How The Approval Of HHR Machines Will Reshape The Sports Betting Debate

Last week, the Minnesota Racing Commission voted to allow historic horse racing machines at the state’s racetracks.

Rep. Zack Stephenson, the author of sports wagering measure House File 2000, thinks what the commission did is illegal.

“People should make no mistake – there’s not going to be historical horse racing. The Legislature will override it either by way of a sports betting bill or stand-alone bill. And they’ll lose in court because they broke the law.”

Racetrack officials, however, applauded the decision, especially considering that the leading sports betting legislation at the capitol doesn’t include them.

The commission’s decision will shape the Minnesota sports betting debate moving forward.

What are HHR machines?

The Minnesota Racing Commission voted on April 1 to approve HHR machines at the state’s two racetracks, Canterbury Park and Running Aces.

Just like placing a wager at a racetrack’s betting window, players can bet on horse races using an HHR machine. The big difference is the races have already been run. Plus, most details of the race (horse names, jockeys, locations, dates) are not available to players.

In other words, it’s impossible for a player to know which horse race a specific HHR game involves.

HHRs are incredibly similar to slot machines. There’s no skill involved and the customer experience is nearly identical.

Some small pieces of information are available to customers, like a jockey win percentage (again, no specific names) and horse post position. It lets customers have the same feeling as if they are betting on a live horse racing event.

Should HHR machines be considered casino gaming?

The question comes down to whether racetracks can legally offer slot-like games. Do they fall in the casino gambling sphere?

Minnesota’s Alcohol and Gambling Enforcement Division Director Carla Cincotta thinks so. She penned a letter to Racing Commission Director Kyle Gustafson last month. In it, Cincotta said she views HHR as video slot machines.

In Minnesota, racetracks cannot offer casino gambling. The state’s tribes have exclusivity over that sector.

Stephenson thinks the machines cross the line.

“You don’t even have to watch the race. It’s a horse-themed slot machine.”

State Sen. Matt Klein, author of a sports betting measure in the Senate (Senate Bill 1949), said the commission’s decision has “definitely shaken things up.”

“Historical horse racing is basically slot machines.”

Two sports betting bills don’t favor racetracks

Neither Klein’s nor Stephenson’s sports betting bills currently address HHR machines. They do specifically bar racetracks from operating sportsbooks.

Under the proposals, the Racing Commission would receive some tax dollars to make available to the tracks. Of course, the amount would be much less than what the tracks could make offering sports betting.

Minnesota’s Native American tribes are on record opposing any sports betting legislation that gives racetracks the option to operate retail sportsbooks.

After years of getting Minnesota’s tribes to support sports betting legislation, Stephenson said the commission’s decision comes at the worst time.

“The path that we were on was to try to negotiate a compromise that everybody could live with. This makes that path much more difficult. I think that folks will be much less inclined to accommodate the tracks. But we’ll just have to see how everything else plays out.”

Running Aces CEO Taro Ito said the machines not only benefit the tracks but they produce tax revenue for state and local coffers.

“At a time when so many of the state’s politicians are pushing to exclude the horse racing industry from any meaningful benefit from sports betting legislation, (HHR) will enhance the tracks’ self-sufficiency, create new jobs and produce additional revenue for state and local governments without burdening taxpayers.”

Did commission overstep its authority?

Minnesota Indian Gaming Association Executive Director Andy Platto said the commission’s decision was “an extreme violation of Legislature authority.”

He added that his agency “will be looking at all available options” to reverse the decision.

Previous attempts in Minnesota at legalizing sports betting fell short when concerns arose on whether online sports wagering would negatively impact casinos.

Plato wrote last year that any gambling legislation must protect tribal sovereignty.

“Any time the state changes the gaming landscape, tribes must carefully consider whether such proposal strengthens, or in fact threatens, tribal sovereignty and self-determination.”

Stephenson is confident the commission’s decision will not stand.

“The Racing Commission does not have the power to override state law and place gambling devices at the tracks.”

He said the move was “really poorly thought out” and that “it’s not going to end well.”

Can racetracks use the decision as leverage?

It’s a tough balancing act for lawmakers to address the concerns of all parties. Tribes demand exclusivity when it comes to sports betting and casino gambling; racetracks say they need HHR machines to combat revenue declines in the horse racing industry.

The tracks might be able to use the commission’s decision on HHR machines to leverage a better deal in sports betting legislation. The Racing Commission’s commissioner, Raymond Dehn, said as much when discussing why the commission chose to allow HHR machines starting May 21, the day after the current legislative session ends.

Proponents hope the decision spurs lawmakers to consider HHR machines when debating sports betting. Maybe racetracks miss out on sports betting, but they’re allowed to offer HHR machines. Or HHR machines are deemed illegal, but racetracks can operate retail sportsbooks.

If nothing else, tracks might get a higher tax revenue percentage than originally proposed.

It remains to be seen exactly how the commission’s decision to allow HHR machines at the state’s two horse racetracks impacts sports betting legislation. Lawmakers might be inclined to punt both issues to next year.