Over two months have lapsed since the California Department of Justice (DOJ) swooped into Santa Anita midway through the races to remove 26 Racing-on-Demand terminals that allow a form of pari-mutuel wagering on previously run races.
Santa Anita subsequently filed suit against state attorney general Rob Bonta making several claims including how the state “unlawfully seized” the terminals “without warning or warrant,” and that they have yet to provide “any legal basis or explanation for their warrantless seizure of Petitioner's property, which Respondents have threatened to destroy.”
At the heart of Santa Anita's argument is the three-by-three wager approved by the California Horse Racing Board (CHRB) in 2024, which the track says gives them the legal cover to operate these machines, including with races that have already been run.
“The 3 X 3 wager, which has already been approved and offered for the past 18 months at Petitioner's California racetrack and also at Del Mar Racetrack, and which continues to be offered today on Santa Anita Park races, is consistent with the principles of pari-mutuel wagering that have guided enforcement of California law permitting wagering on horse racing since 1933. That Petitioner sought to offer the 3 X 3 wager via a self-service tote terminal does not convert an otherwise lawful wager into a criminal act,” the filing states.
In a legal filing, Bonta and the state DOJ agree with many of the facts of the case, like how in April of 2024, “the CHRB authorized Petitioner to offer the 3 X 3 wager on three designated consecutive contemporaneous (live) horse races” which have been “conducted on a single card at Santa Anita Park.”
At the same time, Bonta denies Santa Anita's key substantive claims.
This includes denying “they were required to obtain a warrant prior to seizing the illegal gambling devices as the illegal gambling devices were in plain view. Respondents deny having failed to provide basis for the seizure, the basis for which was stated in the notice provided to Petitioner at the time of the confiscation. Respondents deny that they were obligated to provide a basis for the seizure prior to the confiscation.”
While the Attorney General's office agrees that Santa Anita shared written legal analysis over the legality of the machines, it denies having “consented or acquiesced to the legality of machines that offered 3 X 3 wagers on concluded horse races,” and denies “that the 3 X 3 wager was ever approved for use in machines which allow users to bet on concluded horse races.”
A trial setting conference in the case is scheduled for April 30.
To discuss the case, the TDN spoke with I. Nelson Rose, professor emeritus at Whittier College and a leading expert on gaming law who often acts as a witness and legal consultant to governments and industry.
The following has been distilled from two longer conversations, heavily edited for brevity and clarity.
When the DOJ removed the machines, they issued to Santa Anita a notice of intent to destroy the machines, “unless on or before the expiration of 30 days from the posting hereof, an action is commenced in a court of competent jurisdiction to recover the possession of said machines and devices.”
With Santa Anita having filed its lawsuit within that 30-day window, any potential destruction of the machines was delayed (and if they win, of course, the machines will presumably be returned intact). But with the decision now before a judge, what kind of timeline could this all play out over?
“I always told my students to figure out whose side time is on,” said Rose. “Right now, the machines are with the state, which means time is on the side of the attorney general.”
Had Santa Anita applied for a preliminary injunction, the machines could have been returned to the track, putting the emphasis of time on the side of the track, explained Rose.
“Well, they didn't ask for a preliminary injunction, only for declaratory relief. And therefore, it could be as long as any lawsuit, including maybe there will have to be a trial,” said Rose.
“They might be able to do this through summary judgment with everybody agreeing as to the facts, and then the judge would decide the law. But they also could be hiring experts to testify, to help determine whether the machines meet the legal definitions,” he said.
“We might not have an answer on this by the end of the year,” Rose added. “It could even possibly be longer if they end up having a trial on it.”
What are the main legal factors at play here?
“You always have two questions. The first question is, who decides? Is it going to be the racing board or the legislature or the courts? And then the second is the legal test itself,” said Rose.
“I don't think the question is whether it's skill or not,” Rose added. “But if they're going to rest their argument on the machines being a game of skill, having the quick picks means you can't argue that there's any skill.”
The machines, which Santa Anita argues are akin to Tote terminals, work two ways. Players can select their own horses after viewing handicapping data, or players can use a quick pick option. So, there is a skill option. Does that make a difference?
“First of all, I'm sure if they keep track of the numbers then almost nobody's going to do that [use the handicapping option]. People who play are interested in playing a slot machine,” said Rose.
Slot machines can be modified to slow them down, Rose explained.
“But the idea that somebody is going to spend three minutes handicapping a race already run, it just isn't going to be happening very much, if at all. The question isn't really having the skill option, it's having the quick-pick option. That's the problem for arguing that it's a game of skill.”
Let's get back to the first question you posed: who decides? Why is that so important?
“California prohibits lotteries – not gambling. Lotteries. If somehow the law changes maybe through an act of the legislature, a vote of the people, or an administrative body like a racing board, then the next question is, who decides whether the action has violated the state's constitutional prohibition on lottery?” said Rose.
The courts when asked that question, he said, are generally “split” on the answer.
“Sometimes they say the legislature can do whatever it wants. Normally, the courts say they will decide whether the legislature has violated the state constitution,” he said.
“It's the state legislature that makes the laws – assuming they're not violating the state constitution – and they can delegate much of their power to administrative agencies like the racing board,” said Rose.
“The racing board can do whatever the legislature says it can do, but it can't go beyond that,” said Rose. “And obviously, they can't violate state laws, and they can't violate the constitution.”
In this case, Santa Anita's argument is that the California Horse Racing Board (CHRB) had already provided cover for the machines when they approved the “Three-by-Three” wager in 2024. That said, the board hasn't offered an opinion on the machines themselves.
“It's almost somewhat like what's going on with the predictive markets,” said Rose.
The prediction markets, led by companies like Kalshi and Polymarket, are big business. More than $63 billion was reportedly gambled on predictive markets last year in the U.S. But critics of this gambling form have argued these markets are way under-regulated.
In response, the federal Commodities Futures Trading Commission (which regulates predictive markets) earlier this month announced it's looking into new rules for what's permissible in this gambling arena.
With this in mind, Rose said he thinks it's possible the courts could punt a decision over to the CHRB.
“The one thing I was thinking is that the court could probably say, 'go take it to the board first,'” said Rose.
“They could, you know, because otherwise, they'd have to have a whole trial and question things that really the board is supposed to be evaluating, right? It wouldn't tie up the court's time on things like this,” said Rose.
“They're lucky in many respects that they're in a heavily regulated industry because imagine if a grocery store or a bar did that – they'd get arrested. They wouldn't just take the machines, you know. I mean, if it is illegal, it's illegal gambling, which is at least a misdemeanor in California,” Rose added.
Does Santa Anita stand a chance? It seems like going up against the AG's office is a tall order…
“Oh, sure,” said Rose. “As always happens with the law, there's questions of procedure, right? Did they need a warrant or did they have to give them notice or something?” said Rose. The machines, it should be noted, were removed without a warrant.
“And then there's the substantive question,” Rose added. “If the track is really hanging the case on skill, they're going to lose. But if they're instead going to be arguing, 'well, it's the same as what has already been approved for the track with live wagering – the three-by-three wager – which I guess has a quick pick, then it's possible that this is okay.”
Similarly of note, the filing makes the argument that in 2006, the California Office of Legislative Counsel issued a ruling on so-called Instant Racing, which is a form of pari-mutuel wagering on the outcome of concluded races via specialized tote terminals (and therefore has obvious parallels with the modern-day Racing on Demand machines).
The Legislative Counsel's determination is included as an exhibit in the court filing. It found that these Instant Racing machines would be “considered to be predominantly a game of skill, that the outcome is not made unpredictable by the operation of the machine, and, consequently, that the Instant Racing machines are no more slot machines than the machines currently used to place bets on live horse races. How compelling is this argument?
“Not as much weight as the attorney general's opinion,” said Rose. “Obviously, this attorney general doesn't agree with that. What's being fought throughout the country on historic horse racing is the question not of whether they're horse racing machines, and it's not whether it is skill, but is it horse racing under the state definition of what pari-mutuel betting is allowed.”
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