When the only Arkansas greyhound-racing franchise stops conducting races, where does the casino-tax revenue earmarked for greyhound purses go?
Plain-English summary
Arkansas's Amendment 100 (the 2018 casino amendment) levies a tax on casino gross gaming revenue. It directs 17.5% of that tax to the Arkansas Racing Commission, to be paid out as racing purses. The amendment splits the 17.5% between Arkansas's only two pre-2018 racing franchise holders: 60% to Oaklawn (horse racing) and 40% to Southland (greyhound racing).
Then on January 1, 2023, Southland stopped conducting greyhound races. The Racing Commission asked the Attorney General what to do with the 40% that would normally have gone to Southland.
The AG's answer turns on Amendment 100's word "operating." A Franchise holder is only entitled to its share of the 17.5% during a period when it is "operating a franchise" of the relevant type. If Southland is no longer operating a greyhound franchise, the constitution prohibits the Commission from sending it the 40% share. The remaining money has nowhere else to go under the amendment's text, so the Commission can send the full 17.5% to Oaklawn for horse-racing purses.
If Southland resumes greyhound racing in 2023, it would be entitled to its 40% share of disbursements going forward. Starting January 1, 2024, the formula changes: the 17.5% gets distributed pro rata based on each Franchise holder's actual pari-mutuel handle in the prior calendar year. Under that formula, Southland would have to wait until the year after it resumed racing to receive any disbursement, because the formula uses prior-year activity.
Counsel for Southland argued that distributing 100% of the 17.5% to Oaklawn produced an absurd result, because money would be parked at Southland with no lawful use. The AG rejected the argument on two grounds. First, Southland could voluntarily resume racing and use the money. Second, the Arkansas absurdity doctrine, as the state Supreme Court applied it in State v. Coble, 2016 Ark. 114, 487 S.W.3d 370, is reserved for results "so monstrous that all mankind would, without hesitation, unite in rejecting" them. Money sitting in escrow is awkward but nowhere near that bar.
What this means for you
The Arkansas Racing Commission
Based on the AG's reading, the Commission's decision tree is straightforward when a franchise holder stops operating:
- Determine as a factual matter whether Southland (or any other Franchise holder) has ceased operating its franchise. The AG explicitly said this fact-finding is the Commission's job, not the AG's.
- As long as Southland is not operating, send Southland $0 of the 17.5%. Send the full 17.5% to Oaklawn for horse-racing purses.
- Re-evaluate if Southland resumes greyhound racing. Mid-year resumption in 2023 would entitle Southland to its 40% prospectively from the resumption date.
- After 2023, switch to the pro rata formula based on prior-year handle. A Franchise holder that did not race the prior year will have a $0 pro rata share until the next calendar year.
Document the determination clearly. The AG opinion is persuasive, not binding, and a future challenger could test the Commission's factual findings about whether a franchise was "operating."
The Department of Finance and Administration
DFA collects the casino tax and remits to the Commission. This opinion does not change DFA's role, but it confirms the downstream allocation rules the Commission will apply. Coordinate with the Commission on disbursement reporting so the public record is consistent.
Oaklawn Racing Casino Resort
If the AG's reading is followed and Southland is not operating, you may receive substantially more Amendment 100 purse money than the standard 60% share. Plan racing programs and purse structures with awareness that the 40% top-up is contingent on Southland's status and could disappear if Southland resumes operations.
Southland Greyhound Park
A decision to permanently exit greyhound racing forfeits Amendment 100 purse revenue for the period of non-operation. The opinion does NOT say the franchise is forever forfeited. Southland retains the legal status of "Franchise holder" under the amendment, and resumption of operations would restore the revenue stream prospectively. Mid-2023 resumption preserves access to the 40% share. Resumption in 2024 or later gets caught by the pro rata formula, which uses prior-year handle, so the first calendar year of resumed racing yields $0 pro rata.
State legislators and constitutional drafters
Two takeaways. First, the AG flagged a drafting gap in Amendment 100, § 5(c)(2), which cross-references "section (e)" but should reference section (d). The AG treats this as a "scrivener's error" but a future court might not. Second, the amendment's drafters did not foresee what happens when one of two Franchise holders exits. The pro rata formula uses prior-year handle, which means a holder that races for one year, stops, then resumes after a gap will have idiosyncratic eligibility patterns. If you draft amendments to commodity-tax distribution schemes, build in the scenarios where an eligible payee stops or restarts qualifying activity.
Arkansas taxpayers and journalists tracking casino revenue
The 17.5% never goes to general state revenue under Amendment 100. It is constitutionally locked into racing purses. If Southland is not racing, the practical effect is that more public-facing tax revenue flows to Oaklawn rather than to greyhound purses, but it does not flow to schools, roads, or other state services. A constitutional amendment would be required to redirect Amendment 100 revenue.
Common questions
Why does Amendment 100 only name two franchise holders?
The amendment's definition of "Franchise holder" locks in any entity holding a horse-racing or greyhound-racing franchise as of December 31, 2017. Only Oaklawn and Southland met that test. The amendment does not allow new entities to qualify, even if they later obtain a franchise under the underlying statutes (Ark. Code Ann. §§ 23-110-101 et seq. and 23-111-101 et seq.).
Can the legislature redirect the money to schools or roads?
Not by ordinary legislation. Amendment 100 is a constitutional amendment, so changes to its allocation rules require another constitutional amendment.
What if Southland sells its franchise to another company?
The amendment's December 31, 2017 cutoff for "Franchise holder" status would need careful reading by counsel for any acquirer. The opinion does not address transfers. It addresses only operation status.
Does the same logic apply to Oaklawn if Oaklawn ever stops horse racing?
Yes. The AG's analysis is symmetrical: a Franchise holder that is not "operating" its franchise cannot receive Amendment 100 funds for that activity. If both stopped, no one would be eligible, and the constitutional text would not authorize redirecting the 17.5% elsewhere.
Why isn't the absurdity doctrine triggered when money sits unused?
The Arkansas Supreme Court treats absurdity as a very high bar. State v. Coble, 2016 Ark. 114, 487 S.W.3d 370, quoting Scalia and Garner, says the doctrine corrects "obviously unintended dispositions, not...purposeful dispositions that...make little if any sense." Awkwardness is not absurdity.
Does this opinion bind a court?
No. AG opinions are persuasive authority. A court could disagree with the AG's reading of "operating" or with the rejection of the absurdity argument. The Commission's factual determination of whether Southland has ceased operations could also be challenged.
Background and statutory framework
Amendment 100 was approved by Arkansas voters in November 2018. Key provisions for this opinion:
- § 2(g): Defines "Franchise holder" as an entity holding a horse-racing or greyhound-racing franchise as of December 31, 2017.
- § 5(c)(2): Sends 17.5% of casino tax revenue to the Racing Commission for purses.
- § 5(d): Splits the 17.5% during 2018-2023 as 60% to operating horse-racing franchise / 40% to operating greyhound-racing franchise. Starting January 1, 2024, distributes pro rata based on prior-year pari-mutuel handle.
Underlying franchise statutes:
- Ark. Code Ann. §§ 23-110-101 et seq. (Arkansas Horse Racing Law).
- Ark. Code Ann. §§ 23-111-101 et seq. (Arkansas Greyhound Racing Law).
Arkansas absurdity doctrine:
- State v. Coble, 2016 Ark. 114, 487 S.W.3d 370 (quoting Scalia and Garner, Reading Law: The Interpretation of Legal Texts (2012), on the high bar for the doctrine).
The opinion also cites Justice Joseph Story's Commentaries on the Constitution (1833) for the proposition that absurdity must be "so monstrous, that all mankind would, without hesitation, unite in rejecting the application."
Citations
- Ark. Const. Amend. 100, § 2(g) (Franchise holder definition)
- Ark. Const. Amend. 100, § 5(c)(2) (17.5% to Commission)
- Ark. Const. Amend. 100, § 5(d) (60/40 split; pro rata formula post-2023)
- Ark. Code Ann. §§ 23-110-101 et seq. (Horse Racing Law)
- Ark. Code Ann. §§ 23-111-101 et seq. (Greyhound Racing Law)
- State v. Coble, 2016 Ark. 114, 487 S.W.3d 370 (absurdity doctrine)
Source
Original opinion text
Opinion No. 2023-002
March 30, 2023
The Honorable Byron Freeland
Counsel for the Arkansas Racing Commission
425 West Capitol Avenue
Little Rock, Arkansas 72201
Dear Mr. Freeland:
I am writing in response to your request for an opinion on the distribution of tax revenue generated from a tax levied by our state constitution on casinos. Amendment 100 requires that 17.5% of the revenue from that tax be sent to the Arkansas Racing Commission "to be used only for purses for live horse racing and greyhound racing by the Franchise holders, as the case may be." During 2023, the Commission must distribute the 17.5% unevenly: 60% goes to "the Franchise holder operating a franchise to conduct horse racing" and 40% goes "to the Franchise holder operating a franchise to conduct greyhound racing." Starting January 1, 2024, the Commission must distribute the 17.5% pro rata to the "Franchise holders" based on certain racing statistics from the prior year.
It is my understanding that Oaklawn Racing Casino Resort is the state's sole franchise holder for horse racing and that Southland Greyhound Park is the state's sole franchise holder for greyhound racing. You report that, as of January 1, 2023, Southland no longer conducts greyhound racing. If Southland never resumes greyhound racing, then starting January 1, 2024, when the Commission distributes the 17.5% pro rata, all the money will go to Oaklawn. You report that the Commission and the Department of Finance and Administration have jointly asked how Arkansas law requires the 17.5% share of Amendment 100's tax revenue be distributed during 2023.
RESPONSE
If it is true that Southland has ceased greyhound racing, then Amendment 100 prevents the Commission from sending any of the 17.5% to Southland and allows the full 17.5% to be sent to Oaklawn. But if Southland resumes greyhound racing, Amendment 100 requires the Commission to distribute the appropriate share of the 17.5% to Southland.
DISCUSSION
- Amendment 100's apportionment rules. Amendment 100 levies a tax on casinos and requires that 17.5% of the resulting tax revenue be sent to the Commission "to be used only for purses for live horse racing and greyhound racing by the Franchise holders, as the case may be, and then to be apportioned as set forth in section (e)." Amendment 100 defines a "Franchise holder" by reference to state statute: "'Franchise holder' is defined as any...corporation...or other entity holding a franchise to conduct horse racing under the Arkansas Horse Racing Law, Ark. Code Ann. § 23-110-101 et seq., or greyhound racing under the Arkansas Greyhound Racing Law, Ark. Code Ann. § 23-111-101 et seq. as of December 31, 2017." That definition can only be met by Oaklawn and Southland because only those two entities held a franchise "as of December 31, 2017." Therefore, under Amendment 100, only those two entities are permitted to receive a portion of the tax levied by the amendment.
While Oaklawn and Southland are permitted to receive some of Amendment 100's tax revenue, the Commission may send a given company its share of the revenue only if that company is "operating" its franchise. From Amendment 100's inception in 2018 to December 31, 2023, the Commission must send 60% of the 17.5% "to the Franchise holder operating a franchise to conduct horse racing," and 40% "shall be distributed to the Franchise holder operating a franchise to conduct greyhound racing."
A similar analysis applies on and after January 1, 2024. While Amendment 100's apportionment provisions for that timeframe do not use the phrase "operating a franchise," the provisions rely on the extent to which the franchise was operated in the prior calendar year: "for each calendar year...[after 2023, the 17.5% shall be distributed], pro rata to the Franchise holders based upon the total respective amounts of each Franchise holder's pari-mutuel wagering handle during each respective immediately preceding calendar year from wagers placed on and off-track on the Franchise holder's live races...conducted at the Franchise holder's licensed premises."
- Application to Southland. While I am not a factfinder when issuing opinions, I can opine on the legal consequences that result from assuming, for purposes of argument, that a given fact is true.
If we assume that the Commission correctly determines that Southland has ceased greyhound racing, then Southland is no longer "operating" its franchise for purposes of Amendment 100. Given that assumption, two conclusions follow. First, the Commission would be prohibited from sending any of the 17.5% to Southland from the date on which Southland stopped operating its franchise. Second, the 40% share of the 17.5% that would have gone to Southland during 2023 could be sent to Oaklawn, "the Franchise holder operating a franchise to conduct horse racing." This conclusion is implied by the text of Amendment 100. If Southland is not eligible to receive funds during 2023, then no entity has a legal claim to the 40% share that would have gone to Southland. Since Amendment 100 does not prohibit the Commission from sending Oaklawn more than 60% of the 17.5%, it would be consistent with, though not required by, Amendment 100 for the Commission to send the 40% to Oaklawn for it to pay out in racing purses.
But if Southland later resumes greyhound racing, it would be eligible to receive Amendment 100 funds. The amount of the funding depends entirely on whether the racing was resumed during or after 2023. If the resumption occurred during 2023, then Southland would be immediately entitled to 40% of that month's disbursement of the 17.5%. But if the races were resumed after 2023, then the amount of Southland's share would depend on the calculations noted above, and Southland would have to wait until the next calendar year to receive the disbursement.
- Response to objections. While the foregoing apportionment analysis follows from a plain reading of Amendment 100, it allows for a result that Amendment 100's drafters may not have foreseen. If Southland resumes racing at some point in the future and later stops the racing, then Southland would receive funds based on past racing operations that it might not be able to spend because of the general rule that the funds be used only for racing purses. This result means there is a possibility that tax dollars would be parked at Southland waiting for it to resume racing.
Your correspondence includes a memorandum from an attorney who argues that such a result would violate the absurdity doctrine, which prohibits interpreting a statutory or constitutional provision in a way that leads to an absurd result. The absurdity arises, the attorney claims, because of the rule that the 17.5% can only be used for racing purses, a rule with which it would be "impossible" for Southland to comply since, per the hypothetical, Southland would have ceased greyhound racing. But this argument fails on the facts and the law.
The argument fails as a factual matter because Southland could voluntarily resume greyhound racing. Once the racing was restarted, the money could be used for purses. Therefore, contrary to the attorney's claim, it would be possible for Southland to properly spend the money.
The argument also fails on the law because it overstates the absurdity doctrine. As the leading treatise on the rules of interpreting legal documents explains, the absurdity doctrine allows a statutory or constitutional provision to "be either disregarded or judicially corrected as an error (when the correction is textually simple) if failing to do so would result in a disposition that no reasonable person could approve." The absurdity must be one "that no reasonable person could approve," not merely one that seems odd or suboptimal. One of America's most celebrated jurists, Justice Joseph Story, explained how high the bar must be for an outcome to be considered absurd:
[I]f, in any case, the plain meaning of a provision...is to be disregarded, because we believe the framers of that instrument could not intend what they say, it must be one, where the absurdity and injustice of applying the provision to the case would be so monstrous, that all mankind would, without hesitation, unite in rejecting the application.
While I concede that it seems odd for tax revenue to be parked at Southland waiting for the day the company might resume greyhound races, that oddity is certainly not, to paraphrase Justice Story, "so monstrous that all mankind would reject it." Amendment 100's drafters clearly failed to appreciate the possibility that Southland might cease greyhound racing before 2024 or resume greyhound racing after 2024 before stopping it again; both actions could leave Southland with tax dollars for which it has no immediate lawful use. But, as the treatise notes, the absurdity doctrine does not allow us to override "substantive errors arising from a drafter's failure to appreciate the effect of certain provisions." Therefore, the absurdity doctrine does not prevent Southland from receiving (1) its 40% share if it resumes operating its franchise in 2023, or (2) its pro rata share if it resumes operating its franchise in subsequent years.
- Conclusion. While only Oaklawn and Southland meet Amendment 100's definition of a "Franchise holder," they must be operating that franchise in order to obtain Amendment 100 funds at a given time. If Southland has ceased greyhound racing, then it is no longer "operating" its franchise and cannot receive funds from the Commission. Southland's share could then be disbursed to Oaklawn. But if Southland resumes greyhound racing at some point, it would be eligible to receive funds from the Commission.
Deputy Attorney General Ryan Owsley prepared this opinion, which I hereby approve.
Sincerely,
TIM GRIFFIN
Attorney General