No Contest? An Analysis of the Legality of Thoroughbred Handicapping Contests under Conflicting State Law Regimes

Appearing in KJEANRL Vol 1. No.1 this article was written by Laura A. D'Angelo & Daniel Waxman. The abstract was written by staff member J. Anthony Cash.

Gaming and the equine industry have long and profitable history together. However, the rise of viable gaming options has reduced the market share of gaming revenue collected via traditional track betting on horse races. In response the horse racing industry has experimented with a number of tactics, but none have been more successful than the advent of handicapping tournaments.

A handicapping contest holds much of the same appeal as a fantasy sports league or the World Series of Poker. In a handicapping contest, the most popular of which is the National Handicapping Championship, players pay an entry fee to bet set fictional amounts on a set number of specified races. The player who accumulates the largest fictional bankroll wins the contest and a significant share of the initial pool of entry fees. This creative format creates concern about its legality in a number jurisdictions.

Laura A. D’Angelo and Daniel Waxman confront this problem, analyzing the legality of handicapping contests under the state laws of both Kentucky and Florida, states with a significant horse racing industry. While providing a thorough analysis of the law of each jurisdiction, the authors illustrate a number of possible challenges to the legality of handicapping contest and their possible solutions. Ultimately, the authors’ analysis reveals the incompatibility between the gaming laws of Kentucky and Florida, the possible liability to horse racing establishments conducting handicapping contests, and the subsequent need for an industry wide push to enact legislation permitting handicapping contests.

In order to reach this conclusion, the authors investigate the Predominance/Dominant Factor Test and the Any Chance Test, two tests which have been used by Kentucky courts to determine whether an activity qualifies as a game of chance as opposed to a game of skill. Under Kentucky law wagers on games of chance violate the criminal prohibition against gambling, while wagers on games of skill do not. While the authors make a strong argument that handicapping contests qualify as games of skill under the Predominance/Dominant Factor Test and are, therefore, legal in Kentucky, they also point to case law that could indicate the more restrictive Any Chance Test applies in Kentucky. If that were the case, then handicapping contests would violate Kentucky law if they contain any element of chance, which they undoubtedly do.

Handicapping contests’ questionable legality in Kentucky is compared to their questionable legality under Florida law. Florida law has a more stringent restriction on gaming than does Kentucky. Consequently, the authors show that handicapping contests could be legal under Florida law if the Florida courts deem the entry fees paid to enter the handicapping contest to be “bona fide entry fees” for a “purse, prize, or premium” rather than a wager. Again the authors illustrate that this exemption requires handicapping contests to be viewed as a game of skill rather than a game of chance by the Florida courts.

Considering these factors, the authors’ suggested legislative and administrative exemptions for handicapping contests seem to be a logical solution to a pressing problem.