Item 1. Business
ITEM 1. BUSINESS
Overview
Churchill Downs Incorporated ("CDI" or the "Company") has been creating extraordinary entertainment experiences for over 150 years, beginning with the Company’s most iconic and enduring asset, the Kentucky Derby. Headquartered in Louisville, Kentucky, CDI has expanded through the acquisition, development, and operation of live and historical racing entertainment venues, the growth of the online wagering businesses, and the acquisition, development, and operation of regional casino gaming properties.
Business Segments
The Company manages its business through three reportable segments: Live and Historical Racing, Wagering Services and Solutions, and Gaming. The Wagering Services and Solutions segment was previously known as the TwinSpires segment. We aggregate our other businesses as well as certain corporate operations in All Other. We report net revenue and operating expense associated with these reportable segments and other information about these segments in Part II, Item 8. Financial Statements and Supplementary Data, contained within this Report. Further discussion of segment financial information, and our planned investments in segment properties, is set forth in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations contained within this Report.
Live and Historical Racing
The Live and Historical Racing segment includes live and historical pari-mutuel racing related revenue and expenses at Churchill Downs Racetrack and our historical racing properties in Kentucky, Virginia, and New Hampshire.
Our Live and Historical Racing properties earn commissions primarily from pari-mutuel wagering on live and historical races, simulcast fees earned from other wagering sites, fees from racing event-related services including admissions, personal seat licenses, sponsorships, television rights, other miscellaneous services, and revenue from food and beverage services.
Churchill Downs Racetrack
Churchill Downs Racetrack is in Louisville, Kentucky and is an internationally known thoroughbred racing operation best known as the home of our iconic flagship event, the Kentucky Derby. Thoroughbred racing has been conducted at Churchill Downs Racetrack since 1875. The Kentucky Derby is the longest continuously held annual sporting event in the U.S. and is the first race of the annual series of races for 3-year-old thoroughbreds known as the Triple Crown. The demographic profile of our guests, global television viewership, and long-running nature of this iconic event are attractive to sponsors and corporate partners, especially those with luxury and/or marquee brands.
Churchill Down Racetrack conducts approximately 80 live race days each year.
Churchill Downs Racetrack is located on 175 acres and has a one-mile dirt track, a 7/8-mile turf track, a stabling area, and a variety of areas, structures, and buildings that provide reserved seating for our patrons. Churchill Downs Racetrack has one of the largest 4K video boards in the world sitting 80 feet above the ground and measuring 171 feet wide by 90 feet tall. This video board provides views of the finish line and the entire race for on-track guests, including those in the infield and guests along the entire front side of the racetrack. The facility also has permanent lighting to accommodate night races. We have a saddling paddock and our stable area has barns sufficient to accommodate 1,400 horses and a 114-room dormitory for backside personnel. We have a state-of-the-art equine medical center and quarantine barns on the backside area of Churchill Downs Racetrack which reinforces our ongoing commitment to equine safety and supports our long-term international growth strategy. The Churchill Downs Racetrack facility also includes a simulcast wagering facility. We also own 83 acres of land at our auxiliary training facility, which is five miles from Churchill Downs Racetrack.
In 2002, we transferred title of the Churchill Downs Racetrack facility to the City of Louisville, Kentucky and entered into a 30-year lease for the facility as part of the financing of improvements to the Churchill Downs Racetrack facility. We can reacquire the facility at any time for $1.00 subject to the terms of the lease.
Since 2021, we have completed several major multi-year capital investments at Churchill Downs Racetrack: The Homestretch Club, the First Turn Experience, the Jockey Club Suites renovation, and the Paddock Project. These investments transformed key areas of Churchill Downs Racetrack that enhance the experience for our guests.
The Paddock Project was completed for the 150th running of the Kentucky Derby. The redesigned area improved the flow of guests throughout the paddock. The Paddock Project created a larger paddock walking ring for viewing the horses prior to the races, a new Paddock Club in the area on the first floor under the Twin Spires providing views of the paddock and views of the tunnel that the horses walk through, new hospitality and other amenities for guests in certain areas of the third floor clubhouse seats, and new terraces overlooking the paddock.
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The Company is also investing up to $85 million to renovate the Starting Gate Pavilion and Courtyard to enhance the existing grandstand and provide improved amenities for the 151st Kentucky Derby in May 2025.
Historical Racing Properties
The following table summarizes key information regarding our current historical racing properties:
State Property City/ Location Floor Space (Sq. ft.) Historical Racing Machines ("HRMs") Retail Race & Sportsbook (a)
Kentucky Derby City Gaming & Hotel Louisville, Kentucky 55,000 1,270 ü
Kentucky Derby City Gaming Downtown Louisville, Kentucky 43,000 450 ü
Kentucky Turfway Park Northern Kentucky 45,000 810 ü
Kentucky Newport Northern Kentucky 23,000 460 ü
Kentucky Oak Grove Southwestern Kentucky 180,000 1,240 ü
Kentucky Marshall Yards (b)
Southwestern Kentucky 9,000 250 ü
Kentucky Ellis Park Western Kentucky 40,000 300 ü
Kentucky Owensboro (c)
Western Kentucky 24,000 600 ü
New Hampshire Chasers (d)
Salem, New Hampshire 4,000 (d) N/A
Virginia Colonial Downs / Rosie's New Kent / Central Virginia 127,000 490 N/A
Virginia Rosie's (e)
Richmond / Central Virginia 54,000 1,200 N/A
Virginia Roseshire (f)
Henrico County / Central Virginia 7,000 175 N/A
Virginia Rosie's Dumfries / Northern Virginia 19,000 150 N/A
Virginia The Rose Dumfries / Northern Virginia 58,000 1,650 N/A
Virginia Rosie's Hampton / Southern Virginia 38,000 700 N/A
Virginia Rosie's Emporia / Southern Virginia 22,000 150 N/A
Virginia Rosie's Collinsville / Southern Virginia 2,000 40 N/A
Virginia Rosie's Vinton / Western Virginia 15,000 470 N/A
Total 765,000 10,405
(a) The Company's retail sports betting business is included in the Wagering Services and Solutions segment.
(b) The Company plans to open Marshall Yards Racing & Gaming in the first quarter of 2026.
(c) The Company opened Owensboro Racing & Gaming in February 2025.
(d) The Company plans to build a new charitable gaming facility to accommodate HRMs and table games.
(e) The Company plans to expand Rosie's Richmond HRM venue to accommodate a total of 1,200 HRMs in the third quarter of 2025.
(f) The Company plans to open the Roseshire in Henrico County in the fourth quarter of 2025.
Kentucky
Louisville
Derby City Gaming & Hotel ("Derby City Gaming") opened in September 2018 in Louisville, Kentucky. Derby City Gaming is a state-of-the-art HRM facility located at the Churchill Downs Racetrack auxiliary training facility and has a center bar with large format televisions, two food venues, an open-air gaming patio, and retail sports betting.
Derby City Gaming was expanded in the second quarter of 2023. The expansion included a 123-room hotel, a VIP gaming area, a new sports bar, a stage for live entertainment, and an upscale-casual restaurant and bar.
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Derby City Gaming Downtown ("DCG Downtown") opened in December 2023 in downtown Louisville, Kentucky. DCG Downtown has a gaming area, a main-level sports bar with a stage for live entertainment, retail sports betting, a premium bourbon bar, and an elegant wine lounge for guests, including locals, tourists, and convention attendees.
Northern Kentucky
Newport Racing & Gaming ("Newport") opened in October 2020 and is located within three miles of Cincinnati, Ohio. Newport is an HRM entertainment venue that includes a simulcast area, food and beverage offerings, and retail sports betting.
Turfway Park Racing & Gaming ("Turfway Park") opened in September 2022 in Northern Kentucky. Turfway Park is a state-of-the-art live thoroughbred racing and HRM entertainment venue with an event center, food and beverage offerings, and retail sports betting.
Southwestern Kentucky
Oak Grove Racing, Gaming & Hotel ("Oak Grove") opened in 2020 and is located approximately one-hour north of Nashville, Tennessee. Oak Grove is a premier state-of-the-art live harness racing and HRM entertainment venue with a 128-room hotel, a simulcast center, event center, an amphitheater, recreational vehicle park, equestrian center, and retail sports betting.
Marshall Yards Racing & Gaming ("Marshall Yards") is expected to open in the first quarter 2026 in Calvert City, Kentucky. The new state-of-the-art HRM entertainment venue will have 250 HRMs, a sports bar, retail sportsbook, and a simulcast center.
Western Kentucky
Ellis Park Racing & Gaming ("Ellis Park") was acquired by the Company in September 2022 and is located five miles from Evansville, Indiana. Ellis Park is a live thoroughbred racing and HRM entertainment venue with food and beverage offerings and retail sports betting.
Owensboro Racing & Gaming ("Owensboro") opened in February 2025 in Owensboro, Kentucky with 600 HRMs, a retail sportsbook, simulcast wagering, and multiple food and beverage offerings.
Virginia
Colonial Downs Racetrack ("Colonial Downs") and six historical racing entertainment venues across Virginia were acquired by the Company in November 2022. Colonial Downs has a dirt track, the widest turf track oval in North America, a simulcast area, food and beverage offerings, and two off-track betting facilities ("OTBs"). Colonial Downs conducts approximately 30 live race days each year with plans to increase up to 50 live race days per year. The Company has also created the Virginia Derby to be held in March 2025 as a qualifying race to the Kentucky Derby.
Rosie's Emporia was opened in September 2023 in Emporia, Virginia with 150 HRMs and a restaurant and bar.
The Rose Gaming Resort ("The Rose") was opened in November 2024 in Dumfries, Virginia with a 102-room hotel, eight food and beverage options, and 1,650 HRMs.
Rosie’s Richmond is located in Richmond, Virginia and features 750 HRMs, a simulcast wagering area, food & beverage offerings, and a center bar. Rosie’s Richmond will be expanded by the third quarter of 2025 to add an additional 450 HRMs.
Rosie’s Hampton is located in Hampton, Virginia and features 700 HRMs, a simulcast wagering area, and a food & beverage outlet.
Roseshire in Henrico County is expected to open in the fourth quarter of 2025 as a state-of-the-art HRM entertainment venue in Henrico County, Virginia. Roseshire will open with 175 HRMs.
New Hampshire
Chasers Poker Room ("Chasers") was acquired in 2022 and is in Salem, New Hampshire. Chasers is a charitable gaming facility that offers poker and a variety of table games.
Wagering Services and Solutions
The Wagering Services and Solutions segment includes the revenue and expenses from pari-mutuel wagers through TwinSpires, our retail and online sports betting business, United Tote Company ("United Tote"), and Exacta Systems, LLC ("Exacta").
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TwinSpires
TwinSpires is an advance deposit wagering ("ADW") business that operates the online horse racing wagering business for TwinSpires.com, BetAmerica.com, and other white-label platforms, facilitates high dollar wagering by certain customers, and provides the Bloodstock Research Information Services platform for horse racing statistical data. TwinSpires is one of the largest and most profitable legal online horse racing wagering platforms in the U.S. TwinSpires is headquartered in Louisville, Kentucky. TwinSpires accepts pari-mutuel wagers through ADW from customers residing in certain states who establish and fund an account from which these customers may place wagers via telephone, mobile applications, or through the Internet. This business is licensed as a multi-jurisdictional simulcasting and interactive wagering hub in the state of Oregon and holds licenses from various other states where applicable. This business also offers customers streaming video of live horse races, replays, and an assortment of racing and handicapping information. BetAmerica.com is an online wagering business licensed under TwinSpires that offers wagering on horse racing throughout the U.S. We also provide technology services to third parties, including FanDuel and DraftKings, and we earn commissions from white label ADW products and services. Under these arrangements, we typically provide an ADW platform and related operational services while the third party typically provides the brand, marketing, and limited customer functions.
Sports Betting
Our sports betting business includes the results of our retail sportsbooks at our wholly owned properties and online sports betting through third parties. We have executed strategic market access agreements with Bet365 in Pennsylvania, Golden Nugget in Indiana, and various market access partners in Kentucky. The Company also operates retail sports betting at certain of its racetracks and HRM and gaming facilities.
United Tote
United Tote manufactures and operates pari-mutuel wagering systems for racetracks, OTBs, and other pari-mutuel wagering businesses. United Tote provides totalisator services which accumulate wagers, calculate payoffs, and display wagering data to patrons who wager on horse races. United Tote has contracts to provide totalisator services to several third-party racetracks, OTBs, and other pari-mutuel wagering businesses and provides these services at our facilities.
In April 2024, the Company completed the sale of 49% of United Tote, a wholly owned subsidiary of CDI, to NYRA Content Management Solutions, LLC ("NYRA"), a subsidiary of the New York Racing Association, Inc.
Exacta
Exacta was acquired by the Company on August 22, 2023. Exacta is a leading provider of central determinant system technology in HRMs across the country. Exacta's system architecture supports multiple game vendors and virtually unlimited math modeling capabilities on a single central determinant system enabling Exacta to deliver a diverse gaming library to Company owned and third-party HRM entertainment venues in Virginia, Kentucky, Wyoming, New Hampshire, and is expanding internationally.
Gaming
The Gaming segment includes revenue and expenses for the casino properties and associated racetracks which support the casino license. The Gaming segment generates revenue and expenses from slot machines, table games, video lottery terminals ("VLTs"), video poker, HRMs, ancillary food and beverage services, hotel services, commission on pari-mutuel wagering, racing event-related services, and other miscellaneous operations. The following table summarizes key information regarding our gaming properties:
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State Property Acres Casino Space (Sq. ft.) Slots and Video Lottery Terminals (a)
Table Games Hotel Rooms Retail Sportsbook (b)
Wholly owned
Florida Calder Casino 54 106,000 1,070 6 N/A N/A
Indiana Terre Haute Casino Resort 48 36,000 1,040 36 122 ü
Iowa Hard Rock Iowa 15 41,000 670 25 54 ü
Louisiana Fair Grounds Race Course and Slots and Video Services LLC 145 33,000 2,040 N/A N/A ü
Maine Oxford Casino and Hotel 97 27,000 970 23 107 N/A
Maryland Ocean Downs Casino and Racetrack 167 70,000 900 19 N/A ü
Mississippi Harlow's Casino Resort and Spa 85 33,000 660 13 105 ü
Mississippi Riverwalk Casino Hotel 22 25,000 560 11 76 ü
New York del Lago Resort and Casino 83 99,000 1,670 80 205 ü
Pennsylvania Presque Isle Downs and Casino 270 61,000 1,540 34 N/A ü
Equity Investments
Illinois Rivers Casino Des Plaines 21 78,000 1,520 120 N/A ü
Ohio Miami Valley Gaming and Racing 120 190,000 2,220 N/A N/A ü
Total 799,000 14,860 367 669
(a) Includes HRMs and video poker machines at Fair Grounds Race Course and Slots and Video Services LLC.
(b) The Company's retail sports betting business at its wholly owned properties is included in the Wagering Services and Solutions segment.
Wholly owned gaming properties
Florida
Calder Casino ("Calder") in Miami Gardens, Florida is located near Hard Rock Stadium, home of the Miami Dolphins. Calder offers two dining facilities and an entertainment venue. Calder is located on 54 acres of land, and the Company may sell 15-20 acres of this land in the future for retail development.
Indiana
The Terre Haute Casino Resort ("Terre Haute") gaming entertainment venue was opened in April 2024 and a luxury hotel was opened in May 2024 in Terre Haute, Indiana. Terre Haute has 1,040 slot machines, 36 table games, a state-of-the-art sportsbook, and offers regionally inspired food and beverage amenities.
Iowa
The Company acquired Hard Rock Hotel and Casino in Sioux City, Iowa ("Hard Rock Iowa") in November 2022, which is a gaming facility and hotel with food and beverage offerings, a retail sportsbook, and entertainment venues.
Louisiana
Fair Grounds Race Course & Slots ("Fair Grounds") is located in New Orleans, Louisiana. Fair Grounds is a gaming facility and racecourse with a bar, simulcast facility, dirt and turf track, and stabling area. Fair Grounds conducts approximately 80 live racing days each year. The facility includes clubhouse and grandstand seating for approximately 5,000 guests, a general admissions area, several dining facilities, and a retail sportsbook. The stable area consists of barns that can accommodate approximately 1,900 horses and living quarters for approximately 130 people. Fair Grounds also owns and operates 15 OTBs, 13 of which have over 500 HRMs. Video Services LLC ("VSI") is the owner and operator of video poker machines in 13 of those OTBs in Louisiana.
Maine
Oxford Casino and Hotel is located in Oxford, Maine and is a gaming facility with a hotel and a dining facility.
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Maryland
Ocean Downs Casino and Racetrack ("Ocean Downs") is located in Berlin, Maryland. Ocean Downs is a gaming facility with several dining options, a retail sportsbook, and a racetrack that conducts approximately 45 live harness racing days each year.
Mississippi
Harlow’s Casino Resort and Spa is located in Greenville, Mississippi, and is a gaming facility and hotel with two dining facilities and a retail sportsbook.
Riverwalk Casino Hotel is located in Vicksburg, Mississippi, and is a gaming facility and hotel with two dining facilities and a retail sportsbook.
New York
Del Lago Resort and Casino ("del Lago") was acquired by the Company in November 2022 and is located in Waterloo, New York. Del Lago is a gaming facility and a hotel with several dining options and a retail sportsbook.
Pennsylvania
Presque Isle Downs and Casino ("Presque Isle") is located in Erie, Pennsylvania. Presque Isle is a gaming facility with three dining facilities, a retail sportsbook, an entertainment venue and thoroughbred racetrack that conducts approximately 80 live racing days each year.
Equity Investments
Illinois
The Company has a 61.3% equity ownership in Midwest Gaming Holdings, LLC ("Midwest Gaming"), the parent company of Rivers Casino Des Plaines ("Rivers Des Plaines"), located in Des Plaines, Illinois. Rivers Des Plaines is a gaming entertainment venue located on 21 acres and has seven dining facilities, an approximate 5,000 square-foot state-of-the-art BetRivers Sports Bar, and a 10,000 square-foot ballroom for private events and live entertainment.
Ohio
The Company has a 50% equity investment in Miami Valley Gaming and Racing ("MVG") located just north of Cincinnati, Ohio. MVG is a gaming entertainment venue with a harness racetrack, a racing simulcast center, multiple food and drink offerings, and a retail sportsbook.
All Other
We have aggregated our captive insurance company that was established in April 2024 as well as certain corporate operations in All Other to reconcile to consolidated results.
Corporate
Corporate includes miscellaneous and other revenue, compensation expense, professional fees, and other general and administrative expense not allocated to our segments.
Competition
Overview
We operate in a highly competitive industry with many participants, some of which have financial and other resources that are greater than ours. The industry faces competition from a variety of sources for discretionary consumer spending, including spectator sports, sports wagering, and other entertainment and gaming options. Our brick-and-mortar casinos compete with traditional and Native American casinos, VLTs, state-sponsored lotteries, and other forms of legalized gaming in the U.S. and other jurisdictions.
Legalized gambling is currently permitted in various forms in many states and Canada. Other jurisdictions could legalize gambling in the future, and established gaming jurisdictions could award additional gaming licenses or permit the expansion of existing gaming operations. If additional gaming opportunities become available near our racing or gaming operations, such gaming operations could have a material adverse impact on our business.
In May 2018, the United States Supreme Court struck down the 1992 Professional and Amateur Sports Protection Act, which had effectively banned sports wagering in most states. Removal of the ban gives states the authority to authorize sports wagering.
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Live and Historical Racing
In 2024, approximately 31,000 thoroughbred horse races were conducted in the U.S., which was down 2.8% compared to 2023. As a racetrack operator, we compete for horses with other racetracks running live racing meets at or near the same time as our races. Our ability to compete is substantially dependent on the racing calendar, number of horses racing, and purse sizes. As a content provider, we compete for wagering dollars in the simulcast market with other racetracks conducting races at or near the same times as our races. In recent years, competition has increased as more states legalize gaming and allow slot machines at racetracks with mandatory purse contributions. Our HRM entertainment venues in Kentucky, Virginia, and New Hampshire compete with regional casinos in the area and other forms of legal and illegal gaming.
Wagering Services and Solutions
TwinSpires
TwinSpires competes with other ADW businesses for both customers and racing content, as well as brick-and-mortar racetracks, casinos, OTBs, and other forms of legal and illegal sports betting.
Sports Betting
Our sports betting business competes for customers with retail, mobile, and online offerings from commercial brick-and-mortar casinos and racetracks. We also compete with daily fantasy sports gaming companies that are expanding into mobile and online sports betting and iGaming, international sports betting businesses looking to expand into the U.S. market, and other forms of legal and illegal sports betting and iGaming operations.
Exacta
Exacta competes with HRM and other central determinant systems providers for casino and racino operators, players, and third-party game content providers.
Gaming
Our Gaming properties operate in highly competitive environments and primarily compete for customers with other casinos in the surrounding regional gaming markets. Our Gaming properties compete to a lesser extent with state-sponsored lotteries, off-track wagering, card parlors, online gambling, and other forms of legalized gaming in the U.S.
Human Capital
We believe our people are essential to our operations and fundamental to the long-term success of our Company. Our focus is on attracting innovative and collaborative team members who are eager to develop their skills within a dynamic and growing portfolio of businesses dedicated to delivering exceptional experiences for our guests.
Our People
As of December 31, 2024, we had approximately 8,870 team members, including 6,480 that are full-time. Our highest level of seasonal employment occurs in the second quarter, coinciding with the Kentucky Derby.
As of the same date, approximately 840 full-time team members were covered by 12 collective bargaining agreements. We have not experienced any material operational disruptions due to labor disputes.
Talent Acquisition, Development and Retention
We are committed to attracting, developing, and retaining top talent. Our approach emphasizes a clear purpose and strategy, setting ambitious goals, fostering accountability, continuously assessing and advancing talent, and driving a leadership-led culture of growth. We provide opportunities for team members to expand their expertise within their current roles while also encouraging skill development across different areas of the Company.
Talent reviews and succession planning are conducted regularly with our Chief Executive Officer and Board of Directors, with a focus on accelerating career development, strengthening leadership pipelines, and fostering a breadth of perspectives and experiences within our workforce.
Compensation, Benefits, Safety and Wellness
We strive to offer competitive salaries and wages while providing comprehensive health and retirement benefits to eligible team members. Our core health and welfare offerings are supplemented with targeted programs designed to manage or improve common health conditions, along with a variety of voluntary benefits and paid time-off programs.
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Additionally, we provide innovative initiatives aimed at promoting physical, emotional, and financial well-being. The safety of our team members, customers, and community remains a top priority, and we have established safety programs across all our properties to ensure best practices are continuously identified and implemented.
Governmental Regulations and Potential Legislative Changes
We are subject to various federal, state, local, and international laws and regulations that affect our businesses. The ownership, operation, and management of our Live and Historical Racing, Wagering Services and Solutions, and Gaming segments are subject to regulation under the laws and regulations of each of the jurisdictions in which we operate. Our businesses and properties are also subject to legislative actions at both the federal and state level.
Live and Historical Racing Regulations
Horse racing is a highly regulated industry. In the U.S., interstate pari-mutuel wagering on horse racing is subject to the Interstate Horseracing Act of 1978, as amended in 2000 ("IHA"). Under the IHA, racetracks and ADWs can accept interstate off-track wagers if the racetracks and ADWs have approvals from (1) the host horse racetrack including a written agreement with the horsemen’s group, if applicable, (2) the host racing commission, and (3) the off-track racing commission. If these requirements are met, racetracks can commingle wagers from different racetracks and wagering facilities and broadcast horse racing events to other licensed establishments.
In the U.S., individual states regulate the operations of racetracks located within their respective jurisdictions with the intent to, among other things, protect the public from unfair and illegal gambling practices, generate tax revenue, license racetracks and operators and prevent organized crime from being involved in the industry. Although the specific form may vary, states that regulate horse racing generally do so through a horse racing commission or other gambling regulatory authority. In general, regulatory authorities perform background checks on all racetrack owners prior to granting the necessary operating licenses. Horse owners, trainers, jockeys, drivers, stewards, judges, and backside personnel are also subject to licensing by governmental authorities.
The total number of days on which each racetrack conducts live racing may fluctuate annually based on applications and approvals.
Louisiana
In Louisiana, the 2021 Historical Horse Racing Act (the "2021 HHR Act") allows off-track betting facilities ("OTBs") to have up to 50 HRMs. On October 25, 2022, a number of individual plaintiffs associated with video poker and truckstops, filed a lawsuit in the 19th Judicial District Court in East Baton Rouge, Louisiana against certain racetracks in Louisiana, including our Fair Grounds Race Course and Slots property, alleging that the 2021 HHR Act is unconstitutional to the extent it purports to permit historical racing in a parish without a referendum. On June 8, 2023, plaintiffs filed a motion for summary judgment on the constitutional issues raised in their complaint and a hearing was conducted on September 11, 2023.
On February 23, 2024, the judge issued a ruling in favor of plaintiffs granting summary judgment stating that: (i) historical horseracing is a new form of gaming not specifically authorized by law prior to 1996; (ii) historical horseracing may not be conducted in any parish of the state unless voters approve it through referendum; and (iii) the 2021 HHR Act that authorized historical horseracing is unconstitutional. The summary judgment, which was certified as final for purposes of appeal, was entered on March 18, 2024, and the Company, along with other interested parties including the Louisiana Racing Commission, filed a joint motion for a suspensive appeal, which was entered on March 26, 2024. The suspensive appeal allows the continued operation of HHR during the pendency of the appeal before the Louisiana Supreme Court. The case was lodged in the Louisiana Supreme Court on August 7, 2024 and the Company, and other appellants, including the Louisiana Attorney General on behalf of the Louisiana Racing Commission, filed opening briefs on October 9, 2024. Oral arguments occurred on January 27, 2025. The Company intends to vigorously defend the constitutionality of the HHR Act.
As of December 31, 2024, the Company had approximately 500 HRMs in OTBs in Louisiana. If the 2021 HHR Act is determined to be unconstitutional it could have an adverse impact on our Louisiana HRM results which are reported in our Gaming segment.
Wagering Services and Solutions Regulations and Potential Legislative Changes
TwinSpires is licensed in Oregon under a multi-jurisdictional simulcasting and interactive wagering totalisator hub license issued by the Oregon Racing Commission in accordance with Oregon law and the IHA. We also hold ADW licenses in certain other states where appropriate. Changes in the form of new legislation or regulatory activity at the state or federal level could adversely impact our mobile and online ADW business.
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Sports Betting and iGaming Regulations and Potential Legislative Changes
In May 2018, the United States Supreme Court struck down the 1992 Professional and Amateur Sports Protection Act, which had effectively banned sports wagering in most states. Removal of the ban gave states the authority to authorize sports wagering. Sports betting has been authorized and is operational in thirty-eight states and the District of Columbia as of December 31, 2024. Each state has different structures for the number of allowable industry participants, license fees, taxes, and other operational requirements.
As of December 31, 2024, the Company is operational in ten states for retail sports betting.
Gaming Regulations and Potential Legislative Changes
The gaming industry is a highly regulated industry. In the U.S., gaming laws are generally designed to protect consumers and the viability and integrity of the industry. Gaming laws may also be designed to protect and maximize state and local revenue derived through taxes and licensing fees imposed on industry participants as well as to enhance economic development and tourism. To accomplish these public policy goals, gaming laws establish procedures to ensure that participants in the industry meet certain standards of character and fitness. Gaming laws require industry participants to:
• Ensure that unsuitable individuals and organizations have no role in gaming operations,
• Establish procedures designed to prevent cheating and fraudulent practices,
• Establish and maintain responsible accounting practices and procedures,
• Maintain effective controls over financial practices, including establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenue,
• Maintain systems for reliable record keeping,
• File periodic reports with gaming regulators,
• Ensure that contracts and financial transactions are commercially reasonable, reflect fair market value and are arms-length transactions,
• Establish programs to promote responsible gambling and inform patrons of the availability of help for problem gambling, and
• Enforce minimum age requirements.
A state regulatory environment is established by statute and administered by a regulatory agency with broad discretion to regulate the affairs of owners, managers, and persons with financial interests in gaming operations. Gaming authorities in the various jurisdictions in which we operate:
• Adopt rules and regulations under the implementing statutes,
• Interpret and enforce gaming laws,
• Impose disciplinary sanctions for violations, including fines and penalties,
• Review the character and fitness of participants in gaming operations and make determinations regarding suitability or qualification for licensure,
• Grant licenses for participation in gaming operations,
• Collect and review reports and information submitted by participants in gaming operations,
• Review and approve transactions, such as acquisitions or change-of-control transactions of gaming industry participants, securities offerings, and debt transactions engaged in by such participants, and
• Establish and collect fees and taxes.
Any change in the gaming laws or regulations of a jurisdiction could have a material adverse impact on our gaming operations.
Licensing and Suitability Determinations
Gaming laws require us, each of our subsidiaries engaged in gaming operations, certain of our directors, officers and employees, and in some cases, certain of our shareholders, to obtain licenses from gaming authorities. Licenses typically require a determination that the applicant qualifies or is suitable to hold the license. Gaming authorities have very broad discretion in determining whether an applicant qualifies for licensing or should be deemed suitable. Criteria used in determining whether to grant a license to conduct gaming operations, while varying between jurisdictions, generally include consideration of factors such as the good character, honesty, and integrity of the applicant; the financial stability, integrity, and responsibility of the
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applicant, including whether the operation is adequately capitalized in the state and exhibits the ability to maintain adequate insurance levels; the quality of the applicant’s gaming facilities; the amount of revenue to be derived by the applicable state from the operation of the applicant’s gaming facility; the applicant’s practices with respect to minority hiring and training; and the effect on competition and general impact on the community.
In evaluating individual applicants, gaming authorities consider the individual’s business experience and reputation for good character, the individual’s criminal history, and the character of those with whom the individual associates.
Many gaming jurisdictions limit the number of licenses granted to operate gaming facilities within the state and some states limit the number of licenses granted to any one gaming operator. Licenses under gaming laws are generally not transferable without approval. Licenses in most of the jurisdictions in which we conduct gaming operations are granted for limited durations and require renewal from time to time. There can be no assurance that any of our licenses will be renewed. The failure to renew any of our licenses could have a material adverse impact on our gaming operations.
Gaming authorities may investigate any subsidiary engaged in gaming operations and may investigate any individual who has a material relationship to or material involvement with any of these entities to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Our officers, directors, and certain key employees must file applications with the gaming authorities and may be required to be licensed, qualify, or be found suitable in many jurisdictions. Gaming authorities may deny an application for licensing for any cause that they deem reasonable. Qualification and suitability determinations require submission of detailed personal and financial information followed by a thorough investigation. Changes in licensed positions must be reported to gaming authorities. Gaming authorities have the ability to deny a license, qualification, or finding of suitability and have jurisdiction to disapprove a change in a corporate position.
If one or more gaming authorities were to find that an officer, director, or key employee fails to qualify or is unsuitable for licensing or unsuitable to continue having a relationship with us, we would be required to sever all relationships with such person. Gaming authorities may also require us to terminate the employment of any person who refuses to file appropriate applications.
In many jurisdictions, certain of our shareholders may be required to undergo a suitability investigation similar to that described above. Many jurisdictions require any person who acquires beneficial ownership of more than a certain percentage of our voting securities, typically 5%, to report the acquisition to gaming authorities, and may be required to apply for qualification or a finding of suitability. Most gaming authorities, however, allow an "institutional investor" to apply for a waiver.
Any person who fails or refuses to apply for a finding of suitability or a license within the prescribed period after being advised it is required by gaming authorities may be denied a license or found unsuitable, as applicable. Any shareholder found unsuitable or denied a license and who holds, directly or indirectly, any beneficial ownership of our voting securities beyond such period of time as may be prescribed by the applicable gaming authorities may be guilty of a criminal offense. We may be subject to disciplinary action if, after we receive notice that a person is unsuitable to be a shareholder or to have any other relationship with us or any of our subsidiaries, we:
(i) pay that person any dividend or interest upon our voting securities,
(ii) allow that person to exercise, directly or indirectly, any voting right conferred through securities held by that person,
(iii) pay remuneration in any form to that person for services rendered or otherwise, or
(iv) fail to pursue all lawful efforts to require such unsuitable person to relinquish voting securities including, if necessary, the immediate purchase of said voting securities for cash at fair market value.
Violations of Gaming Laws
If we violate applicable gaming laws, our gaming licenses could be limited, conditioned, suspended, or revoked by gaming authorities, and we and any other persons involved could be subject to substantial fines. A supervisor or conservator can be appointed by gaming authorities to operate our gaming properties, or in some jurisdictions, take title to our gaming assets in the jurisdiction, and under certain circumstances, income generated during such appointment could be forfeited to the applicable state or states. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. As a result, violations by us of applicable gaming laws could have a material adverse impact on our gaming operations.
Some jurisdictions prohibit certain types of political activity by a gaming licensee, officers, directors, and key employees. A violation of such a prohibition may subject the offender to criminal and/or disciplinary action.
Reporting and Record-Keeping Requirements
We are required periodically to submit detailed financial and operating reports and furnish any other information that gaming authorities may require. Under federal law, we are required to record and submit detailed reports of currency transactions
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greater than $10,000 at our gaming facilities and racetracks as well as any suspicious activity that may occur at such facilities. Failure to comply with these requirements could result in fines or cessation of operations. We are required to maintain a current stock ledger that may be examined by gaming authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to gaming authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. Gaming authorities may require certificates for our securities to bear a legend indicating that the securities are subject to specified gaming laws.
Review and Approval of Transactions
Substantially all material loans, leases, sales of securities, and similar financing transactions must be reported to and in some cases approved by gaming authorities. We may not make a public offering of securities without the prior approval of certain gaming authorities. Changes in control through merger, consolidation, stock or asset acquisitions, management, or consulting agreements, or otherwise are subject to receipt of prior approval of gaming authorities. Entities seeking to acquire control of us or one of our subsidiaries must satisfy gaming authorities with respect to a variety of stringent standards prior to assuming control. Gaming authorities may also require controlling shareholders, officers, directors, and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction.
License Fees and Gaming Taxes
We pay substantial license fees and taxes in many jurisdictions in connection with our gaming operations which are computed in various ways depending on the type of gambling or activity involved. Depending upon the particular fee or tax involved, these fees and taxes are payable with varying frequency. License fees and taxes are based upon such factors as a percentage of the gaming revenue received; the number of gambling devices and table games operated; or a one-time fee payable upon the initial receipt of license and fees in connection with the renewal of license. In some jurisdictions, casino tax rates are graduated such that the tax rates increase as gaming revenue increases. Tax rates are subject to change, sometimes with little notice, and such changes could have a material adverse impact on our gaming operations.
Operational Requirements
In most jurisdictions, we are subject to certain requirements and restrictions on how we must conduct our gaming operations. In certain states, we are required to give preference to local suppliers and include minority and women-owned businesses and organized labor in construction projects to the maximum extent practicable. We may be required to give employment preference to minorities, women, and in-state residents in certain jurisdictions. Our ability to conduct certain types of games, introduce new games or move existing games within our facilities may be restricted or subject to regulatory review and approval. Some of our operations are subject to restrictions on the number of gaming positions we may have, and the maximum wagers allowed to be placed by our customers.
Environmental Matters
We are subject to various federal, state, and local environmental laws and regulations that govern activities that may have adverse environmental effects, such as discharges to air and water, as well as the management and disposal of solid, animal, and hazardous wastes and exposure to hazardous materials. These laws and regulations, which are complex and subject to change, include the United States Environmental Protection Agency ("EPA") and state laws and regulations that address the impacts of manure and wastewater generated by Concentrated Animal Feeding Operations ("CAFO") on water quality, including, but not limited to, storm and sanitary water discharges. CAFO and other water discharge regulations include permit requirements and water quality discharge standards. Enforcement of these regulations has been receiving increased governmental attention. Compliance with these and other environmental laws can, in some circumstances, require significant capital expenditures. We may incur future costs under existing and new laws and regulations pertaining to storm water and wastewater management at our racetracks. Violations can result in significant penalties and, in some instances, interruption, or cessation of operations.
We also are subject to laws and regulations that create liability and cleanup responsibility for releases of hazardous substances into the environment. Under certain of these laws and regulations, a current or previous owner or operator of property may be liable for the costs of remediating hazardous substances or petroleum products on its property, without regard to whether the owner or operator knew of, or caused, the presence of the contaminants, and regardless of whether the practices that resulted in the contamination were legal at the time the contamination occurred. The presence of, or failure to remediate properly, such substances may materially adversely affect the ability to sell or rent such property or to borrow funds using such property as collateral. The owner of a property may be subject to claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.
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Marks and Intellectual Property
We hold numerous state and federal service mark registrations on specific names and designs in various categories including the entertainment business, apparel, paper goods, printed matter, housewares, and glass. We license the use of these service marks and derive revenue from such license agreements.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other Securities and Exchange Commission ("SEC") filings, and any amendments to those reports and any other filings that we file with or furnish to the SEC under the Securities Exchange Act of 1934 are made available free of charge on our website ( www.churchilldownsincorporated.com ) as soon as reasonably practicable after we electronically file the materials with the SEC and are also available at the SEC’s website at www.sec.gov .
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