Return of horse racing makes for a crowded field in the contest for Oregon gambling dollar – OregonLive

Coffee magnate Travis Boersma has launched one of the great longshots in Oregon business history.

The co-founder of the Dutch Bros empire of coffee kiosks has brought live horse racing back to the state. Hes spent $15 million on a complete makeover of the old Josephine County Fairgrounds horse track in Grants Pass. Hes prepared to spend another $10 million on an adjoining restaurant and entertainment center dubbed the Flying Lark in honor of a famed Oregon horse.

My friends say Im crazy, he said. The thing is, Im having a great time. Im determined to do this.

Boersma doesnt expect the actual horse races to make money. But hes got a plan to cover any losses: The main attraction at the Flying Lark will be 250 betting terminals known as historic horse racing machines. The controversial machines allow players to bet on a replay of a past horse race, disguising the identities of the racers so gamblers cant know which horse won before placing their bets.

They have landed Boersma in the middle of an acrimonious argument over what constitutes legal gambling in the state. Native American tribes as well as advocates for problem gamblers argue historic horse racing terminals are nothing more than slot machines, which they sometimes resemble, and say the Flying Lark will be a casino.

Boersmas plans have thoroughly shaken up the perennial debate over gambling in Salem. For the Cow Creek Band of Umpqua Tribe of Indians, which operates the Seven Feathers Casino Resort in nearby Canyonville, the Flying Lark will be direct competition.

With an increasing number of internet gambling purveyors now offering their own version of historical horse racing games, it is available to any Oregonian with the right phone and app.

The rise of horse racing betting has to some degree put a tiny state agency into the gambling policy drivers seat. The Oregon Racing Commission will ultimately rule on Boersmas plan. Gov. Kate Bown will defer to the racing commission, a spokeswoman said.

The agency has 10 employees and a biennial budget of $7.3 million. Its charter is to regulate the horse racing business for the good of the horses, the horsemen and women, the bettors, the licensees and the citizenry.

Most observers expect it to approve Boersmas plan.

It caught a lot of people off guard, said Julie Hynes, executive director of the Oregon Council on Problem Gambling. Everyone is keeping such a close eye on the lottery, no one was looking over at the other corner of the internet where these historic horse racing machines came online. A lot of people dont even know these things exist.

Jack McGrail, executive director of the racing commission, said the agency is not a rubber stamp.

Recommendation by this office will be based on a rigorous examination of factors like security, technology and vendor approval.

For Oregon tribal officials, who are struggling to maintain their share of the states gambling dollar, the racing commissions new clout is troubling. They allege that the horse racing terminals are essentially slot machines and their introduction is an end-run around established gambling rules.

Its concerningthat the Oregon Racing Commission has already moved to a mobile slot machine platform without any consultation with tribes, evaluation on affected communities, or broader public input, said Dan Courtney, chairman of the Cow Creek Band of Umpqua Tribe of Indians. The way the state is managing its gaming policies and oversight is starting to feel like a frantic race with no course or end. If the state isnt thoughtful, Oregon is going to open doors that cannot be shut, and the tribes are not the only people who will be impacted.

The Sport of Kings

Sixty years ago, horse racing competed with baseball and boxing as the nations most popular sport. Huge crowds spent the day at the track, pored over the Daily Racing Form, and put some money down on their favorite.

But the sports popularity nosedived. Portland Meadows, Oregons one major track, played to a largely vacant grandstand for years before closing down entirely in 2019.

The major players in the industry realized they needed to diversify if they were to survive.

Racing is on life support, said Jonathan Stettin, a professional handicapper and columnist for the pastthewire.com website. The decline in fan base has led to an environment where the tracks that survive and thrive are the ones with casinos, slots, other unconnected sources of revenue.

Strangely enough, many of those big gambling companies came to Oregon years ago to take advantage of favorable laws and a friendly racing commission. Oregon has become to the online horse race betting industry what Delaware is to corporations: a user friendly and inexpensive place to get licensed.

TwinSpires, the gambling subsidiary of famed Kentucky track Churchill Downs, is licensed in Oregon. So is NYRA bets, the online operation of NYRA, which owns Belmont Park, Aqueduct and Saratoga.

The pandemic was very good to the online gambling concerns. As tracks shut down, gamblers turned to their computers and smartphones in record numbers. The total handle in 2020 nationwide was a record $11 billion, according to the Jockey Club.

More than half that -- $6.6 billion -- was done by companies licensed in Oregon.

McGrail, executive director of the racing commission, said the state should be proud of Oregons status.

Our stamp of approval means something, he said. Its a significant imprimatur. Its why the biggest companies in the industry come to Oregon.

Commission meeting minutes do not mention a single investigation or compliance action against one of its large gambling licensees over the last four years. McGrail did not respond when asked to detail any recent enforcement actions.

Questions persist about the legality of the historic horse racing machines. It boils down to an arcane and highly technical argument over whether the machines qualify as pari-mutuel wagering. Pari-mutuel refers to the kinds of legal betting that are unique to the horse racing business.

Over the years, the definition of pari-mutuel betting expanded to include a limited number of off-site betting locations and simulcasts of real races. More recently, historical horse racing machines were introduced. They look like slot machines, but advocates insist the machines qualify as pari-mutuel wagering because they allow players to compete against other players and the odds of winning can change depending on the bets placed.

Regulators and horse tracks have argued over the machines, sometimes called instant racing machines, for nearly two decades. The Oregon Racing Commission first approved them in 2003, then reversed itself in 2006 amid doubts about their legality. The Oregon Legislature explicitly legalized them in 2013.

Reviews of the machines are mixed. Izzy Trejo, executive director of the New Mexico Racing Commission, decided to give the historical horse racing machines a try while traveling through Kentucky recently. Trejo assumed the machine would give him the time and opportunity to carefully consider his wager, just like real horse racing.

But he never did figure out how to get information about any of the virtual horses.

To me, it played like a slot machine, only I lost my $20 faster, Trejo said. It was gone in a heartbeat.

The Family Foundation of Kentucky argued all the way to the Kentucky Supreme Court that the machines are simply slot machines under a different label. The Supreme Court shocked the gambling industry when it sided with the Family Foundation in 2020 and again in 2021.

In response, the Kentucky Legislature tweaked the statutory language of what constituted a legal betting machine.

It was a total David and Goliath situation, said Martin Cothran, a policy analyst at the Family Foundation. We won the battle but lost the war.

The political gamble

Gambling is one of the hot-button issues in Salem. All of the major players came into the 2021 session with an agenda.

Boersma is seeking a tweak to existing law that would lower the payments Grants Pass Downs will have to pay the state. Instead of a percent of revenue, Boersma wants to pay a flat fee.

The bill is pending.

Anti-gambling groups hope to forbid the Oregon Lottery from expanding its mobile gambling operation. But House Bill 3078 has hit a snag. Gov. Kate Brown has directed lottery Executive Director Barry Pack to try to negotiate a peace treaty of sorts with the anti-gambling groups that both sides can live with.

The racing commission entered the session with an audacious policy goal. It got a bill introduced that would allow all of its regulated gambling companies to launch their own Oregon sports betting operations. It would have been a boon for gambling companies but politically, it was a nonstarter.

The tribes have not yet tipped their hand. They are considering a call for a complete moratorium on new gambling products and initiatives until the state can undertake a comprehensive review of how the current system is working.

Were 25 years into this, said Justin Martin, an influential lobbyist and member of the Confederated Tribes of Grand Ronde. Lets slow down and take a breath and reassess where were going.

Martin was blunt about the racing commission.

This is group of about five people that spends much of its time debating track conditions and the safety of horses, which is great, he said. But should they be making these big, important decisions on the states gaming policy?

The tribes eight casinos are losing ground financially to the Oregon Lottery.

Bob Whelan, an economist with ECONorthwest who has long studied gambling issues, estimates the revenue from the eight tribal casinos peaked in 2006 at about $500 million a year and has been flat since then. Sales at the lottery, meanwhile, have continued to grow and now exceed $1 billion a year.

Elizabeth Merah, spokeswoman for the governor, said Brown recognizes the issues facing the tribes. We have told our tribal partners that all plans for Oregon State Lottery expansion are on hold until we consult with them.

The problem gambling groups agree that its fitting time to hit the pause button. Polling indicates that about 83,000 Oregonians self-identify as problem gamblers, said Hynes, with the problem gambling nonprofit. She said that number will only increase as mobile gambling grows.

We have an opportunity to be a national leader here, Hynes said.

Feeling Luckii

In a quiet office park on Northeast Stucki Avenue in Hillsboro, the urgent politicking around gambling seems a world away. Tucked between a title company and an investment firm, Luckii.com has set up shop.

It is the latest gambling company to come to Oregon and be licensed by the state racing commission. It is also a unique animal in horse racing gambling. Luckii is purely virtual. It is not affiliated with any track.

Luckii offers a variety of what it calls Vegas-style games. They qualify as pari-mutuel because the results of each game are powered by the results of actual horse races previously run at hundreds of tracks around the country.

The company is owned and managed by ELS Gaming in Boston.

For now, Luckii is making its website available only to Oregonians, which offers a unique look at the size of the local market. Since launching late last year, the company claims more than $2 million has been bet on its site.

Volume is showing consistent double-digit weekly growth. Dozens of Oregonians have won $10,000 or more and hundreds have won more than $1,000 since the sites launch, it claims.

Larry Lucas, company chairman, said the future for online gambling and for his company are bright.

Oregon is just the first stop, he said.

-- Jeff Manning | jmanning@oregonian.com | 971-263-5164

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Return of horse racing makes for a crowded field in the contest for Oregon gambling dollar - OregonLive