The announcement comes two days after the U.S. Supreme Court allowed states to legalize sports betting by endorsing New Jersey's bid for such wagering and striking down a 1992 federal law that prohibited it.
The ruling will give the states the option to capitalize on sports betting, which was so far limited to Las Vegas.
Churchill Downs said it has also signed a deal with the Golden Nugget Atlantic City resort and would start accepting legal wagers for online gaming and sports betting in New Jersey in the first quarter of 2019.
"With partnerships with SBTech and Golden Nugget, the company grants itself positioning among the first operators of many to attempt to enter a nascent sports betting market," Jefferies analyst David Katz said.
On Wednesday, gaming company Paddy Power Betfair, said it is considering merging its U.S. business with fantasy sports company FanDuel to focus on the sports betting market in the country.
Analysts say regional gaming companies such as Boyd Gaming Corp and Penn National Gaming Inc stand to benefit, as capital investment to setup the hardware is very low and tax on sports betting in states such as New Jersey is reasonable.
According to certain estimates, the U.S. sports betting market could rack up $1.8 billion (1.3 billion pounds) at the low end and move as high as $9 billion of gross gaming revenue, depending on how many states allow wagering.
Churchill Downs Chief Executive Officer Bill Carstanjen said the company's sports betting venture will benefit from its experience of operating the largest legal online horse racing wagering business in the United States.
In Pennsylvania, Churchill Downs is set to buy Presque Isle Downs & Casino from Eldorado Resorts Inc, while in Mississippi, it already has two brick-and-mortar casinos that will offer sports betting products.
Shares of Churchill Downs, which closed up about 5 percent on Monday after the court ruling, rose as much as 2.4 percent to hit a fresh record at $304.84 in morning trading.
(Reporting by Arunima Banerjee and Ankit Ajmera in Bengaluru; Editing by Arun Koyyur)
