Should MD be investing so much in the horse racing industry?

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On April 21, 2026, Churchill Downs Incorporated announced it had a definitive agreement to purchase the Intellectual Property Rights to the Preakness and Black Eyed Susan Stakes. This sale by 1/ST Maryland LLC, controlled by the Stronach Family as part of The Stronach Group, begs further scrutiny as to why, after committing more than $500 million to revitalize Pimlico and the Maryland horse racing, any party other than the State of Maryland owns the Intellectual Property in question.

Under the terms of an Exclusive Use Agreement dated June 28, 2024, Maryland agreed to lease the intellectual property of the Preakness from Stronach as part of an overall agreement whereby Stronach transferred the aging Pimlico facility to the state. Under this agreement, once the state begins to operate the Preakness in 2026, Maryland would be allowed to conduct the Preakness in exchange for an annual fee equal to the sum of $3 million (increasing at 2½% annually compounded) plus 2% of the handle on Black Eyed Susan and Preakness Days combined. Had Maryland had to pay this fee in 2025, it would have been $5.7 million. The fee is due “off the top,” whether Maryland makes any money operating the Preakness or not. The portion of the fee computed on the handle will grow each year as the handle grows, so in effect, the better Maryland does at running the race, the more CDI will make.

If the sale by Stronach to CDI is completed, Maryland will be paying the fee to the owners of the Kentucky Derby, as well as Colonial Downs, which, at times, competes with Maryland. This fee is in addition to the more than $500 million Maryland has committed to the rebuild of Pimlico, the purchase and rebuild of Laurel as a horse training site (now being reviewed by the Maryland Legislative Committee), the sunk costs of the now dissolved Maryland Thoroughbred Racetrack Operating Authority and the aborted Shamrock Farm as a potential training center which is now an unwanted asset owned by the state. To add insult to injury, the sale of the IP by Stronach to CDI was announced immediately after the board of the Maryland Stadium Authority voted to approve the purchase of Laurel from Stronach.

So how did Maryland get in this position?

Even though Maryland had substantial leverage over Stronach, including quick take authority over all of Stronach’s assets, Maryland chose to agree to lease the IP from them. Was there an appraisal of the value of the IP conducted before Maryland agreed to these terms? If so, what does the appraisal say?

Knowing that the penalty for transferring the Preakness Stakes out of Maryland is in Md. Code Business Regulation Section 11-520 was, in fact, no penalty at all, was it Stronach’s plan all along to establish value for the Preakness IP through this agreement and then turn around and sell it to the highest bidder? Wasn’t this predictable, and why, at the May 15, 2024, Board of Public Works Meeting, did no member ask any questions about this? As our fiscal watchdog, the citizens of Maryland deserve better.

Under the aforementioned statute, the state has 60 days to exercise a right of first refusal whereby it can purchase the IP under the same terms and conditions CDI has agreed to purchase it. It appears Maryland is pursuing that now. That would mean that Maryland would need to invest an additional $85 million or continue to lease the IP from CDI under the same terms it agreed to lease the IP from Stronach.

If it decides to invest an additional $85 million, where would that money come from? Since there is no guarantee that Maryland racing will be successful long term, should Maryland take the additional $85 million risk, thereby having $600 million invested with zero chance of a return if Maryland racing fails? Alternatively, is a partnership with CDI that would give Maryland a guarantee of 120 days of racing per year and a payout based on Preakness performance, potentially a better outcome for racing and the taxpayers?

We believe it would have been best if Gov. Wes Moore had brought this question to the citizens of Maryland and provided them enough information about these various transactions to have allowed them to decide whether this was an industry worthy of such a massive investment. Before deciding which path to take next, the governor and members of the legislature should be totally forthcoming and transparent with the taxpayers of Maryland in their decision-making.

Editorial Advisory Board Members Nancy Forster and Julie C. Janofsky did not participate in this opinion.

EDITORIAL ADVISORY BOARD MEMBERS

James B. Astrachan, Chair

Gary E. Bair

Jill P. Carter

Arthur F. Fergenson

Nancy Forster

Susan Francis

Julie C. Janofsky

Ericka N. King

George Liebmann

George Nilson

Steven I. Platt

Angela W. Russell

Debra G. Schubert

Jeff Sovern

H. Mark Stichel

The Daily Record Editorial Advisory Board is composed of members of the legal profession who serve voluntarily and are independent of The Daily Record. Through their ongoing exchange of views, members of the board attempt to develop consensus on issues of importance to the bench, bar and public. When their minds meet, unsigned opinions will result. When they differ, or if a conflict exists, majority views and the names of members who do not participate will appear. Members of the community are invited to contribute letters to the editor and/or columns about opinions expressed by the Editorial Advisory Board.