The state said Thursday it is exercising its option to match an $85 million offer to retain the intellectual property rights to the Preakness Stakes and the Black-Eyed Susan Stakes, which were on the verge of being sold to the owners of the Kentucky Derby.
Money for the deal will come from tax-exempt revenue bonds to be issued by MEDCO, the Maryland Economic Development Corp., and repaid with revenues from the two signature races, “including wagering, ticketing and sponsorship streams,” according to a late Thursday afternoon announcement from Gov. Wes Moore’s (D) office.
The announcement was careful to point out that no money from the state’s strapped general fund would go toward the deal.
Moore called the deal an investment in the Preakness Stakes, “a cornerstone of Maryland’s history, culture, and economy.”
“This decision secures a vital asset for our state, allows Maryland to shape its horseracing destiny, and by leveraging the Preakness’s iconic status and partnering with industry experts to enhance the fan experience, preserve Maryland’s position as a key power player in the Triple Crown for generations to come,” Moore said in the statement released by his office.
The deal is just the latest multimillion-dollar investment by the state in Maryland’s flagging horse racing industry. The Maryland Stadium Authority said in April that it would spend $48.5 million to buy Laurel Park and convert it into a training facility — after spending $4.5 million earlier this year for a Carroll County farm for that purpose, before realizing that cost and potential environmental impacts made that site unfeasible.
Both Laurel Park and the Preakness rights are owned by arms of 1/ST, which had largely controlled racing in Maryland, but will be getting out of the state once the latest deals go through. In 2024, 1/ST Racing, controlled by the Stronach family, transferred control of all thoroughbred racing in Maryland to the state, and transferred memorabilia to the Maryland Jockey Club, but retained the intellectual property rights now on the market.
The state is also spending $400 million for a complete renovation of the aging Pimlico Race Course, the traditional home to the Preakness. The track was closed for construction earlier this year and the Preakness was moved to Laurel Park, but officials have vowed that the new Pimlico will be open in time for the Preakness next May.
Not everyone is convinced that the state should be spending more on racing, or that the intellectual property rights to the Preakness will be worth the cost.
“The governor is asking Maryland taxpayers to take on substantial financial risk in exchange for promises that may not withstand economic reality,” Senate Minority Leader Steve Hershey (R-Upper Shore) said in an emailed statement Thursday. “Before committing the public to an obligation of this magnitude, we should have been focused on securing the strongest possible long-term business model for the Preakness and Maryland racing.”
Hershey said the state could have partnered with Churchill Downs Inc., the owner of the Kentucky Derby, to promote racing, but has instead turned the race over to “a newly created nonprofit organization that has yet to demonstrate it can generate the same level of revenue, sponsorships, and national exposure.”
“Maryland had the opportunity to partner with the best in the business. Instead, we chose to buy the risk, assume the debt, and hope for the best,” Hershey said. “That’s not a business strategy, and it’s certainly not the kind of stewardship taxpayers should expect from their government.”
Moore’s statement said the state “remains open to identifying areas of mutual interest with Churchill Downs and other industry partners to benefit the broader Triple Crown and the sport of horseracing.”
And the CEO of Churchill Downs Inc. said Thursday that his organization is committed to working with Maryland for the betterment of Triple Crown racing.
“We understand why the state of Maryland would decide to acquire the Preakness IP rights as a state-owned asset from 1/ST Maryland LLC,” said CEO Bill Carstanjen. “We remain committed to working with the Governor and other elected leaders and horse racing constituents in Maryland to fully realize the potential of a redeveloped Pimlico and Preakness Stakes within the Triple Crown and the broader sports and entertainment landscape.”
Thursday’s announcement comes almost two months after Churchill Downs said it had reached an $85 million deal with 1/ST Maryland LLC to buy the intellectual property rights, “all trademarks and associated rights” for the Black-Eyed Susan and the Preakness, the second leg of racing’s Triple Crown.
Under its 2024 agreement with 1/ST, the state received an “exclusive and perpetual license” to the Preakness for 10 years, starting this July, after which the deal would automatically renew for five years at a time, unless the state canceled the deal.
As part of that deal, the state would pay a $3 million base fee for the races that would increase by 2% a year, as well as paying out 2% of the handle from races. That money would have gone to Churchill Downs had its deal with 1/ST gone through.
But Maryland had the right to match any offer for the intellectual property rights, which it did Thursday.
Moore’s office said that, with the state already owning Pimlico, about to own Laurel Park, overseeing the Preakness and controlling all racing days in the state, it made sense to buy the intellectual property rights, which “completes the State’s control over the essential assets of the race.”
The deal was welcomed by groups ranging from the Maryland Jockey Club to the Greater Baltimore Committee.
“The Preakness is more than a horse race. It is one of Maryland’s most iconic brands, one of its most important cultural assets, and one of the State’s strongest opportunities for long-term economic growth,” said Mark Anthony Thomas, president and CEO of the Greater Baltimore Committee.
“Ownership ensures that the decisions shaping the future of the Preakness are made in the interest of Maryland and that the value created through public investment benefits Maryland taxpayers, businesses, workers, communities, and the equine industry,” his statement said.