Pricci: If not betting exchanges, how about fixed-odds wagering?

by | 12.22.2011 | 11:52am

Horse Race Insider John Pricci writes that if recent betting scandals in Britain sour U.S. racing jurisdictions on the idea of betting exchanges, then perhaps the U.S. industry should at least consider offering fixed-odds bets to shake things up:

“Fixed-odds wagering could stand alone, but given that the industry and many of its fans are resistant to change, it probably should be used to complement the existing pari-mutuel model. Both options can be made available at racetracks, bet shops and online.”

“By creating a fixed-odds market, overall handle could grow because of the arbitraging possibilities fixed-odds betting affords. It also is a way to eliminate last-minute odds fluctuations since the price you take at the time you bet doesn't change.”

“Fixed-odds wagering should be explored as an alternative to exchange betting if the latter isn't embraced, for whatever reason. It's time for the industry to take a chance.”

Your thoughts?

  • David

    Implied here is that a fixed odds platform would run parallel to the conventional pari-mutuel pool.  Forgive my naiveté in advance, but explain exactly how a square fixed odds peg fits in a round pari-mutuel hole (aka, allowance)?  CD could argue (I guess) their “future” Kentucky Oaks and Derby pools are an example but for real-time race day execution, how is this market going to be made without some creative legal type saying it’s a duck?

  • Stuart Morris

    This is a great idea and can work seamlessly. The odds will change but the odds on your horse at the time of your wager are the ones that you get paid on. How many times have been frustrated watching the odds get cut in half or worse during the last two minutes of wagering on a race. Only to watch your 6-1 winner at the time you bet pay only 5-2. Great opportunity for those who handicap early and pay attention to opening line odds.

  • Tinky

    So, John, how, pray tell, do you expect such a market to work? Would racetracks and ADWs become bookmakers? If not, then good luck making it work.

    How would the odds be set? What would the limits be on wagers? Etc.

    Even in the remote chance that it could work, it would only create a fraction of the handle that a well-run exchange would create.

  • David

    Yes, I understand the objective of fixed odds play but in order for you to get your 6 to 1 there’s got to be a prorated like amount against; otherwise you’d essentially be operating under a bookmaking model.  Noted one individual (on the RI site) suggested such a system is in operation down under (Australian TAB); if that’s the case and even if it required enactments it would certainly warrant the energy.

  • Tinky

    David –

    The TAb operation is a BOOKMAKING operation. Unless the American tracks wish to become bookmakers, there would be no way to generate robust pools with fixed odds.

    Exchange wagering is the only way to radically and quickly increase wagering in the U.S.

  • Byron Rogers

    It works in a perfectly complementary fashion in Australia. If you go onto the ADW (Tabcorp) site they have the pari-mutuel and fixed odds betting side by side. It is a no brainer if set up correctly.

  • donnyess

    Sure, IBM’s Watson makes the odds, wanna play?

  • David

    Tinky, yes, quite aware and last I visited reality no racing organization is the US is empowered to conduct anything but pari-mutuel wagering through an authorized (and auditable) totalistic system.  I’d love to see fixed odds wagering or any productive innovation that racing wouldn’t have to go to state house hat (and wallet) in hand but think it’s (literally) going to take an act of congress to get what Mr. Pricci is suggesting done.  Alas that too might be possible if New Jersey is correct in its forward thinking.   In any event, I echo the basic question of “just how does one do that?”  Paulick’s new system needed more time in beta, don’t you think?

  • Tinky

    From the TAb site:

    “TAB Fixed Odds betting is offered on racing through TAB Sportsbet. TAB Sportsbet is a bookmaker…”

  • Tinky

    “Paulick’s new system needed more time in beta, don’t you think?”

    Yes, agreed.

    And while it is (too) easy to be cynical about American racing, we certainly are witnessing an interesting period…

  • Andy

    Mr Pricci, please think before you write. Fixed odds betting has to have a match. If you are implying someone out there will lay this action then you best read the Federal Wire Act to start. BTW, exchange wagering is fixed odds betting……….or haven’t you given this any thought either.

  • Sandra Warren

    This is a TERRIBLE idea.  If the odds are fixed, it will matter to the house who wins.  The whole reason why state governments approved of horse racing as their only form of legalized gambling for so long was because in pari-mutuel betting, the house doesn’t care who wins so few people try to manipulate the result.  There will nothing but mob shenanigans if they do this.  Horse racing has become less and less popular through the era of exotic betting.  People dump their dough on a high-risk bet and get no return.  I always urge my non-racing friends to bet to win only.

  • Third Party

    Well how about this concept?  Pari-mutuel wagering on new things other than horses.  Uses totalizators, completely auditable and doesn’t even touch the existing race wagering so that the risk of cannabalization is minimized.  Also the takeout on the new wagering options can have similar takeouts so in effect you are truly increasing the pari-mutuel pie.

  • David

    Perhaps barrel racing, horseshoes, corn holing, etc.?

  • Third Party

    Ah, no.  Thinking more like fantasy sports.  WPS and exotics on performance stats of professional sports.  30M play fantasy sports in the US and they’re the right type of player that has the potential to be of value as a horseplayer – younger…cerebral…affluent.

  • David

    What’s around the corner is harnessing the world of cyber betting, which has implications far beyond racing.  About the only thing certain is government will get a cut of the action.  Racing has enjoyed a competitive advantage via interstate, on-line allowances but failed miserably to capitalize.   How does racing fare when products like lotteries, table games, sports and poker get a similar green light?   Racing’s portion of the total gaming pie will shrink further.  Sad.

  • voiceofreason

    Are you suggesting change for this industry?
    hahahah! So cute!

  • Stixnstones42

    The whole point of handicapping is to determine whether a horse should be backed at a certain price.  If, as often happens now, the horse is 8-5 just before post-time but drops
    to 4-5 entering the clubhouse turn, the entire logic of racing is destroyed. Th parimutuel system should mimic the bookmakers it replaced and give the bettor thw odds prevailing at the time of his bet.

  • David

    That’s the point of one type of betting, not necessarily the pari-mutuel version.  I’m told you can bet as you suggest but not through licensed racing organizations in this country.   Once Vegas was in the bookmaking business on horse racing results; they beat their chests and said, “bring it on and we’ll pay track odds” but even then players were at the mercy of what happened within respective pari-mutuel pools.  I’d say if you want fixed odds betting try Australia, UK or selected other countries ‘cause you’re not going to see it legalized here for quite some time.

  • Third Party

    You are correct.  If trends continue, racing continues its decline.  Conventional wisdom leans on slots and now exchange wagering to keep revenues to the sport sustainable.  As discussed in earlier article posts, I don’t think that exchange wagering at its current takeout will actually increase revenues to the sport.  With regard to slots, they can provide additional revenues.  What slots and exchange wagering don’t appear to make a case for is the potential to generate new horseplayers.  They may claim such, but I don’t see a plausible argument.

    People wager on “something.”  That something may be horses, dice, cards, sports, literally anything.  It’s the “something” that is of interest to the person and drives the wagering interest, not the method of wagering.  I don’t think in the typical case someone bets on a football game for example, just because a particular betting method exists.  So, I don’t think exchange wagering will generate new horseplayers.  If you don’t know the horses, you’re not going to wager, regardless of method.  It’s actually similar to the people that don’t buy individual stocks, because they don’t understand them and stick to savings accounts, insurance policies or real estate.  You invest in what you know.

    What I am suggesting here is try something that doesn’t reslice the current racing pari-mutuel pie and claim that by slicing in a new way, you actually get more pie.  And you also keep to the pari-mutuel method as that is going to be the dominant racing wagering method for the foreseeable future.  To get new horseplayers, you need to move the right non-horseplayer demographic to do two things, expose them to the sport and teach them the wagering method. 

    Slots get people to the facility and expose them minimally to the sport, but they’re the not the right demographic and you don’t teach them pari-mutuel.  Exchange wagering isn’t pari-mutuel.  Although exchange wagering can point to implementations in other countries, the reality is that racing in those countries is more popular than in the US.  In the UK, racing may be second in popularity to soccer (ahem, football to some).  In the US, no one credibly claims racing is more popular than the NFL, MLB, NBA, NHL, NASCAR or even college sports.  Lots of people like those things and even bet on them.  These are the people you want as new horseplayers.

    In my earlier comment, I mentioned that there are about 30M Americans that play fantasy sports.  Craft a pari-mutuel game that allows them to come to the tracks and OTBs (keep brick and mortar for now).  They are interested in those sports.  Give them a pari-mutuel method to wager on their fantasy sports and teach them pari-mutuel.  These folks are younger, typically college-educated, and have incomes higher than the national average. 

    Now you have this right demographic on your properties wagering and generating F&B revenue, which racing’s 4,305,386 entities wanting part of this pari-mutuel pie receiving new revenue without reslicing the racing pari-mutuel pie.  It is then up to racing to teach that captive audience how to translate their fantasy sports handicapping to handicapping horses.  Then, if exchange wagering is in existence, they can even choose the method of horse wagering.  There is research that approximately 20% of fantasy sports players have made a horse racing wager, so if accurate, that is a higher percentage than the crossover between slots players making racing bets.

    My 3 cents, (sorry for the verbosity).

  • John Gilmore

    Betfair is a fixed odds operation so what’s different. Clearly this guy who wrote the suggestion should take a  look around the world, where Betfair and  Bookmakers flourish. They all have one thing in common, horseracings finance is the loser as these parasites only pay a miserable 1-1.5%  of turnover  back to fund the sport..
    Why do you think Betfair is keen to get his greasy hands on  the American  racing market, it’s not for the love of the sport but to exploit it. Then eventually take bets on all other sports and destroy racing.
    Now betfair is saying it’s willing to pay back 6.66% from winning bets to Racing  in California if given the go ahead in May 2012.
     How curious when it only pays 1% in Britain. The Betfair  U.S. Director  who is English,   said at the recent Arizona conference;  that the amount paid to Racing  in both countries worked out ar  about the same. Clearly Mathematics  isn’t his strong point.

  • David

    Third party, you’re preaching to the choir, I couldn’t agree more.  For as long as I’ve been around this game we’ve force-fed the current pari-mutuel model and seldom investigated and evaluated new pyridines.  The closest thing is surrounds exotic wagering, which while favored by the public, has the unintended consequence of reducing the number of winners and churn.  This business will always be somewhat constrained in terms of developing new products as regulators will continue to feel the need to “protect the public”.  That said if Exchange Betting doesn’t work unless it has sufficient liquidity or a fixed odds version won’t fit into pari-mutuel models, then try something else.  On Breeders’ Cup day last November, one saw the best of the best run at a magnificent facility with many more enjoying national cable coverage.  Unfortunately, most everyone got their brains beat out at the windows.  To the extent it’s legally and practically possible racing needs to reduce the degree of difficulty; unless and until it does, the worst thing you can do is introduce new customers to this game.

  • Michael

    Many countries can already use exchange wagering. The U.S. government forbids U.S. citizens from using sites such as Betfair in the U.K. But they also forbid real money poker betting at Pokerstars (for example). This is not in the interests of horse racing. Government-protected monopolies, that outlaw free-enterprise, usually kill their hosts like unregulated parasites. The horse racing industry is becoming a victim of greedy monopolists. We need more freedom and less restriction of trade!

  • Michael

    Just another idea of how to avoid last minute odds changes with the pari-mutual system: Close down the betting every five minutes and you get the odds at that time. Instead of one “post time” you have a betting “post time” every five minutes. Hmmmmmmmmm.

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