CDI tells casino to drop futures

Churchill Downs Inc. has successfully pressed a Mississippi casino to cease taking future bets on the Kentucky Derby, citing federal law, in a development that could have ramifications throughout the burgeoning U.S. sports-betting market.

Churchill Downs confirmed Wednesday morning that it had pressed the Scarlet Pearl Casino’s sportsbook in D’Iberville, Miss., to take down the odds on Derby futures on Monday morning, shortly after the sportsbook had posted the odds on nearly 300 3-year-olds.

“Federal law requires the consent of the track on which the wager is placed as well as other necessary approvals,” Churchill Downs said in a prepared statement. “In this case, the wagers did not meet the requirements of federal law, including obtaining our consent.”

While Churchill Downs declined to comment beyond the prepared statement, the federal law that the company cited is almost certainly the Interstate Horseracing Act, which requires that bet-takers obtain the consent of racetracks and horsemen before accepting wagers on races. While that law has applied in the past to parimutuel wagers, officials for racing companies have signaled that they intend to cite the law when sports books offer fixed-odds wagers on horse racing, such as future bets. Sports betting is growing across the United States due to a decision last year by the Supreme Court allowing states to legalize the practice.

Nic Sfanos, manager of the Scarlet Pearl sportsbook, did not return a phone call Tuesday. The incident was first reported by VSiN.com, a sports wagering website.

John Avello, a veteran racebook oddsmaker who was recently brought on by Scarlet Pearl to help manage the book, said Wednesday morning he could not comment without authorization from DraftKings, which manages the sportsbook operation. DraftKings did not immediately respond to a request for authorization.

Churchill Downs has allowed sports books in Nevada to offer future bets on horse racing for decades. However, those books have simulcasting agreements with Churchill Downs and other tracks allowing the operations to take horse racing bets, and those contracts typically include express permissions to offer the fixed-odds wagers.

The Scarlet Pearl incident is complicated by the fact that Mississippi state law does not allow for betting on horses. The state legislature authorized sports betting last year, but the law does not explicitly include authorization for horse racing wagers.

Churchill Downs, which has casino properties in multiple states, opened sports books at its two Mississippi casinos late last year, but those casinos do not offer any bets on horse racing, despite the company’s racing businesses. Citing Mississippi’s prohibition on horse-race betting, Churchill does not allow Mississippi residents to open accounts with its Twinspires.com accountwagering operation.

Despite the fact that sports books have not traditionally shared a cut of their revenues with sports leagues, horse racing interests have stated that they intend to hold books accountable to the Interstate Horseracing Act if they plan to offer fixed-odds bets on horse racing. That position rests in part on a 2017 declaratory judgment by a federal judge that said entry fees for websites offering contests on horse racing should be treated as “interstate wagers” and be subject to the requirements of the IHA, a set of federal laws passed in 1978 to provide a legal foundation for interstate simulcasting.

Scott Daruty, president of the simulcast-marketing arm of The Stronach Group, which was a party to the suit resulting in the declaratory judgment, recently said at a racing conference that the company would consider any racing offerings by a sports book as subject to the IHA, including fixed-odds bets and parlays that include both the results of sports contests and races.

A handful of states have authorized sports betting since the Supreme Court decision last May, and dozens more are expected to legalize the practice in the next several years.