Stronach Group Sues the State of Florida

Florida has had many developments in the last 7 years related to gambling in the state with regards to casinos attached to parimutuel operations. In 2018 the state passed Amendment 3 which said that Florida residents had the sole right to decide via a referendum whether to allow casino gambling outside of Indian lands. All Class III Indian gambling was legal per the IGRA as long as the Tribe had a compact with the state and in 2021 the Seminole Tribe extended its compact with Governor Ron DeSantis for 30 years, giving them exclusive rights to offer Class III gambling outside of the Miami-Dade area and exclusive rights to offer sports betting. At the same time, as a result of Amendment 3 and a vote by Floridians, parimutuel operations were given the right to offer slots and table games in the Miami area, but it was limited to parimutuels that offered harness racing, jai-alai or greyhound racing. The courts also ruled that as long as the facilities had those types of parimutuel operations they could still offer casino wagering even if they stopped offering harness racing, jai-alai or greyhound racing. Greyhound racing actually ended in Florida in 2021. The one exception was thoroughbred racing, which the state said needed to continue for the track to be able to offer casino wagering as well. Since Hialeah Park stopped offering thoroughbred racing in 2001 and Calder Racecourse stopped offering racing in 2020, that meant the only Miami track with thoroughbred racing was Gulfstream Park, which is owned and operated by The Stronach Group. Tampa Bay Downs is the only other racetrack in the state, but they don’t offer casino wagering since that part of Florida is exclusive to the Seminole compact. The rule that allowed parimutuel operations to offer casinos even if they stopped offering the parimutuel product was known as the decoupling clause.

As a result of the 2021 decision, the only legal casinos in the state are 6 Seminole casinos as well as the following:

  - The Big Easy Casino, formerly a greyhound track
  - Calder Casino, which stopped offering thoroughbred racing in 2020 but started offering jai-alai in 2019
  - The Casino at Dania Beach, which offers jai-alai
  - Casino Miami, which was a former jai-alai fronton
  - Pompano Beach, owned by Harrah’s which was a former harness track that still has occasional harness racing for fairs
  - Hialeah Park, which offered harness racing in addition to thoroughbred racing giving them the right to offer casino wagering
  - Magic City Casino, which has a jai-alai fronton

As well, the Miccosukee Tribe offers a casino and resort on their lands and has avoided signing a compact with the state since they only offer class II gaming, which is effectively an electronic form of bingo that doesn’t require a compact with the state.

Sweepstake casinos are also prevalent in the state, but like in much of the United States, there are lawsuits being handled to discuss their legality.

Not surprisingly, this decision has caused a lot of consternation with the Stronach Group which owns Gulfstream Park who said it is unconstitutional to treat thoroughbred racing differently than other forms of parimutuel wagering. The company had hoped that a hearing in March by state legislators to discuss the possibility of decoupling thoroughbred racing and casinos would go their way, but the House and Senate decided to keep the requirement that thoroughbred racing  must take place at Gulfstream Park for that venue to continue offering casino wagering.

Looking to "decouple" casino gambling from Parimutuel betting

Prior to that March meeting Frank Stronach released a letter to the legislators saying that he has no intent on ending horse racing at Gulfstream and if anything, the inability to decouple would lead to the ending of horse racing in the state.

"It is from this profound place, with my love of the horse racing industry, a great respect for the Thoroughbred industry and owners, and the continued and unwavering support of the Florida Thoroughbred Horsemen, that I feel compelled to encourage the Florida Legislature not to pass legislation that would jeopardize the future of horse racing in Florida…

My heartfelt opposition to this legislation comes from my love of the industry, the respect for the men and women in this sport, and the deep concern in what this legislation would mean for the future of horse racing in the state. To put it simply, it would end horse racing in Florida…

I know that not everyone will feel the same passion for this industry that I do, but I do think we can all understand economic impacts. This legislation will mean that Florida will lose a lot, especially rural and agricultural areas of the state that contribute significantly to horses that are bred, raised and trained…

I respect those who are pushing this legislation, and I respect my former colleagues at Gulfstream Park for their business interests that have led to this move, but I would say to them that this endeavor is not right. It's not right for the industry; it's not right for those who love horse racing; and it's not right for Florida."

Lawsuit may be the answer

But with the March decision of legislators not going the company’s way, The Stronach Group has now sued the Florida Gaming Control Commission demanding that they reverse that decision because it is unfair and unconstitutional. The suit under the name Gulfstream Park Racing Commission said that singling out horse racing as the only form of parimutuel wagering not able to decouple goes against the fourteenth amendment which disallows unequal treatment under the law.

The Florida Thoroughbred Owners and Breeders Association disagreed and said that the company has benefitted for decades from thoroughbred racing and should not have the ability to abandon horse racing if they choose. One Stronach lawyer in response wrote:

"We are committed to a sustainable future for racing. It’s about our inability to compete with private slot operators who don’t have to meet the same obligations we must meet to run our business, because they receive special treatment at our expense."

Motivation

Although the actual motives of The Stronach Group are unknown, some cynics feel that Stronach is hoping to work out a deal with a major casino company like MGM or Caesars to build a large resort casino on the property.  But Stronach realizes this wouldn’t be possible if there is a requirement to share casino revenues with the horse racing industry. If The Stronach Group can decouple racing and casino like other parimutuels, it opens up a plethora of new opportunities for the company. There is also some concern that since Frank Stronach is over 90 years old, his passion for horse racing may not be observed by others in the organization and the group may be looking to get out of the business or reduce it considerably.

Belinda Stronach is still passionately involved, but there is no question that the sport is not as proliferate as it once was. Until the year 2004 Florida had over 7,000 horses foaled annually, whereas today that number has declined to just over 2000 and the trend suggests it will continue to decline for some time. The closure of Calder Racecourse no doubt contributed to that, but so too is the reality that horse racing is not as lucrative as it once was.

Horse racing declines

Since 2000, 41 racetracks have closed in the United States while only two opened. This included both large and small tracks and the number of closures is set to rise with Aqueduct and Laurel, two prominent racetracks in racing’s heyday, likely to close by 2026. The New York Racing Association has said Aqueduct isn’t closing, but every horse racing analyst said it’s inevitable. And with the redesign of Pimlico, it is already known that Laurel Racecourse is hosting The Preakness Stakes next year (it offered it this year as well) and then will close. Some other prominent tracks that closed in recent years are Hollywood Park, Bay Meadows, Arlington Park, Bowie Racecourse and a host of lesser tracks.

Analysts have noted that the main reason for all these closures is that developers simply see the land as being more profitable as a development opportunity, particularly if they can continue offering slots or table games without the need to offer horse racing as well. And many say that this is strictly a North American issue since UK, Ireland, France, Germany, Australia and other jurisdictions see horse racing thriving and unlike North America, most tracks don’t have casinos attached to them. In fact, in the UK and Ireland one still has to pay an admission fee to see races, which has all but disappeared in the majority of North American tracks that have casinos. In the UK, general admission for races at B tracks such as Brighton or Wolverhampton runs between USD$15 and USD$20, and for weekends and major event days admission be over USD$100 for actual designated seats. And unlike the United States and Canada, the attraction to get people to come to the races isn’t casinos but rather free concerts, theme days and just the horse racing itself.

So, the question has to be asked. Is the lawsuit filed by The Stronach Group legitimate or is it just sour grapes? The answer seems to be a little of both. There’s no question that Stronach has made a lot of his fortune as a result of racing at the tracks he owns like Gulfstream Park, Santa Anita Park and Pimlico Racecourse, but it’s also true that it is extremely unfair to provide exemptions to offering parimutuel activities like harness racing and jai-alai while demanding that the company offer horse racing if they want to offer slots as well. The reasoning behind the Florida legislators decision in March is clearly to ensure that Stronach doesn’t abandon Gulfstream Park to pursue land development deals but the government could come up with a viable alternative that guarantees Gulfstream Park stays operating, while at the same time allowing Stronach to look at new opportunities to expand casino operations. Perhaps that is what everyoine will eventually agree on. After all Gulfstream Park is still quite profitable and outside of New York, California and Kentucky, Gulfstream is the most important track in the country, having hosted the Breeders Cup on three occasions.

But the whole lawsuit still begs the question as to why horse racing needs casinos to survive and why the sport is dying a slow death in North America? I have written many articles on the issue, including "Horse racing needs to reconsider synthetic surfaces for horse and rider safety", and the issues in those articles still persist. The fact is that many younger bettors see horse racing as cruel and are turned off by the reality that horse breakdowns are commonplace and drug use continues more or less unabated. The fact the industry welcomed back trainer Rick Dutrow after a 10 year ban due to severe drugging violations, and seemed to welcome back Bob Baffert with very little consequence after he was caught drugging horses, including Medina Spirit who won the Kentucky Derby and died of a heart attack while working out at Santa Anita Park, indicates to younger fans that their concerns are inconsequential. The decision also by many tracks such as Santa Anita to give up safer synthetic surfaces for dirt surfaces also doesn’t help, plus, of course the general refusal by tracks in North America to give up or supplement parimutuel wagering with fixed odds wagering doesn’t help either.

In Europe and Australia both fixed and parimutuel are available for bettors and both coincide well together. It is true that some tracks in The United States have offered fixed odds on horse racing, but they have such a high hold, it is of no interest to traditional sports bettors. If the industry wants to really allow fixed odds horse racing, then they should allow traditional sports betting companies like FanDuel, Bet365 or Caesars to create the odds with a hold in line, like a futures bet on sports.

So, after a long battle in the courts to settle the Seminole compact with the Governor, it appears the state will now have to go to court again to decide whether they have the right to exclude thoroughbred racing from the decoupling clause. The answer seems to be similar to the Seminole issue, i.e. it does violate the constitution, but the courts are willing to set that aside. Hopefully, the courts can come to a compromise which will guarantee horse racing at Gulfstream Park continues indefinitely while also giving The Stronach Group some leeway to offer casino wagering in a way that better benefits them, but chances are this will be a long, drawn out fight and no one can know for sure how it will resolve itself.

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