How Federal Laws Impact Kentucky Derby Betting

It is probably fair to say that betting on a horse race goes back all the way to the first time two bronze age farmers decided to see whose draft horse was faster when not hooked up to a plow. Even as the practice of breeding and raising thoroughbred horses specifically for racing developed into its currently heavily commercialized state, it just seems like such a given that horse racing should be legal as there have never really been social stigmas against it. The United States’ history with horse racing and wagering on those races is no different: from the time of the wild frontier to the Interstate Horse Racing Act of 1978 (IHRA), there have been more laws protecting it than banning it.

That being said, the Interstate Horse Racing Act of 1978 is an interesting case among federal laws related to legal gambling practices with important ramifications for legal Kentucky Derby betting. The IHRA does not make anything illegal, nor does it make horse racing betting legal on its own – rather, the law, was instituted to make sure that no individual state could infringe on the right of another state to offer legal horse racing options for its residents.

Passed right around the time that off track wagering by telephone was starting to take off around the nation, the IHRA presupposes that the 50 states can all decide for themselves whether or not they want to make horse racing betting a legal activity. What the IHRA did was to make sure that, from the perspective of the federal government, the 10th Amendment to the U.S. Constitution covers the states’ rights to regulate the wagering of horse racing as the authority to legalize and regulate gambling and wagering activities has always been a purview of the states themselves. This was necessary, as off track betting was quickly becoming a popular option for states that did not have racebooks or even horse racing tracks inside their borders.

The IHRA was, in essence, the official federal protection for the development of the off track horse betting marketplace. This single law contributed more to the growth of widespread pari-mutuel betting than perhaps any other piece of federal or state level legislation, and legal Kentucky Derby betting would in large part not be possible without it. Because of the IHRA, no one state can pass a law that would inhibit the ability of another state to regulate its own horse racing wagering market. For instance, the IHRA would not enable a state with an on track racebook to prohibit wagers from another state if the other state passed laws allowing its residents to do so.

The 2000 Amendment To The Interstate Horse Racing Act of 1978

The IHRA was groundbreaking in its time for its protections of horse racing wagering from the federal level on down, but with the advent of widespread internet use starting in the early 1990s, it was clear that the upcoming 21st century would bring with it all sorts of new challenges that the older law was not prepared to meet. That is because the original IHRA was only a federal level recognition of the 50 states’ individual right to pass their own laws legalizing and regulating horse racing betting within their borders up to the point that a state could legally offer wagering options on events taking place in other states if an agreement between the two states could be reached. However, the internet made things considerably more complicated, as the ability to instantly (or near enough to instant – come on, this was the era of dial up internet connections) place bets on horses and races, even legal Kentucky Derby bets posed a risk of violating the Federal Wire Act of 1961.

The way federal lawmakers got around this inherent difficulty was to issue the 2000 Amendment to the Interstate Horse Racing Act of 1978 was to issue a top down redefinition of pari-mutuel betting to specifically include wagers placed on horse races by way of telephone or over the internet. This move was passed by Congress over the protests of the U.S. Department of Justice (USDOJ), which predicted an increased possibility for a reintroduction of the organized criminal element back into gambling, and lawmakers that were opposed to the expansion of gambling in a general sense, whether for commercial interests or out of supposed moral concerns. Nevertheless, the law passed and proved by its passage that Congressional legislators had, on the whole, figured out that the USDOJ had not really taken much action to enforce the laws already on the books as far as the interstate transmission of bets or relevant information related to wagering.

Following the passage of the 2000 Amendment to the IHRA, the newly revamped law was signed into effect by then President Bill Clinton late that same year. The amended IHRA now made it legal for states that already had off track betting options to offer internet wagering at their authorized pari-mutuel betting stations, kiosks and on track racebooks, but individual residents and visitors with access to a sufficiently fast internet connection could also place legal Kentucky Derby wagers online. The only real provision was that horse racing wagering had to be legal in the state that the race was taking place and in the state from which the digital wager was generated.

Perhaps one of the most widely panned and frequently reviled of all federal anti-gambling laws ever passed, the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA) was, in practical terms, the death knell of what was the rapidly growing online casino and cards marketplace. This law was snuck in at the last possible minute as a rider on a piece of must-pass legislation designed to provide more funding for security at the United States’ major sea ports in the wake of the September 11, 2001, World Trade Center terrorist attacks. Though the law is roundly – and deservedly – hated by operators of internet poker platforms that were soon after driven out of business, the UIGEA was actually a boon for legal Kentucky Derby betting and horse racing wagering generally speaking.

At the most basic level, the UIGEA prohibited financial institutions based in the U.S. from processing credit card transactions related to internet gambling, which was really the last nail in the coffin for the nascent online wagering market in the states. This emphasis on going after the ability of gamblers to use their own money rather than limiting access to sports betting on the basis of convenience (like the Wire Act) or because of perceived harm to the sacred nature of competition (like the Professional and Amateur Sports Protection Act of 1992) is what differentiated the UIGEA from its predecessors.

In fact, the legal offshore sportsbook sites like Bovada, BetOnline, and SportsBettng only just recently got around the deleterious effect of the UIGEA by offering their American users access to an in house credit card processing service, enabling the use of credit and debit card for sportsbook and racebook deposits.

Following the passage of the UIGEA, pretty much the only ways to win real money on sporting events was either to play fantasy sports or to be a horseplayer. The latter group being our focus here at LegalKentuckyDerby.com, we’ll stick to discussing how this federal law impacted betting on the “Run for the Roses.” The UIGEA, for all its other faults, did include a subparagraph that continued to enshrine betting on horse racing as a protected activity according to state law, recognizing the primacy of the earlier Interstate Horse Racing Act of 1978 in this regard. That means that an individual gambler wanting to earn a few extra bucks betting on the Kentucky Derby this year won’t have to worry about running afoul of the law.

All in all, legal Kentucky Derby betting and other forms of horse racing wagering are some of the safest forms of betting that American players can engage in. That’s true whether you choose to place your wagers at any of the myriad off track betting stations or on track racebooks found in nearly 4 out of 5 states or at any of most highly recommended legal offshore racebook websites – Bovada, BetOnline, and SportsBetting being the best of the best in the segment. Fortunately for fans of picking horses and races, the federal laws impact on Kentucky Derby betting is fairly minimal and actually helps promote horse racing’s continued popularity here in the United States.