Churchill Downs Inc. (CDI) has declared its intention to exit Louisiana’s Fair Grounds Race Course and its gaming operations due to economic challenges stemming from recent legislative moves and a Louisiana Supreme Court ruling. In a letter dated June 9 to the Louisiana State Racing Commission (LSRC), CDI CEO Bill Carstanjen expressed the company’s plan to relinquish live racing and off-track betting licenses, as well as slot machine and video poker permits, a decision driven by insufficient legislative support.
Carstanjen mentioned, “CDI is left with no choice but to request an appearance before the LSRC to begin the next steps for voluntarily surrendering the racing license held by the Fair Grounds,” highlighting the adverse impact of the legislature’s decisions on the business model.
The immediate catalyst was a ruling by the Louisiana Supreme Court in March which invalidated the legal basis for Historical Horse Racing (HHR) machines, critical to revenue at Fair Grounds’ off-track betting venues. Installed in 2022, these machines were intended to modernize and enhance profitability. The ruling wiped out nearly half of the off-track betting revenue and about 74% of EBITDA, putting CDI in a financially untenable position. “Operating under the current status quo is no longer an option,” stated attorney Ozair Shariff at a May LSRC meeting.
CDI was further frustrated by two new bills: one increasing the number of video poker machines at truck stops and bars, and House Bill 547 allowing fixed-odds betting on horse racing, shifting away from the pari-mutuel system. Though the latter includes a mechanism to funnel 5% of proceeds into a purse fund for Louisiana horse racing, CDI argued it could divert significant revenue from racetracks and off-track betting sites to online sportsbooks.
Despite efforts to engage with legislators before the session’s adjournment on June 12, CDI faced apathy and resistance. “Our efforts to engage elected officials have not led to meaningful discussions and, confoundingly, CDI’s efforts have been met with a combination of reluctance, indifference, apathy, and even opposition,” Carstanjen noted. Some state leaders, like former Fair Grounds owner Louie Roussel III, were openly defiant. “Do not allow these people to do this,” he told commissioners. “If they tell you they don’t want to race, fine them $50,000 or $100,000 a day for every day they don’t race. There will be no state subsidy for this racetrack. None.”
Despite opposition, CDI maintained that ongoing operations were unsustainable without HHR revenue and legislative compromise. The closure of Fair Grounds, a historic U.S. racetrack and vital to Louisiana’s Thoroughbred industry, would be a considerable setback for the local economy and racing community. “Closing one of the nation’s oldest racetracks, and the most important track in Louisiana, will be a devastating blow to Louisiana’s equine industry and the New Orleans economy,” Carstanjen warned.
Fair Grounds hosts essential winter and spring races linked to the national Kentucky Derby prep circuit, drawing participants nationwide. Its absence may leave a gap in the local racing calendar and affect breeders, trainers, and staff statewide. Churchill Downs has a precedent for exiting markets post-disputes with local governments, as seen with its 2021 closure and sale of Arlington Park in Illinois following failed tax arrangement negotiations for a proposed casino.
The Louisiana State Racing Commission is set to meet on June 15 to evaluate the situation and hear from CDI representatives, who will discuss “the timeline and next steps” for license surrender. The future of Fair Grounds Race Course remains uncertain, with possibilities like replacing HHR machines with legal video poker or seeking parish-level approval for HHR under new legal circumstances not publicly considered by the company. Absent last-minute agreements or policy changes, Louisiana risks losing a key racing venue, marking a significant turning point for the state’s equine industry and its role in gambling policy.
- SCCG Management. The Gambling Industry’s Global Connector. Access Here.
- Source: SCCGManagement.com