Request By:
Keith B. Hunter
General Counsel
Kentucky Lottery Corporation
Two Paragon Centre, Suite 400
6040 Dutchmans Lane
Louisville, Kentucky 40205-3271
Opinion
Opinion By: Chris Gorman, Attorney General; Ann M. Sheadel, Director, Civil and Environmental Law Division; Ross T. Carter, Assistant Attorney General
You have requested an Opinion regarding the legality of a proposed lottery game to be based on the Breeder's Cup horse races. This proposed lottery game was described in your letter as follows:
The Lottery intends to design and implement a new Lottery game based on the Breeder's Cup horse races to be held on Saturday, October 31, 1992, at Gulf Stream Park in Hallandale, Florida. The outcome of the new Lottery game will be determined by the result of the seven Breeder's Cup races (the "Pick 7 Game"). It is contemplated that tickets for the Pick 7 Game will be sold at all Kentucky Lottery retail outlets and possibly at some future date out-of-state Lottery terminals up to the post-time for the first race of the Breeder's Cup.
The object of the Pick 7 Game will be for a player on a pay slip to select one number for each of the seven races and match such numbers with the corresponding numbers of the winning horses in the seven Breeder Cup races. Picks will be made through "quick picks" (i.e. solely by chance) or through handicapping (i.e. predominately by chance). Correctly matching five out of seven, six out of seven or seven out of seven selected numbers with winning race horse numbers shall entitle the ticket holder to a parimutuel prize payment out of the allocated winning's pool determined and calculated in a manner similar to that utilized by the Lottery in its Lotto Kentucky on-line Lottery game.
You have asked us whether the Kentucky Lottery Corporation is authorized by Section 226 of the Kentucky Constitution and KRS Chapter 154A to establish this new game. For the reasons stated below, it is our Opinion that the Kentucky Lottery Corporation is authorized to establish this new game.
For many years, Section 226 of the Kentucky Constitution forbade all "lotteries and gift enterprises." In 1988, however, Section 226 was amended to provide an exception to this general prohibition:
The general assembly may establish a Kentucky state lottery and may establish a state lottery to be conducted in cooperation with other states. Any lottery so established shall be operated by or on behalf of the Commonwealth of Kentucky.
This Amendment to Section 226 of the Constitution clearly authorizes the general assembly to establish a state "lottery. "
In response to this Amendment, the general assembly created the Kentucky Lottery Corporation and provided it with the authority to, among other things,
utilize horse racing or contests involving horses for any purpose including, but not limited to, advertising, promoting, conducting a lottery, or as a basis for a lottery, after obtaining the necessary permission from the horse racing track or sponsoring authority involved.
KRS 154A.065. This statute clearly authorizes the Lottery Corporation to use a horse racing event such as the Breeder's Cup to conduct a "lottery" or as the basis for a "lottery. "
The question that we must examine is whether the Kentucky Lottery Corporation's proposed new game, which is to be based on the Breeder's Cup horse races, is a "lottery" that is authorized by Section 226 of the Kentucky Constitution. If it qualifies as a "lottery" pursuant to Section 226 of the Kentucky Constitution, then it is authorized by KRS 154A.065.
The general assembly has defined the word "lottery" to mean, in relevant part, "any game of chance approved by the [Kentucky lottery] corporation and operated pursuant to [Chapter 154A] . . . ." KRS 154A.010(3). That definition does not determine the answer to the question of whether the proposed new game is an authorized "lottery, " however, because the only games that can qualify as authorized lotteries are those that qualify as "lotteries" pursuant to Section 226 of the Kentucky Constitution. It is the courts, not the legislature, that have the power to define words that are used in the
Constitution. Kentucky Board of Tax Appeals v. Gess, Ky., 534 S.W.2d 247 (1976). Accordingly, the definition of "lottery" that must guide us in this matter is the common law definition of "lottery" that was in effect with the courts in 1988, the year in which Section 226 of our Constitution was amended to permit the establishment of a state lottery.
The courts have defined the word "lottery" on several occasions. On one occasion in particular, in
Commonwealth v. Kentucky Jockey Club, Ky., 38 S.W.2d 987 (1931), the court dealt with the question of whether wagering on the outcome of horse races is within the meaning of "lottery" as that term in used in Section 226 of the Constitution. As interpreted by a later court:
Kentucky Jockey Club held pari-mutuel betting at race tracks to be a form of gambling not prohibited by Section 226 of the Constitution. In that case the court referred to the debates of the constitutional convention which adopted our present constitution. In those debates the question of whether pooling privileges at race tracks should be prohibited by the constitution was discussed and the delegates clearly indicated an intention that race track pooling was not to be prohibited by the constitutional provision against lotteries. In Kentucky Jockey Club the court gave effect to the intention expressed by the drafters of the constitution.
Otto v. Kosofsky, Ky., 476 S.W.2d 626, 628-29 (1971). In Kentucky Jockey Club , then, the court decided that pari-mutuel betting at race tracks did not constitute a "lottery" for purposes of Section 226 of the Constitution. We do not view that decision as dispositive of the question regarding whether the proposed new game is an authorized "lottery, " however, because the Kentucky Jockey Club decision, as interpreted by the Otto court, was limited to the question of whether pari-mutuel betting at race tracks was a lottery. The proposed new game, as described in your letter, is not identical to pari-mutuel betting at race tracks.
Therefore, we must look to other court decisions for guidance on this question. In A. B. Long Music Co. V. Commonwealth, Ky., 429 S.W.2d 391, 394 (1968), the court stated:
The elements of "lottery" are a prize, an award thereof by chance, and a consideration . . . . The word "lottery" is a generic term and embraces all schemes for distribution of prizes by chance for consideration . . . .
Likewise, in
Commonwealth v. Malco-Memphis Theatres, Inc., Ky., 169 S.W.2d 531, 598 (1943), the court determined:
To constitute a lottery there must be a payment of a valuable consideration for the chance to receive the prize . . . . A lottery is "a species of gaming which may be defined as a scheme for the distribution of prizes or things of value by lot or chance among persons who have paid or agreed to pay a valuable consideration for the chance to obtain a prize. " 38 C.J., page 286.
The Malco-Memphis Theatres case was cited in
Otto v. Kosofsky, Ky., 476 S.W.2d 626, 629 (1972), as authority for its finding that:
A lottery is a scheme for the distribution of prizes or things of value purely by lot or chance among persons who have paid or agreed to pay a consideration for the chance to share in the distribution.
These cases all agree that the elements that must be present for a game to qualify as a "lottery" are: (1) a prize; (2) distribution of the prize by chance; and (3) a valuable consideration paid for the chance. In the Lottery Corporation's proposed new game, there is no question that a prize will be given and that a valuable consideration will be paid. The question appears to center on whether the prize will be distributed by "chance."
In determining whether a prize will be distributed by "chance," the courts examine whether chance predominates over skill in the game in question, whether "'chance permeates the entire scheme.'"
Commonwealth v. Allen, Ky., 404 S.W.2d 464, 466 and 467 (1966), quoting
Sherwood & Roberts-Yakima, Inc. v. Leach, Wash., 409 P.2d 160, 163 and 164. Although the Otto decision quoted above uses the phrase "purely by lot or chance," it is our Opinion that the other court decisions state the more accurate rule when they indicate that the proper determination is one of whether "chance permeates the entire scheme." In the Corporation's proposed new game, chance clearly "permeates the entire scheme" according to the information that you have supplied to us: the odds of winning are roughly 1 in 35,000,000.
Accordingly, it is our Opinion that the Corporation's proposed new game includes all the elements of a "lottery" as that word has been defined by the courts in interpreting Section 226 of the Kentucky Constitution: it has a prize, the prize is distributed by chance, and a valuable consideration is paid for the chance. Therefore, the proposed new game is a "lottery" that is authorized by Section 226 of the Kentucky Constitution and KRS 154A.065.