Earlier this year, Paddy Power Betfair, the U.K.-based gambling giant, launched its exchange wagering platform in New Jersey in partnership with Monmouth Park, making New Jersey the first state to offer the fast-paced form of wagering popular in other countries. Kip Levin, a relative newcomer to racing who was named CEO of Betfair US and TVG in May 2014, spoke about the launch at last month's Jockey Club Round Table in Saratoga Springs, N.Y.
Levin, who came to TVG after 12 years with Live Nation and Ticketmaster, provided further details on some of the early trends of exchange wagering in the following Q&A with the Paulick Report.
So you launched exchange wagering in New Jersey in May and it appears that it's not off to the strongest start with a little over $2 million in matched volume over the first 12 weeks?
Kip Levin: We are encouraged with the launch. We knew there would be challenges and that there would be a learning curve for U.S. bettors. There are some very positive early indicators – the average age of our new exchange customer is 20 years younger than our average 4NJBets customer, 41 and 61, respectively. And 80 percent of the money wagered so far has come from new customers that were not previously wagering on the 4NJBets ADW product. Forty-five percent of current customers are transacting with mobile devices. While the exchange in New Jersey is in its infancy, it is doing what it is supposed to do – giving people who are not playing in the current system a contemporary, fast-paced way to interact with and enjoy our game
How many tracks are being offered on the New Jersey exchange? Right now you're not offering NYRA or any of the Stronach Group or Churchill Downs' signals. Is the lack of premium content an impediment to generating customers and handle?
First, it is important to note that New Jersey is not its own exchange of only New Jersey residents. Our New Jersey customers are wagering into our European exchange to ensure a better consumer experience – more choices and more liquidity.
We are now offering 21 North American tracks to New Jersey exchange customers and we are adding additional tracks from the UK. We're also in discussion with a number of major U.S. tracks about bringing their content to New Jersey customers.
In some cases, it's just a matter of clearing up some misconceptions about exchange wagering and helping people understand its potential for delivering new revenue. We have early adopters and others taking a wait-and-see approach. We have confirmed with Breeders' Cup the plan for its races to be offered on the exchange this year as they have been in the past. We want to offer additional track content, we are in active discussions and we need to keep making our case to our track partners.
What's the hold-up? Some of these tracks are offered already on your UK exchange. Are there integrity concerns?
We've heard a little of that, which is one of the reasons I went out of my way to address it at the Round Table. We believe exchange wagering enhances integrity and will be good for U.S. racing. Unlike the current tote system, where anyone can walk up to a window and anonymously place a bet or a series of bets, providing little transparency about who is behind the wagering, the exchange offers a complete, transparent audit trail for regulators and investigators. And wagering activity can be monitored by regulators with support from our own integrity team on a real-time basis to detect suspicious activity.
While we report any irregular betting patterns to the proper authorities, it is then up to them to decide what to do with that information and whether or not it represents a potential infraction of the rules and regulatory standards for their jurisdiction.
There are some urban legends out there about exchange wagering, too. You cannot bet a horse to be on the lead at the half-mile pole. You cannot bet a horse to finish last. Our exchange platform is win, place and show markets only – for and against.
Some have suggested that being able to wager against a horse to finish in the money somehow increases the chances of someone trying to manipulate the results of a race. In fact, it is no different than someone boxing several horses in a trifecta and leaving others out. That bettor is, in effect, betting against the horses that are not in his trifecta box. It also does not alter the rules of racing in any way. Riders must still persevere and give their best effort to place.
What about the business deal for tracks and horsemen? Some have suggested that it's not as lucrative as traditional simulcasting.
As mentioned earlier, 80% of the volume traded so from from NJ players is from people who were not active ADW customers. Because of its nature as a fast-paced trading platform, exchange is proven to attract customers who are not already playing in the traditional tote. The business deal works the same as simulcasting under the Interstate Horseracing Act – we offer a revenue share with the tracks and horsemen out of the 12% commission we charge from wagering, ensuring that tracks and horsemen share in the revenue stream.
It's important to remember that commissions on the exchange are calculated based on each player's net winnings, rather than the traditional model of takeout on total handle. As a result, customers on the exchange tend to stay and play longer than those in the traditional tote, generating larger revenue. In our experience, a $100 deposit in an ADW account produces about $310 in handle and that same $100 deposit in an exchange account produces over $1,000 in wagering. This also encourages greater levels of engagement – people paying attention to the races more, which is good for everyone.
Del Mar officials have said they'd like to be on the exchange and they've expressed support in the past for exchange wagering in California, which has a law specifically authorizing exchange wagering. Any progress in California?
Our home is California and we promote California racing on TVG as much as we possibly can. We believe exchange wagering is a massive, untapped economic opportunity for California racing. It's a matter of getting all the stakeholders to agree on the program. We're in discussions with all the parties and we are hopeful that the results in New Jersey will help answer any questions and eliminate any reservations that the California racing community has about this.
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