Do you know what a Historical Horse Racing machine is? Probably not — even if you’ve sat down and gambled at one.
Like pull tabs and other obscure forms of legal gambling, Historical Horse Racing (HHR) machines can only be found in a handful of states — in this case, Kansas, Kentucky, Louisiana, New Hampshire, Virginia, and Wyoming. To the untrained eye, present-day HHR machines are indiscriminate from slot machines. But because the success of an HHR wager is dictated by the result of an actual horse race — often from the distant past, at a track far, far away — and the prize money is doled out from a parimutuel pool, the slot lookalikes are widely considered to be games of skill.
One thing’s for certain: HHR machines are big business. During the 2022 fiscal year, HHR handle in Kentucky alone was $6.8 billion. Meanwhile, in sparsely populated Wyoming, HHR handle neared $1.3 billion during the last calendar year, dwarfing the same line item for simulcast wagering ($3.2 million) and live betting ($2.3 million) at the state’s three racetracks.
Wyoming only taxes gross handle from HHR at a rate of 1.9%, with $5.5 million of those receipts funding a breeder award program that former Wyoming Gaming Commission Program Manager David Carpenter described as “the largest per capita” in the United States. And, like in Wyoming, the vast majority of untaxed HHR revenue has been reinvested into participating states’ horse racing industries, fattening purses that might otherwise be paltry and paying for much-needed facility improvements.
In fact, HHR has become such a stealth force that it can be at least partially credited with the construction of a racetrack in Kentucky, the destruction of commercial horse racing in Oregon, and the sport’s very salvation in Arkansas, the state in which it began.
Hot Springs eternal
After decades of little to no competition for gambling dollars in the mid-South, Oaklawn Park in Hot Springs, Arkansas, found itself surrounded by states with newly legalized casinos in the 1990s.
“Our business plummeted,” said Eric Jackson, then the racetrack’s general manager. “We were limited to parimutuel wagering, so we had to try and come up with an electronic product [to compete with slot machines] that, at its core, was parimutuel wagering on racing.”
To come up with a workable concept, Jackson reached out to Ted Mudge, an executive with Amtote.
“I was down at Oaklawn in [Jackson’s] office and he said, ‘Hey, why don’t we create a betting machine like a slot machine?’ I said, ‘Eric, if that was easy, it would have been done a long time ago.’ But he persisted, and I agreed to talk to the programmers, and the programming department thought it might be worth pursuing a little bit.”
Before long, Mudge found himself bunked up with Jackson and a team of collaborators in a remote Chesapeake Bay cabin, determined to come up with a plan.
“We hunkered down for two days and came to the conclusion that it could be done,” said Mudge. “The regulator said it would pass muster. The slot manufacturer looked at us and said, ‘You’re crazy. You’ve got a 1 percent chance of any success with this thing. Nobody’s gonna play it.’ With that encouraging remark, we dug in and figured out a way to get it to work like a slot machine.”
The earliest HHR machines featured historical data from The Daily Racing Form, with the race replays visible on each cabinet.
“Our first games were truly rudimentary,” recalled Mudge. “They did not look that much like a horse racing game. I guess the important thing was to make the outcome similar to a slot machine. If you expected to win $20 from one cherry and two bananas, we could design a game for something similar, even though it was parimutuel.”
“When I look back on the first couple of generations, it looked more like horse racing than later generations,” said Jackson, who now serves as Oaklawn’s senior vice president. “But the goal from the beginning was to try and have a unit that looked and felt familiar to people who had slot machines.”
Next came persuading elected officials to allow them to install the machines in the Oaklawn grandstand.
“This was their desperate play to boost purses, and Eric couldn’t have been any better at getting this thing approved by the legislature,” said Mudge. “By the time he got to the unveiling of this thing, he’d pretty much taken the clothes off the stripper and everyone knew she was gonna be naked. It got much bigger and better than we ever thought it would.
“It evolved and you learn from these things and begin to understand what motivates people to play. It was a really fun ride. We went through a lot of stuff and had a lot of doubters, but Eric hung in there and we got it done. For years in Arkansas, that was the only thing available and they were basing their purses on the [HHR] revenue. It may not be as good as a slot machine, but it sure beats nothin’.”
Added Jackson, “The whole goal was to come up with a product to generate a revenue stream that Oaklawn could use to generate purses to save racing, and that’s what it did for us.”
In fact, as Jackson put it, the HHR machines would come to serve as the “first baby step” toward a full racino at the facility, now known as Oaklawn Racing Casino Resort and the recent beneficiary of a $100 million facelift.
“As our purses went up, our racing got better. As our racing got better, racing fans began to return,” he said of the path HHR machines set his track upon. “Then, in the mid-’00s, the state of Arkansas allowed us to have additional games of skill because we had proven we could operate this in a manner that was positive to the state — jobs, taxes, purses. We were able to add things like video poker and other skill-based electric games, and we did that up until 2018, when the state voted to allow the two racetracks to become full casinos.
“It saved Oaklawn and it’s having a huge impact in Kentucky and other places. We always saw it as a way for racing to save itself without waiting for the white knight of casino gambling.”
Holding its own against the slots
Corey Johnsen was working at Thistledown Race Track in Ohio in the early ‘90s when he caught wind of Jackson and Mudge’s wheeler-dealings. One of Johnsen’s co-workers at the Cleveland-area track was Damon Thayer, now a top-ranking Kentucky state senator who was instrumental in getting HHR machines approved in the cradle of horse racing.
By then, Johnsen was president at Kentucky Downs, a bucolic, European-style track in Franklin that hosts a seven-day annual meet consisting exclusively of high-stakes turf races. With 358 additional days on the calendar and a rather large facility at his disposal, Johnsen jumped at the chance to build a Historical Horse Racing parlor at Kentucky Downs, and he’d eventually open some satellite locations as well.
Success — and bigger purses — came swiftly in a state where commercial casino gaming and sports betting are not legal. (Horse betting, of course, is.)
“At Kentucky Downs, in our first year we offered $600,000 to $700,000 total in purses for days of racing, and now I think it’s like $2 million in purses per day,” said Johnsen, who left the track in 2019. “I think in Wyoming, you’re gonna see continued improvement. That’s a really good story, and that came directly from the Kentucky experience. I actually testified before a committee in Wyoming about the success of Kentucky Downs and what it meant to the industry.”
As for advantages HHR wagering has over its slotty counterpart, Johnsen said, “It’s very time consuming to add casino wagering to a state because you’ve got to go out and take applications for the licenses and usually the losers sue. You’ve got to have an all-new gaming commission and this and that. Whereas if you just look at a third type of parimutuel racing, it’s fairly efficient.
“I believe there’s an intrinsic advantage to HHR and that’s that it is based on parimutuel wagering, and that ensures that the horse industry is properly compensated for its part in HHR. In many states where you have casino gaming or slot machines only, there’s been history that says that government comes in and tries to take away the percentage that goes to the [horse racing] industry.”
When Johnsen asked his HHR customers at Kentucky Downs how the machines there compared to proper slots, he said, “There were actually some people who thought [HHR] was better. The only negative was when people walk into Kentucky Downs, they were looking for their favorite type of game.
“Somebody walks into Kentucky Downs, they’re looking for Wheel of Fortune or their favorite game because that game has a certain design that they like. These casino games, they’ve got brands and they’ve built those brands over the years. If I go to play in Vegas or Mississippi and my favorite game is X, yes, it would be nice to have those kind of games on the floor.”
That being said, Johnsen concluded, “We were limited early on in terms of game themes, but we learned that this was a type of gaming that people like and could hold its own against slots.”
From Bluegrass bullishness, a track rises
In the U.S. horse racing industry, the popular narrative of the past half century has been that the sport is on an extreme wane, with once-great tracks in major metropolitan areas — Hollywood Park in Los Angeles and Chicago’s Arlington Park come readily to mind — shuttered in favor of glitzier, more lucrative redevelopments.
But in Ashland, Kentucky, near the West Virginia border, a company called Revolutionary Racing is actually building a $55 million quarter horse track, a prospect that would be unfathomable without the success of Historical Horse Racing machines in the Bluegrass State.
The racetrack, dubbed Sandy Ridge, and an adjacent equestrian center will reportedly be completed sometime in 2024 or 2025, with a six-date proxy meet — Sandy Ridge at the Red Mile — set to get underway at the Red Mile in Lexington in just a few weeks on April 1.
The HHR facility in Ashland, to be called Sandy’s Racing & Gaming, is expected to open by the end of this year.
“You’ve got to run a race meet for the privilege to operate HHR. They’re dependent on each other,” explained Revolutionary Racing President John Marshall. “Here’s an opportunity to revitalize quarter horse racing, and when we do it, we want to do it well without cutting any corners.”
Until November 2022, Marshall was the executive vice president of operations at Colonial Downs in Virginia, another state that’s had great success with Historical Horse Racing, despite competition from commercial casinos.
Colonial Downs has access to 10 HHR licenses and has opened six of them as Rosie’s Gaming (the boilerplate for Sandy’s Gaming) locations throughout the state. In early 2022, Churchill Downs Inc. (CDI) announced that it had reached a deal to purchase Colonial Downs, as well as its HHR sites, from Peninsula Pacific Entertainment.
Best known as the namesake owner and operator of the Louisville track that hosts the Kentucky Derby, CDI has divested itself of some racetrack properties while venturing deeply into the casino and HHR spaces in recent years. So bullish is the gaming company on Historical Horse Racing’s future that it has agreed to pay $250 million to purchase Exacta Systems, which manufactures the machines that are in operation at its many Kentucky and Virginia HHR facilities.
When asked whether the average gambler can tell the difference between an HHR machine and a slot machine, Wyoming’s Carpenter, who left his gaming commission post last week to pursue private sector opportunities, answered with a blunt “no,” adding that any horse racing information — the date of the race, where it was run — is displayed on each machine “for about two seconds.”
While there is a means by which an HHR player may handicap a race involved in their next spin, “99.9 percent of people are just hitting the spin button” willy-nilly, said Carpenter.
“Do you have the ability to use skill on this? The answer’s yes. Does anybody use it? The answer’s no.”
Carpenter’s assessment provides the legal reasoning behind why HHR, which once thrived in Oregon, no longer does. And with HHR’s demise has come the death of the commercial horse racing industry in the state.
The final nail in Oregon’s horse racing coffin came this week when Travis Boersma, the billionaire co-founder of Dutch Bros Coffee, announced that he was terminating his company’s 99-year lease of the Josephine County Fairgrounds, where he’d invested $50 million to develop Grants Pass Downs, a rural racetrack that was successful and unique enough to warrant a lengthy 2021 profile in The New York Times.
The most significant improvement Boersma made to the Josephine County property was the erection of the $35 million Flying Lark entertainment facility, which would have housed 225 HHR machines. Boersma, who hails from the area, had good reason to believe this operation would fly. The Oregon Racing Commission had voiced its support and, after all, the machines — approved by the state legislature in 2013 — extended the life of the recently shuttered Portland Meadows by several years.
But in a stunning rebuke of the legislature’s authorization, Oregon’s Department of Justice ruled that the machines violated the state’s constitutional prohibition on commercial casinos — a decision supported by the vast majority of the state’s casino-operating tribes and then-Gov. Kate Brown. Boersma, having concluded that HHR was essential to the long-term viability of Grants Pass Downs, responded by shutting down his meet, costing 250 people in a remote portion of the state their jobs, Josephine County $313,999 in annual rent, and the entire state the sport of horse racing.
As states that have embraced HHR have proven, it didn’t have to end this way for Oregon.
“Personally, the biggest advantage I see for HHR is it’s racing’s opportunity to prove that it can be self-sustaining,” said Marshall. “We need new customers, we need more money for purses — the industry as a whole has been slow to embrace HHR and take ownership of it. Virginia handled over $4 billion last year alone. When you aggregate all the HHR handle, you’re equal to or better than the total thoroughbred handle nationwide.”
Photo: Hulton-Deutsch Collection/CORBIS via Getty Images