View From The Eighth Pole: The Sting Left On Illinois Racing By Churchill Downs Inc.

Arlington Park in Arlington Heights, Ill.

You’ve probably heard the fable of the scorpion and the frog.

A scorpion wants to cross a stream but needs help getting from one side to the other. He sees a frog and tells him of his desire, asking if he can ride across the stream on the frog’s back.

The frog says, “Why should I trust you? You’re a scorpion and may bite me.”

“If I did that,” the scorpion said. “You would die and I would drown.”

The frog agreed to help out the scorpion, but as they crossed the stream, the scorpion stung the frog, paralyzing him with his venom.

Stunned, the frog asked the scorpion, “Why did you do that?”

The scorpion replied, “It’s my nature.”

Both died.

A modern-day example of the scorpion and frog fable has a different ending.

In this case the scorpion is a public company, Churchill Downs Inc., which, among other things, owns Arlington Park in suburban Chicago. The frog represents Illinois horse racing and the thousands of people who depend on it for their livelihoods.

In this version of the scorpion and the frog, the scorpion waits until the frog reaches the other side of the stream. Just before safely climbing off its back, the scorpion leaves a deadly bite on the frog’s neck, saying it’s with a heavy heart that he had to do it.

Again, the frog asked, “Why?”

“It’s my nature,” the scorpion said.

That, in a nutshell, is what happened after Illinois horsemen – year after year after year – helped Arlington Park and other tracks lobby state legislators for casino wagering in order to become more competitive and level the playing field with surrounding states. Their perseverance was remarkable.

It seemed nothing short of a miracle when sweeping legislation passed the Illinois General Assembly in June permitting racetracks to offer as many as 1,200 gambling positions (slot machines and table games) and called for a new harness track/casino to be built. The legislation, enthusiastically signed into law by Gov. J.B. Pritzker, approved six new casinos throughout Illinois, including one in Chicago, bringing the total to 16. It legalized sports betting and made online gambling legal for existing casinos, which also were permitted to expand the number of slot machines and table games at their facilities.

Hawthorne, near Chicago’s southwest side, and Fairmount Park in downstate Illinois, made immediate plans to add casino wagering to their facilities.

Churchill Downs Inc. held out making any announcement about Arlington Park until a state-imposed late August deadline, though it quickly signaled its intention to bid for a new casino license in Waukegan, roughly 40 miles north of Chicago and 55 miles south of Milwaukee, Wis.

Churchill Downs Inc. will benefit greatly from the new law at the Rivers Casino it purchased majority ownership in last year. Located in Des Plaines near O’Hare Airport about 11 miles from Arlington Park, Rivers is by far the most successful and popular casino in Illinois; through August, according to the Illinois Gaming Board, its year-to-date adjusted gross receipts total nearly $294 million, 2 ½ times more than any other casino in the state.

Rivers Casino will be able to add another 800 gaming positions to its current 1,200. It can also offer sports betting and host online gaming.

When the late August deadline arrived, Churchill Downs Inc. released a statement saying it would not seek a casino license at Arlington Park, despite the fact the track could operate slot machines and table games and had a commuter train station adjacent to its front door. The company said it would offer sports betting at Arlington Park – which provides no revenue to horsemen and would like siphon off pari-mutuel wagering – and promised to keep the track open for horse racing in 2020 and ’21.

The statement said Churchill Downs Inc. was unhappy with the financials of the casino deal, specifically complaining about having to share revenue from the track’s casino with the horsemen who helped them get the casino bill passed. The revenue would boost Arlington’s anemic purses, provide a stimulus for the disappearing breeding industry and presumably improve the quality of racing. Left unsaid was the fact that Churchill Downs may not want to open a second casino in the same market as Rivers Casino (or maybe it entered into a non-compete agreement with its purchase of Rivers). And if it doesn’t want to compete with itself, Churchill Downs Inc. certainly won’t sell Arlington to someone else to open a racetrack casino in that same market.

No matter the reason, the sting to horsemen was similar to how the frog must have felt after helping the scorpion across the stream.

“They used us,” Mike Campbell, president of the Illinois Thoroughbred Horsemen’s Association, told At the Races radio host Steve Byk. “They used the horsemen and the agribusiness component of the horse industry to get a license. And they used the horse and the horsemen front and center to do that. And when they got what they wanted, they shot the horse right between the eyes.”

Pritzker, the Illinois governor, wasn’t happy with the stunning announcement by the Kentucky-based Churchill Downs Inc.

“This represents a significant reversal from the years and years of racetrack owners seeking additional ways to generate revenue to keep their operations working,” a statement from Pritzker’s office said. “In fact, the gaming legislation provides several opportunities for significant additional revenues, including table games and slots. Just as importantly, the legislation allows the racing industry to flourish instead of facing more years of decline. Just to be clear: actions taken around gaming will be done to benefit the people of Illinois, not solely for the bottom line of individual operators.”

Pritzker’s displeasure trickled down to the Illinois Racing Board, which met on Tuesday to consider 2020 racing dates. At the meeting (covered extensively by Nicolle Neulist on Twitter), as Arlington Park president and Churchill Downs senior vice president Tony Petrillo was grilled over the company’s decision, it became clear the board was not going to rubber stamp Arlington’s dates request. Petrillo hemmed and hawed about Churchill Downs Inc. being a publicly traded company and having ethical and fiduciary responsibilities to shareholders. He failed to provide specific answers about what it would take to make the company happy enough to apply for a casino license as Hawthorne and Fairmount Park had done.

As a result, the Illinois Racing Board put off a decision on racing dates for a week, hoping Churchill Downs Inc. might discover a conscience and reconsider its decision.

For the record, Churchill Downs Inc. has had shareholders since 1950 and for most of its 70-year history has been a horse racing company. Those days are over. It is now an integrated gaming company that, apart from Kentucky Oaks and Derby day, cares more about casinos and online gaming than it does about racetracks and horses and the people who breed, own, train and care for them.

So when those Illinois Racing Board members asked Petrillo why Churchill Downs Inc. made the treacherous decision to start pounding the final nails into the coffin that is Illinois racing, he might just as well have said, “It’s our nature.”

That’s my view from the eighth pole.