement division, the agency determined that HHR machines are technically “gambling devices” and games of chance under Minnesota law. The agency said the games are designed to resemble video slot machines.

The letter also addressed the argument that HHR machines are games of skill because knowledge of horse racing can lead to successful outcomes.

“The player who understands handicapping may … make choices that impact their rate of return. However, this is not much different than a player of a video poker machine. The video poker machine determines the initial set of cards to be delivered to the player, then a player who understands poker strategy makes choices to impact their rate of return.”

HHR machines at the center of sports betting bill debate

HHR’s May 21 launch date is one day after the 2024 session of the Minnesota Legislature ends. Legislators are working to pass a bill to legalize sports betting in the state. Two of the three bills in the legislature would give exclusivity to the tribes. Many Republican legislators want any sports betting bill to include concessions to the racetracks.

Minnesota Racing Commissioner Raymond Dehn proposed the May 21 date, saying that he hoped it would force legislators to negotiate sufficient concessions to the tracks, including potentially allowing the machines. He said if legislators complied, they could pull back their HHR approval at the commission’s May 18 meeting.

But a sports betting bill in the House (House File 2000) does the opposite. It explicitly prohibits HHR machines in the state.

Commission’s decision likely to face legal challenges

In a House committee hearing on April 3, HF 2000’s author, Rep. Zach Stephenson, said legalizing HHR machines won’t happen.

“There is no universe in which any bill that leaves this committee is going to authorize historical horse racing at the tracks.”

Stephenson said the HHR provisions in HF 2000 simply clarify that “historical horse racing in Minnesota is illegal.” He said the commission’s decision broke two laws.

First, they approved illegal gambling devices. Second, they didn’t consult with the tribes, who have exclusivity over casino gaming, before the decision.

At the April 1 meeting, commissioners said a meeting with the tribes was being scheduled.

Stephenson said he does not expect the commission’s decision to survive judicial review.

“The non-partisan regulator (AGE) said that (HHR) breaks Minnesota law. It’s a gambling device that is unauthorized under Minnesota law. The racing commission does not have the power or authority to change that. We do. We are not.”

Racing commissioner Julie Idelkope, the sole “no” vote on HHR approval, said she was troubled by the commission’s unexpected vote. At the April 1 meeting, she said she was open to the machines. But she didn’t think the commission could approve them.

“We are getting in front of the state Legislature, which is a really bad idea. I encourage you all to continue to testify at the state Legislature where they determine policy, where they determine gambling expansion. That is not our role.”