For a state that’s known today for bucolic pastures and bourbon-fueled race days, Kentucky wasn't always the top destination for horse racing.
Marshall Gramm, a Rhodes College economics professor and horse owner, said it’s a simple economic fact that contenders will chase the races with the biggest prize purses — but to fund those prizes, tracks need to make money from handling bets.
“Louisville's base of population to bet on horses is a lot smaller than New York and California,” he said. “So if everything was driven by betting handle, well, New York and Los Angeles were going to have the best racing. Churchill Downs was a second-tier track with the exception of having the most important race in the country.”
But now, he said Kentucky’s race industry is thriving, and the total amount of purses awarded in the state has more than tripled — from about $70 million to $220 million.
That’s even while betting on horse races has declined nationally as gamblers can now use a myriad of apps to bet on everything from football scores to the results of the next political election.
So how’s this possible?
According to Gramm, it’s due to the explosion of slot-like historical horse racing machines in Kentucky. Only horse racing companies are legally allowed to operate them — which he calls a lawmaker-created monopoly.
“The industry is thriving in Kentucky and surviving in other places solely because of subsidies,” he said.
To a casual gambler, historical horse racing machines look nearly indistinguishable from Vegas-style slots. They can have all sorts of themes, from traditional bars of spinning 7s and cherries to animated pandas. Recently, state regulators even allowed electronic roulette games that spit real balls onto spinning wheels.
But Travers Manley, senior vice president of gaming with the Kentucky Horse Racing and Gaming Corporation, said these aren’t your typical casino games.
“You might see witches and goblins and all these different things,” he said. “All of that … is just an entertaining game theme. Everything is based on the results of a historical horse race.”
What he means is that somewhere deep inside the guts of each game, a horse race from the past is playing out, then translated into the results of this not-roulette roulette wheel. For each bet, a portion goes back into the prize purses for actual, honest-to-god live horse races.
Kentucky’s gaming agency reported that in 2024, people wagered about $10.1 billion dollars on these machines — more than five times the amount bet on live horse racing in the state according to data from Equibase.
In 2025, Manley said more than $11 billion was bet on the machines — an impact he called a “game changer” for horse racing.
“The increase in the amount of … money coming from the historical horse racing and the purses going up … has had a major impact,” Manley said.
When the Kentucky Derby purse was increased from $3 million to $5 million in 2024, Churchill Downs directly attributed it to historical horse racing machines and thanked lawmakers at the time for “working closely with private enterprise.”
It’s indisputable that Kentucky’s past horse races are supercharging the present success of the industry — but not everyone agrees with the method.
“As a horse owner and someone who loves racing, I think this is great,” Gramm said. “As an economist, I think this is crazy.”
Gramm argued that supply and demand should dictate any industry. He said purses for live races always had a rather predictable correlation between wagering on live races. But in Kentucky, purses of late have risen at a faster rate than live race handles, effectively decoupling fans from the economics of the sport.
“Does racing make sense in its current form if we can't sustain ourselves? I don't believe so,” Gramm said. “I hope we can move in that direction. And I worry that we're taking these subsidies, and we're not using them to grow the sport enough.”
For the longest time, the amount bet on live horse races has been a good indicator of the health of Kentucky’s industry.
In that number, there may be an indication that the commonwealth’s success isn’t solely due to historical horse racing games.
According to Equibase data accessed by the Kentucky Thoroughbred Association, the total handle for both in-state and out-of-state betting on live races has increased, even though it’s decreasing in other major states.
“We were a second-tier racing jurisdiction that is achieving the big time now,” said Chauncy Morris, head of the Kentucky Thoroughbred Association. “You can see how much racing is contracted in some of the other states. That has not happened here.”
Morris said as long as the live race wagering numbers continue to grow, Kentucky tracks still have a reason to invest in live horse racing. Churchill Downs is a good example of this, having dedicated hundreds of millions of dollars in the past decade to upgrade seating, paddocks and luxury dining areas to attract guests.
And whether people gamble on live or historical horses, associations like the Kentucky Thoroughbred Association convert a percentage of gambling taxes into bonus prizes for winning Kentucky horse owners and breeders.
“If we were to just sitting back on our laurels on what we were earning off historical horse racing, we have not done our job well,” Morris said. “We’ve been breeding and racing thoroughbred horses here for 200 years, but the golden age of horse racing in Kentucky is today.”
Just weeks ago, Kentucky lawmakers took another step to inject even more money into racing. This year, fixed-odds wagering will be legal by this summer. It’s a popular type of gambling most people are already used to with sports betting and could draw even more horse racing fans back to the track.
This story was produced by the Appalachia + Mid-South Newsroom, a collaboration between West Virginia Public Broadcasting, WPLN and WUOT in Tennessee, LPM, WEKU, WKMS and WKU Public Radio in Kentucky, and NPR. Sign up for the weekly Porch light newsletter here for news from around the region.
