Updated: Ban on ‘gray machines’ divides Ky. GOP, stops in its tracks in House

Frankfort’s most expensive fight became its most dramatic this week.

A bill to ban so-called ‘gray machines’ cleared a House committee late on Thursday night, but was tabled on the House floor when brought up in a narrow vote that almost evenly divided the House GOP caucus.

House Bill 594, from Rep. Killian Timoney, R-Lexington, would ban the machines from Kentucky. Often referred to as ‘skill games’ by proponents and ‘gray machines’ by opponents, thousands of them have flooded convenience stores, gas stations and bars across the state in recent years – the most popular brand being Burning Barrel by the company Pace-O-Matic.

The bill cleared a vote on the House Licensing & Occupations Committee 13-7, with Republicans split 10-6 in favor, but stalled when Rep. Steven Doan, R-Erlanger, called to table the bill on the House floor Friday afternoon. Doan’s motion succeeded 42-35, with many legislators not voting on the controversial issue.

Doan has his own bill, backed by the ‘gray machine’ industry, that would create a regulatory body to oversee the machines and tax them at 6%. In a floor speech against the bill, Doan said that legislators should not be beholden to any industry’s lobby.

He also framed a ban as helping just the giants in Kentucky’s horse racing industry, including Churchill Downs, to the detriment of small businesses that rely on the money.

“We should not be in the business of making policy decisions based on who spends the most money and who has the most influence here in the halls of Frankfort,” Doan said. “Rather, our attention to focus should be focused squarely on improving the financial position of small businesses, especially in this time where it means a ban will destroy thousands of jobs for those that desperately need them and benefits only one giant corporation.”

Those who supported the bill argued that not banning the machines outright would be a mistake.

Before adjourning, House Majority Floor Leader Steven Rudy, R-Paducah, said that the motion to table to the bill constituted “the largest expansion of gambling in the state’s history.”

In the month of January alone, groups for and against the bill spent more than $300,000 on advertising to the public – that almost beat the amount spent for that purpose during all of 2022, according to the Kentucky Legislative Ethics Commission.

Arguments for and against

Timoney, along with others including the Kentucky Chamber of Commerce, argued in committee that the machines came to the state illegally and that the machines’ continued existence could hurt Kentucky’s horse industry.

A group of industry and small business representatives pointed out that they had asked permission from local prosecutors before entering the state, that the games played on the machines are not games of chance and that the pushback against the industry is fueled by the horse industry’s desire to keep a monopoly on gaming.

Under legislation passed in 2021, the horse industry was granted the opportunity to operate Historical Horse Racing (HHR) facilities, where bettors wager on slot-like games that simulate past horse races.

Dozens of small business owners showed up to the committee meeting to protest the bill. Mike Barley, spokesperson for Pace-O-Matic, estimated that owners of the convenience stores and other establishments that have the machines make about $25,000 to $30,000 per year on them – a vital lifeline during uncertain economic times, he argued.

“The only thing that is clear about this bill is that it’s solely intended to punish the Kentucky small businesses who are seated behind me. Ask yourselves ‘for what’ and ‘for whom,’” Mike Barley, spokesperson for Pace-O-Matic said.

Kentucky Chamber of Commerce President Ashli Watts testified in support of the bill adding that the machines “pose a threat” to the state’s equine industry.

“We are unabashed supporters, cheerleaders and advocates for our signature industries here in Kentucky,” Watts said. “We have worked really hard to become the horse capital of the world, the bourbon capital of the world, and we don’t want to do anything that could put this in jeopardy. We know that some of these machines pose a threat to the equine industry that you all as legislators have fought so hard to protect.”

Former GOP state representative Bob Heleringer, now a lobbyist who works on behalf of the company Prominent Technologies, said that he’s a friend of the horse industry but that it’s obvious what they’re doing here.

“This isn’t about hurting or helping the horse race industry, it’s about whether or not we’re going to give them a monopoly,” Heleringer said. “How far are we going to go? How far are you going to let them go to crush anyone who they think is a possible competitor?”

On the House floor, Rep. Chris Fugate, R-Chavies, expressed internal conflict about where to land on the issue. He said he opposes gambling but also opposes kowtowing to one industry.

“Here’s my dilemma: If I vote yes to destroy the gray machines, then Churchill Downs gets a monopoly, and who’s to say that in future legislation they don’t try to pass a bill to put their machines in the local stores. If I vote ‘no,’ I’m promoting gambling, too... I hate things that take from our people,” Fugate said.

Fugate implied that the legislature would be better off focusing on other matters than picking winners and losers in a given industry.

“There are good bills sitting in filing cabinets that’s not going to get heard that could really help Kentucky,” Fugate said. “I could use some housing money in East Kentucky. We in East Kentucky could use some jobs. Rural Kentucky, all across Kentucky, could use more jobs.”

The Eastern Kentucky representative was one of 42 votes to set the bill aside.

Companies like Pace-O-Matic and industry group Kentucky Merchants and Amusement Coalition (KY MAC) have supported Doan’s bill.

A fiscal impact statement from the Legislative Research Commission stated that the impact of a proposed 6% tax on the machines is indeterminate due to the lack of historical data and uncertainty surrounding how many such machines are in the state.

Meanwhile, Rep. Tom Odell Smith, R-Corbin, has a bill that would legalize a more expansive definition of “electronic gaming” machines, potentially including machines that make no claim to be based on skill. Smith’s bill would tax all electronic gaming machines 26% on net proceeds. Smith’s bill, like Doan’s, has been assigned to committee but has not received any readings on the House floor.

Last year, a similar bill from Timoney passed the House and the Senate, but the House did not concur with changes to the legislation made by the Senate.

Timoney told reporters on Thursday that he felt confident that enough votes for the bill existed within the 80-member Republican House caucus, allowing for it to pass without the need to consult the 20-member House Democratic minority.

“The ad”

Aside from his central role in the battle over ‘gray machines,’ Timoney has been appearing on the television screens of many conservatives in recent days. A mysterious group placed a 30-second ad criticizing Timoney for his vote against a ban on transgender girls in girls sports on Fox News in the Lexington area.

Some observers suggested that the timing of the ad could have something to do with Timoney’s lead role on House Bill 594.

The legislator, who represents much of suburban Southwestern Fayette County and a portion of Western Jessamine County, said he was unfazed by the ad, which represents “an aggressive element” in Kentucky politics.

“I have a lot of thoughts on it, but you know, it’s part of politics. I occupy a space that there’s not a lot of (legislators) where I fall on the political spectrum. My district is very, very unique. Sometimes when you stand out, like I did on that vote last year, you become a target,” Timoney said.

He didn’t comment on who believes funded the ad, which just bought another week on the conservative news network, totaling about $64,000 spent on the effort. It will air on the network until March 10.

Timoney, a former teacher and current administrator for Fayette County Public Schools, said that he believes transgender students should be supported. He said he didn’t vote on House Bill 470, which passed the House with the vast majority of Republicans voting for it on Thursday, because he was preparing for the committee meeting but that he would have been one of the few GOP “no” votes.

“My faith tells me to look out for people who are struggling, and I believe that in society right now, in particular the kids that I work with in schools, our trans kids are definitely in that category,” Timoney said.

Timoney said he’s heard some constituents express disagreement with his views, and that he’s received indications he’ll receive a primary challenge in 2024, but that he’s also felt a “tremendous outpouring of support” after the ad.

“I think there are a lot of people who are looking for people just to stick their neck out for somebody else in America and Kentucky,” Timoney said.