One of my Nevada neighbors recently visited Kentucky and was surprised to see slot machines. He said they called them “Historical Horse Race” machines, and he asked me what that “HHR” designation meant. Since he was not in the industry, my simple answer closely resembled Shakespear’s line from Romeo and Juliet: “A rose by any other name would smell as sweet.”
I told him, “Whether today’s slot machines are HHR, Class 2 or Class 3, they are all pretty much all the same.*”
But if you are in the industry, that asterisk at the end of my sentence is a big deal and stands for years of work with lawmakers, regulators, politicians, Native Americans, racetrack owners and judges.
Likewise, the short answer for my industry colleagues is: “They are just slot machines designed to get around the laws by using different methods to determine the winners and losers. With today’s technology, most players would find it impossible to tell the difference between these types of games.**”
Please note that not everyone agrees. HHR system providers are quick to note that their machines are definitely not “slot machines”. They know how important those precise legal definitions are in new gaming jurisdictions.
That double asterisk above is also a big deal, but only for machine designers, law enforcement, tax collectors, trivia junkies, and mathematicians. With that in mind, here’s an abbreviated (and very loose) look at the history of how these different types of slots (and non-slots) work. It begins with “fan clocks,” moves to computers … on to Bingo … and now has evolved to HHRs.
Gambling, except for lotteries, was always legal in Nevada (unless you were around before 1931). Outside the state, you could probably bet on horse or dog races, play Bingo or maybe buy a lottery ticket; but everything else was against the law.
Reno and Las Vegas started with table games, but seem to add more and more slot machines every year. The early successful slots were all mechanical reel-spinners. They used springs, gears, wheels and levers to become the infamous “one-armed bandits”. Just like today, these “Class 3” machines used a Random Number Generator (RNG).
Until the 1960s this was generally a coiled spring, much like a wind-up music box. It was attached to a small blade that spun in the air until the spring wound down. It was called a “fan clock” (pictured).
Once the blade slowed down, it triggered a set of levers that banged against the sides of the reels. If there was a “slot” or hole in the reel (or all the reels) where the lever hit, it would trigger a set of slides that would drop a number of coins into the tray for a win. If there was no slot, there would be no win. (NOTE: there is some debate among historians as to whether the term “slot machine” derives from these “slots” in the reels or from the “coin slot” where you deposited your wager.)
The fan clock was a “true RNG” since it used physical properties like atmospheric pressure, humidity, the shape and size of the fan, friction, the spring’s stiffness, and air temperature which all influenced the spin rate and duration of the fan clock. Variations of this type of RNG were used in slot machines for 70 years beginning in the late 1890s.
Next came computer chips and algorithms that electronically did the same thing as the springs and levers. Since there were no physical factors involved, these algorithms are known as “pseudo-RNGs or PRNGs”.
Regardless, today’s Class 3 games all use internal PRNGs to determine an outcome. Today’s “mechanical reels” are spun using stepper motors which can stop at specific locations directed by the computer. Video games are even simpler with no motors or reels required, just a good display screen. That’s how all Class 3 machines work, both then and now.
But what’s with that name “Class 3?” For that answer, let’s go back about three dozen years to 1988. That’s the year Congress realized they needed to get in front of the growing “threat” of Native American Bingo halls and small Indian-run casinos. Bolstered by several favorable Supreme Court rulings, lawmakers worried that Indians might be able to run larger casinos without any state regulation and, more selfishly, without the state getting any tax money! They quickly rallied and passed the Indian Gaming Regulatory Act (IGRA) in October of that year to protect their interests.
That IGRA statute defined three types of gaming: Class I (1) – these were historical tribal games generally played using sticks, stones, bones and balls; Class II (2) – these games were restricted to Bingo (many tribes were already operating their own Halls); and Class III (3) – these were “Nevada-style” games which included slots and table games.
IGRA also established the right of states to tax and regulate C3 games. However, C2 games were generally exempt from taxes. Native American operators in Florida, Oklahoma and California were instrumental in encouraging manufacturers like VGT, Multimedia, WMS and others to develop new types of C2 machines that they argued were legal because they were “just a form of Bingo”.
Almost everyone knows what traditional Bingo is. By definition, it is a pari-mutuel game with a “central determinate”. Wikipedia defines pari-mutuel as “a betting system in which all bets of a particular type are placed together in a pool”. At a Bingo Hall, the “pool” consists of all the players who’ve bought a ticket(s). The winner is the first one to match a specific pattern on their ticket. The winner gets all the money in the pool, or a posted jackpot amount, with the casino getting a cut or % fee.
The “central determinant” is the Bingo caller (or more correctly a “true RNG” in the form of a Bingo blower which randomly spits out numbered ping-pong balls for the caller to announce).
To meet the pari-mutuel regulation, a group of Class 2 machines was hooked together (or networked) within the casino to form the “pool” of players. The new electronic “Bingo blower” was a “Pseudo-RNG” running in the backroom on the same computer server that hooked all the games together.
The early C2 machines were terrible. There was a requirement that you had to “daub” the machine multiple times to see the outcome (this was to mimic the ink- filled foam daubers that players used to mark called numbers on Bingo tickets). Regulators felt that pushing the spin button would be like daubing. The early requirement was that you had push this button three or more times instead of once to see the outcome of the machine!?!
Likewise, while the early games could use reels and/or video game slot machine symbols, they also had to display a large Bingo card on the screen at the same time. It was confusing at best.
Worst of all, if no one else in the casino was playing, you couldn’t have a “pool”. You had to wait for another player. And if he/she hit a winner, the pool would be exhausted temporarily.
Despite these shortcomings, these games were better than no games at all. And, fortunately, they got better. If we fast forward several years, skipping dozens of improvements in regulations and court decisions; today’s C2 machines are networked to multiple, nationwide pools, and they play multiple Bingo cards at once with multiple winning patterns.
This is how C2-machines differ from a standard Bingo game. Instead of just one winner who yells “Bingo”, with a C2 system there can be multiple winners from big-to-little by running multiple card patterns and multiple games all at once.
The “daub” requirement was eventually abandoned, and the required Bingo displays are now very small or hidden completely in the machine’s background. As mentioned, it is hard for non-slot pros to spot the difference between today’s C3 and C2 games.
Oklahoma can now operate both C3 and/or C2 machines. However, for years only C2 games were legal there. The Sooners fell in love with these games. In the most recent Eilers & Krejcik report, Class 2 machines occupy the Top Five positions in Oklahoma/Texas performance, and they make up 12 of the Top 25 performers in that list that includes the best Class 3 core video machines.
So, those states with legal slots and Native Americans with both C3 and C2 machines, were set. Everyone was happy.
Well, not everyone. Horse and dog racing gaming revenues have been declining for years. Attendance has slipped, purses have declined, and many tracks have been forced into closure.
A small portion of that is due to concerns about the humane treatment of animals. But the bigger issue has been competition from casinos and slot machines. Ironically, tracks have a gaming history as long as, or longer than, Nevada via handicapping legalized racing.
However, compared to slot machines, track owners felt they’d been left behind with no way to compete against these popular devices. The laws in many states that allowed horse racing prohibited slot machines.
Oaklawn Park racetrack in Little Rock, Arkansas fought back in 2000. They convinced their state legislature to approve what was then called “Instant Racing” machines. This was the start of the “Historical Horse Race” machine industry. Today there are thousands of HHR machines in operation. While many will argue “it is just horse racing and not a slot machine”, it sounds a lot like the argument “it is just Bingo and not a slot machine” made decades earlier by Native Americans.
Ironically, Arkansas is no longer supporting HHR machines, but five other states are all in: Kentucky, Louisiana, New Hampshire, Virginia and Wyoming. Kansas should come online in 2025. Alabama has some HHR too, but only in selected locations. Several other states, including Arkansas, Idaho, Oregon, Maine, Minnesota and Texas have sponsored past efforts, or are working toward new efforts, to allow HHR in their jurisdictions.
There is also international interest. Malta, an island south of Sicily, recently legalized the games. Nick Khin, IGT’s President, Global Gaming said, “By offering players HHR-versions of highly popular IGT games such as Prosperity Link and Cleopatra, National Lottery plc (in Malta) is extending the reach of some of the gaming industry’s most celebrated content in a format that players readily enjoy.” There is some speculation that other countries around the globe are exploring HHR machines. Industry observers are optimistic that the HHR segment could double in the next five years.
Existing racetracks are enthusiastic since they get a healthy cut of the HHR revenues. State legislators also liked this concept since it saved, or created new, local jobs in the racing industry. It was also a new source of tax money. In New Hampshire, the traditional tracks’ share is directed to charities, which is always a popular cause.
Without standard RNGs or Bingo simulations, how do these games work? Just like the name says, the outcomes are determined by “handicapping” horse races that have occurred in the past. Handicapping is a way to even out the advantages that skilled or knowledgeable players may have. It is much like a handicap in golf or in bowling. The worse you are, the higher your handicap. A weak player in golf may get a 10 or 15 stroke advantage over a better player (I get 20 over my son!).
In horserace betting, they even the playing field by assigning different odds to the horses. The faster horses, or those with a better record, may not get good odds and have small payouts for winning. But the long shots and horses who haven’t won much, may pay high multiples of the original wager if they win.
Early on, Churchill Downs (CHDN) in Kentucky worked with Ainsworth Gaming Technology (AGT) to become a major supplier of this historical horse race data. At that time, Casino Journal named their HHR System as one of the “Top 20 Most Innovative Gaming Technology Products”. Exacta soon emerged as a leader in this new HHR system category.
About this time last year, CHDN purchased Exacta. There are several other suppliers of this information including PariMax (Stronach Group), Grover Gaming and Castle Hill. As mentioned, just about every supplier of traditional C3 slot machines has partnered with one or more of these HHR system providers to power their games. They all are making HHR versions of many of their popular themes.
Each of these HHR system providers offers data on thousands of past horse races held around the country and/or overseas (both for thoroughbred and standardbred races). For slot play, these companies randomly select a group of races. According to Exacta, “Prior to placing a bet, a player is provided with handicapping information. This data is the past performance information about the horses in the race that helps players of live and/or historical horse races select their winning horses.” Exacta adds, “to ensure fairness, this data is obscured to prevent a player from identifying the race. Horse names, jockey names, and other identifying details are removed, and all handicapping data is provided in statistical form.”
Of course, the majority of HHR machine players may simply want to press the spin button (imagine they are on the Las Vegas Strip) and see the instant results like they do with a C3 machine. That’s easily accomplished by letting the HHR system randomly do the handicapping. It is known as “autopick”.
The math and algorithms behind all this are complicated, but the outcomes are simple and closely resemble those slot players have always known. Nimai Malle, VP of Product Development and Engineering at Exacta, says, “Our development team consistently goes above and beyond to ensure that our Historical Horse Racing systems deliver the best possible play experience. We are dedicated to maintaining the integrity of true pari-mutuel wagering, continually innovating, and refining our technology to exceed industry standards.”
HHR games may be purchased and/or leased from the major manufacturers. However, they all have some form of connection fee to communicate with the HHR database system. These fees can be a daily revenue share or a flat fee. Both C2 and HHR machines are server based, and therefore they must be connected to some central determinate system. Most HHR games are compatible with standard slot accounting and loyalty card marketing systems from the major providers.
The result has been that many jobs in the racing industry have been saved or created, tracks are doing much better, and some of the new HHR gaming revenues have gone to improving the actual horseraces themselves with larger purses and more outings.
But what if a “Rain Man-type” individual with an extraordinary photographic memory (or a mini-computer in his back pocket) could recall all the horse races run everywhere in the past. Could this gifted person (or cheater) win like Dustin Hoffman did at Blackjack in the movie? Not really.
As mentioned, the data (while real) lacks enough specifics to prevent anyone, or their computers, from accurately handicapping to the races. For all practical purposes, the outcomes are totally random.
So, while manually handicapping the races on an HHR machine may feel empowering for some horseracing fans, it doesn’t really provide an advantage. Like all the other forms of slot play, the #1 way to become a winner is to get lucky. There is no #2 way.
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(NOTE: Unlike C2 and HHR machines, many say that Class 3 games are unique since they use an independent PRNG to determine the outcome. They argue that Class 2 games are based on Bingo, and HHR machines are based on past horse races. That is certainly true, however, there is a Pseudo-RNG at the heart of all these machines. C2 machines use their PRNG to select the winning bingo balls, and HHR games use their PRNG to select which group of past horse races will be used each time.)
