Churchill expands Derby seating but avoids prediction markets
If Churchill Downs Inc. is the mother ship, then the Kentucky Derby is its anchor.
That was the theme of CEO Bill Carstanjen’s comments on a Thursday morning call with investors before the markets opened to discuss the company’s third quarter earnings and planned expansion of its flagship Churchill Downs racetrack.
Churchill Downs has higher earnings in 3rd quarter.
The street liked what it heard. Churchill’s NASDAQ stock showed a gain of as much as 12% on Thursday before closing at $103.68, an increase of 7.8% from Wednesday’s close. The stock had stagnated recently, declining to a 52-week low of $85.58 last week. It previously traded below $90 in April after the company announced it was scaling back on previously announced capital expenditures at Churchill related to Kentucky Derby expansion.
Churchill somewhat reversed that course in an after-market Wednesday release detailing plans for a $280 million to $300 million remodel of the area between the clubhouse and new first-turn area which includes the Skye Terrace and a new premium experience dubbed Victory Run. That announcement coincided with a strong earnings report, particularly in Churchill’s racing segment which includes both live events and historical horse-racing casino machines.
“The Kentucky Derby is a very old event. It’s been around for 151 years, but I think we’re just in the third inning,” Carstanjen said when asked by an investor to compare the Derby’s life cycle to a baseball game. “It’s a very dynamic event. As we develop it, and the country changes, we see customers move toward experience-related spend. The future is very bright for the Derby with a lot more to come. It’s important to have a breadth of offering for the Derby.
“When we talk about Victory Run, it’s a great part of the track just past the finish with a great view of the horses thundering down the stretch. But that was a tired part of the track. Internally we referred to it as the gap in the smile. It hadn’t had capital expenditure in a long time. This increases attendance 20% in that section and overall capacity by about 2%, but we’re careful not to talk too much about capacity, because it’s more about the experience. We don’t want to just add people. This is the right next step in that philosophy.”
The Victory Run announcement came six months after Churchill said it was pausing plans to redo the Skye Terrace as well as an infield expansion. The company has maintained its commitment to reimagine its trophy room, finish-line suites and Mansion areas, which are on the fifth and sixth floors of the main grandstand overlooking the finish line. Also for 2026 the track will update the paneling on its big video board to match technology available for sports venues. There will be no change to the board’s structure on the backstretch, only the display.
One area Churchill will not expand into is predictive markets such as Kalshi and Polymarket. Responding to an investor question regarding the company’s interest in having horse racing on such platforms, Carstanjen was bearish.
“Wagering on horse racing in the United States is governed by the interstate horse-racing act,” he said. “That’s different than sports wagering state by state. Wagering on our sport is fundamentally different than all other sports wagering activity. The law is very clear about what it takes to take a wager. A contract with us and agreement with horsemen. Our approach is to engage with prediction markets and discuss with them how wagering happens and the civil and criminal penalties if federal law is not followed.”
Carstanjen concluded by saying that any discussions with prediction markets at this time would be to remind them of federal law, not to work with them.
“If people act counter to the interstate horse-racing act, then we’ll pursue all legal rights and remedies,” he said.