Posts Tagged ‘pari-mutuel wagering’

By Ray Paulick
Equibase has been a financial success in the 19 years since it was created by the Jockey Club and member tracks of the Thoroughbred Racing Associations of North America. As a reader pointed out in a comment to yesterday’s Paulick Report article on Thoroughbred racing’s official database, Equibase paid out $3.6 million in dividends at the end of 2008 (that’s $2.4 million for the TRA tracks and $1.2 million for the Jockey Club). An earlier press release said Equibase had paid out $24.6 million in dividends since 1998.

For June 2009

 

June 2009 vs. June 2008

 

 

YTD 2009 vs. YTD 2008

 

 

By Ray Paulick
For the second time in five days, wagering on a horse race at an American racetrack was allowed to continue until after the contest had been run. The latest incident, which involved Wednesday night’s second race at Penn National in Pennsylvania, came on the heels of a tote system failure at Hollywood Park on Saturday.

The Penn National tote failure was similar to the Hollywood Park problem in that a stop-betting signal was not communicated when the race began. United Tote, which has the contract at the Penn National Gaming racetracks, experienced a system-wide failure, allowing on-track and simulcast wagers to continue during and after  the running of the race. The Hollywood Park stop-betting signal from Scientific Games Racing tote equipment was not received by 33 simulcast sites.

John Pricci first wrote about the Penn National problem at Horse Race Insider.

United Tote personnel informed track officials about a communications router failure just as the second race was beginning, Chris McErlean, vice president of racing for Penn National, told the Paulick Report. “The stop betting command which is initiated here did not go out on track or anywhere in the network,” McErlean said. “The pools remained open and were opened well past the finish of the race.”

It was apparent wagers were made after the start of the race, but because United Tote cannot see details on every wager made, track officials were unable to segregate the late bets from those made before the race began, McErlean added. “We discussed with them the various scenarios and the best thing we could do was call the race a no-contest,” he said. “We took the position that the pools had been compromised, and based on the information we had at the time we took the most conservative path and made what we thought was the right decision.”

In Hollywood Park’s past-posting incident on Saturday, all  wagers from the 33 sites where the stop-betting signal was not received were thrown out of the pari-mutuel pools and the money refunded to bettors who retained their tickets.

A total of $164,000 was wagered on the race, which McErlean said may have been a little higher than normal but not exceedingly so. All wagers were refunded, though horseplayers were kept in the dark for some time as to why the race was not declared official. Those who had losing bets may have discarded their tickets before the  race was declared "no contest."

McErlean admitted that the decision was not communicated as well as it should have been across the wagering network. “I will say in terms of communication there was confusion,” he said. “The race was never made official. From a display point of view, the television monitors may have displayed official without tote prices. That was obviously not.”

The Pennsylania Horse Racing Commission and Thoroughbred Racing Protective Bureau were notified of the problems, McErlean said.

To his knowledge, this was the first time since McErlean joined Penn National Gaming in December 2006 that any of the company’s six tracks have experienced this type of problem. “It appears to be either networking or equipment failure involving a communications router ,” McErlean said. “The issue that has to be discussed and talked about is where is the potential safety valve if one system fails or one part fails. What is the backup or Plan B?”

Good question, and one racing regulators must demand from the tote companies that are jeopardizing the integrity of the wagering systems that are the foundation of this game. 

Be sure to vote in today’s Daily Paulick Poll asking whether you have confidence in the security of the U.S. pari-mutuel wagering systems.

Copyright © 2009, The Paulick Report

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By Ray Paulick
Betting windows at 33 simulcast sites remained open on Saturday’s Los Angeles Handicap at Hollywood Park until after the Grade 3 stakes race had been run because they did not receive a stop betting signal from the Scientific Games tote system that contracts with California racetracks to handle pari-mutuel wagering.

According to Eual Wyatt Jr., the Inglewood, Calif., track’s general manager, all of the money wagered at those sites – properly or improperly—was “thrown out of the pools” and refunded. Wyatt did not know the amount. He said the 33 simulcast sites all went through a single betting hub. (Click here to view the sites affected and the amount wagered at those sites.) 

The incident is under investigation by the California Horse Racing Board.

The past-post wagering was first reported by Mike Maloney, a Lexington, Ky.-based professional horseplayer and industry watchdog on betting issues, in an article posted on the Horseplayers Association of North America web site. Maloney, a frequent speaker at industry gatherings on the issue of integrity of totalizator systems, was recently named vice president of HANA.

Terry McWilliams, a West Coast representative for Scientific Games Racing (formerly Autotote), would not comment on Saturday’s betting irregularities, saying, “I am not authorized to speak on behalf of the company. “ McWilliams referred the Paulick Report to a corporate spokesperson who did not immediately return a phone call. Scientific Games Racing president Brooks Pierce also could not be reached for comment.

Here is one explanation of the incident provided to Hollywood Park officials by George Brannen, Western Regional Director of Scientific Games Racing, in an email provided by the California Horse Racing Board to the Paulick Report. “At stop betting of race 9 for Hollywood Park we were not receiving pools from a group of 33 imports,” Brennan wrote. “All of these import processes were running on the Slave system. We had 7 other systems in the room wagering on Hollywood and of those 4 were on the Slave system and did not get the stop betting message from the California tote. The other 3 systems imports that were on the Master system did get the stop betting and shipped pools final on time. Because of this we were pretty sure that a stop betting message was not sent to any of the 33 imports and made the decision to clear and close those 33 sites. We then stopped the Slave system, promoted the Clone to become Slave, restarted all the Golden Gate imports that were also hung on the old Slave so that Golden Gate would not be delayed. A more detailed report will follow.”

“This is my first recollection of this (type of wagering irregularity),” Wyatt said. “The good thing is whatever mechanical error occurred, it was discovered and those bets didn’t count.”

At least that’s what Scientific Games apparently is telling Hollywood Park officials. This isn’t the first irregularity in California regarding the tote company, which in 2008 agreed to a settlement with the California Horse Racing Board over software errors related to “quick pick” wagers. Scientific Games knew of the software flaws for months, yet failed to notify the tracks or CHRB. It wasn’t until a horseplayer discovered the flaws while making “quick pick” superfecta wagers on the 2008 Kentucky Derby that the software problem was made public.

Other Scientific Games tote problems have been reported in other states, including a Philadelphia Park past posting incident last June 28 when wagering sites in Florida did not receive a stop-betting signal from a Scientific Games hub. Maloney reported a past-posting incident on a race originating at Fair Grounds in New Orleans, which also used Scientific Games. The most infamous Scientific Games/Autotote incident, however, involved the 2002 Breeders’ Cup Pick Six scandal when company employees hacked into the system to make Pick Six wagers long after the betting cutoff and took home the entire pool.

Kirk Breed, executive director of the California Horse Racing Board, has ordered an investigation by his agency into the latest Scientific Games mistake. “I have read Scientific Games’ explanation and did not understand what it said,” said Breed. “It is their fault. They basically said it’s a malfunction, and I accept that as their malfunction, so they are taking responsibility. They’re the ones that are going to be charged with responding to whoever lost money or was left out.”

Is Breed satisfied that the past-post wagers on the Los Angeles Handicap were excluded from the pools? “I don’t know. I’m not satisfied with anything at this stage,” he said. “All I have is an explanation from Scientific Games sent to Eual at Hollywood Park and which he sent it to me immediately. He and I talked yesterday. Frankly, I do not understand what they are talking about.

“It’s like the quick-pick," Breed added. “It had been going on for nine months and they didn’t do anything about it and didn’t tell us about it. This is why we are trying to get some real-time monitoring in this state so we can have an independent source looking at our wagering, rather than depending on Scientific Games.”

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By Ray Paulick
There was a table-pounding moment Tuesday afternoon at the annual convention of the Association of Racing Commissioners International when Ed Martin, president of the group seen widely as a do-nothing organization, admonished its members to do something.

I felt, for the first time in over 20 years of reporting on the RCI, that it actually might have a pulse. I flashed back to the cherubic Tony Chamblin, whose primary job as longtime head of the RCI was trying to keep his own job. When he could no longer win that battle, he left behind a legacy of a civil war among regulators, one that resulted in two national organizations, RCI and the splinter group North American Pari-Mutuel Regulators Association. Racing industry veteran Lonny Powell replaced Chamblin in 2001, and in his tenure helped put Humpty Dumpty back together. Martin finished the job in 2005, when he succeeded Powell as president of RCI, and the merger of the two organizations was completed in 2006.

So, a cynic might say, we once again have just one useless national organization of regulators with no real authority, instead of two.

Martin is hoping to change that image of the RCI, but it was clear in his rising voice and pointed words that his frustrations are growing. Betting scandals and pari-mutuel pool tampering continues, Martin said, but regulators do nothing. The industry spends $35 million on drug testing to little avail, he said, but virtually nothing on wagering security, the economic foundation of the business. Regulators  at the RCI convention hear proposals for how wagering security can be improved and then go home and do nothing. Tracks, he said, say they want to do their own thing but end up doing nothing.

Professional horseplayer Mike Maloney outlined ongoing problems with past-post betting and pool tampering and said regulators exacerbate the problems and suspicions about the integrity of wagering by shielding the incidents from the public. There must be transparency before you can insure integrity, Maloney said.

I had the opportunity to address the regulators at the RCI convention and tried to impress upon them that horseplayers are fed up like I’ve never seen before. I asked readers of the Paulick Report to tell me what they think should be the top priorities of state racing commissioners, and owners, breeders, trainers and horseplayers responded with legitimate and well-reasoned concerns. Foremost among them were calls for tougher enforcement of medication violations and uniform rules from one state to another, something that might not have been important 25 years ago when racing was a localized sport. Today, with interstate simulcasting accounting for nearly 90% of pari-mutuel handle, it is imperative that the rules are the same across the board: on medication, drug testing, penalties, wagering, and licensing.

There is cheating going on, and people in this industry know it, whether it’s medication violations by trainers and veterinarians who know how to game the system (and only get a slap on the wrist when they’re caught) or gamblers using off-shore account-wagering businesses that are not adequately regulated.

Your comments (all of which are being made available to RCI members) helped me convey to regulators how critically important it is for them to take serious action. If they don’t, I suggested, the federal government will.

That point was driven home earlier in the day by Keeneland president and CEO Nick Nicholson, who is also chairman of the American Horse Council and as a former U.S. Senate aide knows how Washington can work. “This particular Congress is not concerned where the problem is but they are determined that they will be part of the solution,” Nicholson said. “This Congress is going to be activist.”

Nicholson brought the Council of State Governments into play last year in hopes of creating an alternative to federal intervention, using interstate compacts, something that is common to other industries. RCI’s president, Ed Martin, also sees interstate compacts as a realistic solution to the challenge of having 38 state regulatory boards walking in lock-step with one another. But it’s going to be up to the individual state racing commissions to make a compact work.

John Mountjoy, director of policy and research for the Council of State Governments, explained to RCI members how interstate compacts work and outlined their various benefits. Among other things, Mountjoy said, interstate compacts offer a federal solution “without Washington.” Uniform rules, operations and training can be achieved through an interstate compact, he said, while allowing flexibility and state sovereignty.

Interstate compacts can’t happen overnight, he added, indicating it could take several years to have one fully operational.

This much we know. There is a crisis of confidence in this industry among the biggest stakeholders–the horseplayers who fund the economic engine with billions of dollars of bets each year. But those stakeholders wagered fewer dollars on U.S. racing in 2008 than in any year since 1998, and this year’s handle promises to be even lower.

Racing commissioners from different states have shown over time they are incapable of taking the necessary steps to address the fundamental problems. There may be a pulse at the RCI that I didn’t sense 10 years ago, and there are good people involved at RCI and many state racing commissions. However, I’m afraid that when most of the commissioners and their paid staff return home from the RCI 2009 convention, it will be business as usual and nothing significantly will change.

That will open the door to Congress and let the federal government come up with its own solution.

Copyright © 2009, The Paulick Report

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By Ray Paulick
Is anyone really surprised to see Churchill Downs Inc. involved in yet another dispute with horsemen’s organizations over contractual terms for account wagering or advance deposit wagering? The incident in California involving TrackNet Media, the company CDI owns in partnership with Magna Entertainment, is the latest in a series of contractual and legal disputes between the Louisville, Ky.-based company and horsemen’s organizations in several states. 

The common thread in all of the disagreements is an effort by Churchill Downs to squeeze as high a percentage as possible for its TwinSpires ADW platform. In so doing, purses and state breeding programs, and in some cases racetracks, will get a smaller slice from account wagering dollars.

The formation with Magna of TrackNet Media in 2007, along with the subsequent launch of TwinSpires and the purchase of the AmericaTAB account wagering company, Bloodstock Research Information Services and an interest in the Horse Racing TV cable network, has made Churchill Downs a major player in the ADW world. The company can offer content (through its racetracks), wagering services (TwinSpires, which absorbed many of the AmericaTAB customers), television distribution (HRTV) and past performance information used by horseplayers (Bloodstock Research). 

CDI is also rumored to be the leading candidate to buy TVG, the largest ADW company in terms of customers and pari-mutuel handle, and with much greater distribution on cable and satellite television than HRTV. TVG is believed to be getting a larger share of account wagering revenue than any of the other ADW companies, at least in California, in part because of their investment in programming and distribution. If CDI ends up owning TVG and keeping its customers, it will be the leading ADW company in the U.S. It also may put an end to a lawsuit filed by TVG’s owners against HRTV for alleged infringement of company patents.

TrackNet Media negotiates ADW contracts with racetracks, including those owned by Churchill or Magna, which is what happened in the current California dispute. In essence, then, a company owned by Churchill and Magna may be negotiating on behalf of ADW companies owned by Churchill and Magna with racetracks owned by Churchill and Magna – an interesting scenario, to say the least. In some cases, as in California, those negotiations do not include representatives of horse owners.

Many industry participants who have been following CDI’s activities over the last 18 months are convinced the company is intent on moving wagers made on track or at simulcast facilities – including those owned by Churchill Downs – to its TwinSpires ADW platform. The reason? Churchill is positioning itself to make more from each dollar wagered through TwinSpires than it does from a dollar wagered on-track or at one of its off-track betting facilities.

The company has refused to negotiate with the Thoroughbred Horsemen’s Group, a company formed in November 2007 to act as an agent on behalf of its members (local horsemen’s organizations throughout the United States) on ADW contracts. In fact, last year, when horsemen in Kentucky and Florida exercised their rights under the Interstate Horseracing Act to cut off signals for simulcasting or account wagering, CDI sued several local horsemen’s organizations and the Thoroughbred Horsemen’s Group, alleging anti-trust violations.

Some parties were dropped from the suits when CDI and local horsemen’s organizations reached contractual agreements on ADW revenue splits (in some cases, very short-term agreements). But at least one of the defendants, the Kentucky Horsemen’s Benevolent and Protective Association, which countersued CDI, opted not to have the legal action dropped after CDI and the horsemen reached an agreement on account wagering for the 2009 Churchill Downs spring meeting.

It’s an interesting case. In its counterclaim, the Kentucky HBPA pointed out a clause in the purse contract between Churchill and Kentucky horsemen that dealt specifically with possible future ownership of an account wagering company by CDI. The contract, said to be written by the Kentucky HBPA’s longtime counsel, the late Don Sturgill, with Sturgill, Turner, Barker & Maloney, was executed before CDI got into the account wagering business and is effective through the end of 2009.

The counterclaim (click here for a copy) against CDI reads: “Section 4E of the contract clarifies that wagers made on races through an ADW owned by CDI, i.e. TwinSpires, are to be treated as if made physically at Churchill Downs racetrack for purposes of determining the percentage of monies to be paid into the Horsemen’s Account for horsemen’s purses. Section 4E specifically states:

“Telephone Account or Other Electronic Media Wagering: For purposes of determining the amount of purses to be paid under this Paragraph 4, a telephone account wager or other wager made through an electronic media wagering system, the majority of which is owned by Churchill, shall be deemed to have been made at the racetrack or Trackside (Churchill’s OTB facility), as the case may be, and Churchill revenues received therefrom shall be allocated and paid to Horsemen as purses in the manner decribed in the appropriate subparagraph of this Paragraph 4. Fifty percent (50%) of any source market or other similar fees received by Churchill from telephone account wagering systems as a result of wagers made in Kentucky on races simulcast from within or outside of Kentucky shall be allocated and paid to the Horsemen as purses. For purposes of this Agreement, the term “source market” or “other fees” shall mean: any and all fees paid to Churchill and/or its horsemen by Television Games Network or any other account wagering entities not owned by Churchill for the right to accept wagers from account holders located in the state of Kentucky.”

The HBPA claims that Churchill Downs has not paid horsemen in accordance with that clause in its purse contract, and estimates a $3 million shortfall in purses.

Judge John Heyburn II of the U.S. District Court for the Western District of Kentucky at Louisville has ordered a Feb. 19 conference to discuss and argue the pending motions in the case. Judge Henburn also wrote a draft (which can be seen by clicking here) containing “a statement of the relevant facts and Plaintiff’s (Churchill Downs) legal theory as well as discussion of the standing, statutory immunity and contract issues.”

The HBPA must feel as though they are on solid ground with their counterclaim against CDI. Otherwise, why wouldn’t they have agreed with CDI to have the legal action dropped?

Account wagering has brought about many changes in the pari-mutuel industry. It’s clear that what is decided now on the division of revenue, either in the courts or among horsemen, tracks and ADW companies, will have a major bearing on the future economics for horse owners, tracks and the wagering companies, as well as on the horseplayers who fuel the game.

Let’s hope these issues are resolved while we still have people interested in betting on our sport.

The Paulick Report is interested in what you think about this issue. Write a publilc comment in the section below, and take the Daily Paulick Poll (located on the left-hand column of the home page) about whether you think it’s in the best interests of horsemen and fans for Churchill Downs Inc. to purchase TVG.

Copyright © 2009, The Paulick Report

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