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FRANKFORT, Ky. -- Kentucky's horse racing industry suffered a potentially huge setback Thursday when the state's highest court ruled at least some historical racing games being offered in betting parlors aren't legal.

Historical racing -- featuring slots-style machines allowing people to bet on randomly generated, past horse races -- has become a lucrative venture for racetracks. Bettors in Kentucky wagered more than $2 billion on historical racing machines in the previous fiscal year ending June 30.

Kentucky's Supreme Court ruled that a form of historical race wagering offered by some tracks does not meet the standard for pari-mutuel wagering. Writing for the court, Justice Laurance B. VanMeter said the historical racing system under review "does not create a wagering pool among patrons such that they are wagering among themselves as required for pari-mutuel wagering."

The ruling stems from a long-running dispute between racing interests and The Family Foundation, a conservative group that opposes expanded gambling. The foundation has long argued that historical horse racing machines do not meet pari-mutuel wagering standards under Kentucky law. Attorneys for the racing interests have insisted that historical horse racing is a valid form of wagering. The high court heard oral arguments in the high-stakes case last month.

After the court's ruling, the foundation said "the time for flouting the law is over." The group called on race tracks to cease operating their historical racing parlors "until it can be demonstratively shown that their activities are legal."

"This decision reaffirms that words have meaning and that even the state's most powerful industry can't turn the plain language of the law upside-down for its own economic benefit," said Martin Cothran, a spokesman for the foundation.

The Kentucky Horse Racing Commission did not immediately comment on the ruling's effect on historical racing gambling parlors. Keeneland vice president Vince Gabbert told the Lexington Herald-Leader the track was still evaluating the opinion "but nothing seems to change course on their previous ruling that the commission acted appropriately in promulgating the regulations."

VanMeter acknowledged the "economic pressures" riding on the issue for the horse racing industry.

For years, Kentucky horse tracks pushed to legalize casino-style gambling, but those proposals died in the state legislature. The tracks instead ventured into historical horse racing, which pumped money into race purses and bred development funds to put them on more solid ground in competing with tracks and horse breeding operations in other states. The historical racing games typically show video of condensed horse races.

The Supreme Court ruled Thursday that the historical wagering system under review doesn't meet the pari-mutuel standard because bettors aren't wagering on the same race and aren't betting into the same pool to set odds.

"The [Horse Racing]Commission is charged with regulating pari-mutuel wagering," VanMeter wrote. "But without positive legislative action and sanction, it has no authority to create from whole cloth and to approve a wagering pool in which each patron is wagering on a different event or set of events. Such a wagering pool by no means can be considered a pari-mutuel wagering pool in which patrons, as among themselves, are setting the betting odds and payout."

VanMeter flatly said it would be wrong to suggest "that the random generation of multiple historical horse races with patrons placing wagers on different races qualifies as pari-mutuel wagering."

"To be clear, pari-mutuel wagering requires that patrons generate the pools based on wagering on the same discrete, finite events," he added.

The ruling reversed a lower court ruling that the form of historical wagering constituted a pari-mutuel system of wagering.

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