by | 11.17.2010 | 12:46am
By Ray Paulick

Are betting exchanges a possible solution to the problems facing the U.S. Thoroughbred industry, which in 2008 saw its annual pari-mutuel handle fall for the fourth time in six years, dropping over 7% to a 10-year low? The Thoroughbred Owners of California thinks they may be, having recently signed a letter of agreement with betting exchange giant Betfair to have the UK-based company promote California racing abroad while TOC helps BetFair obtain statutory and regulatory approval to operate a betting exchange in California.

Betfair, which has been trying for several years to gain access to the U.S. market, is also believed to be a leading candidate to buy TVG, whose parent company, Macrovision, announced its intention to sell TVG last year. Though there are no confirmed suitors, others rumored to be potential buyers of the racing network and Advance Deposit Wagering platform include Churchill Downs Inc.; Marc Nathanson, a cable TV industry billionaire and father of TVG president David Nathanson; and an industry consortium that could include Keeneland, the New York Racing Association, former Hollywood Park chairman R.D. Hubbard, and Los Alamitos racetrack owner Edward Allred.

Betfair, a privately held company, was founded in June of 2000, using a technologically advanced platform permitting individuals to go online and bet against one another on a wide range of events, including horse racing, sports, politics and even reality television shows. By taking commissions of 2%-5% from winning bets, the company offers extremely low takeout and has built enormous volume: it claims to have over one million customers from 140 countries, with 100,000 or more active players in a given week. (UPDATE: Betfair said in October 2008 that it signed up its two millionth customer; see comments section, below) Its wagering platform handles over five million bets per day. In 2007, Betfair had 42 million English pounds in earnings before interest, depreciation, taxes and amortization on revenue of 240 million pounds. According to its annual report (which can be seen here), Betfair has 110 million pounds cash on hand.


The problem many see with Betfair is that the company pays a small percentage for the rights to races on which it handles wagers. In England, for example, it pays a bit over 10% of gross profits on racing wagers. In some cases, however, it pays no fees at all, as is currently the case with racing from the U.S. Betfair currently accepts bets on American racing, but only from customers outside of the U.S., and it does not have rights to any video signals. Betfair is acutely aware of concerns from racing interests in the U.S. who believe betting exchanges would cannibalize pari-mutuel betting and decrease revenue to tracks and purses. It addresses some of those fears in this pamphlet, which was designed to appease the racing industry in the United Kingdom.

Another concern raised about Betfair centers on wagers it accepts that a specific horse will lose, prompting worries about race-fixing. But Betfair has cooperated in several investigations involving horse racing and sports betting, giving authorities access to detailed betting information as part of its memorandum of understanding. 

Drew Couto, the president of TOC, said the letter of agreement with BetFair was signed last month. He believes wagering will continue to suffer unless the industry distances itself from Albert Einstein's definition of insanity: doing the same thing time after time and expecting a different result.  “That really describes our industry's approach to this sport and business over the last decade,” Couto said. 

“Going forward,” he added, “we have to face two very important realities. “First, we have allowed the sport to basically disappear. It's no longer a sport, but simply a justification to gamble and wager, and as a wagering proposition we know it's not the most attractive. We have to go back and make it a sport. We have to give the sport some structure to have it make sense for the fans, make some very serious fundamental changes to focus on the sporting aspect of racing. We have left it largely to the tracks to be the stewards of the sport, and they only care about the financial side. 

“Second,” Couto said, “we have to adopt new ways our fans can participate. New wagers, betting exchanges. We have to embrace these new ways of playing as ancillary to the way we currently operate, so it's new and fresh. That includes tournament-style wagering that was approved by the RCI (Association of Racing Commissioners International) last summer. If we don't begin to do things differently and find new ways to operate, we are bound to be the definitive example of what Einstein said.”


Chris Scherf, executive vice president of the Thoroughbred Racing Associations of North America, a racetrack trade organization, for years has advocated that North American tracks consider developing their own betting exchange. He sees the trend in downward handle as a serious crisis. 

“We've got to look into pricing (the takeout charge on pari-mutuel bets), the product that's being provided and the convenience factor for wagering,” Scherf said. “We need to make the same kind of concerted effort on handle that is currently being made to improve the safety and welfare issues. Track by track, you can get swamped in a million problems, but this has to be at the top of the pile. We are losing bettors. What do we have to do to change that aspect of the business, the part that provides us revenue? Of course, the entire debacle of cutting off signals in the last year (due to contractual disagreements between tracks and horsemen over ADW splits) was extremely detrimental to any kind of sustained gambling business. 

“The problem,” Scherf said, “is we've got tracks and horsemen both saying they need more money in this economy. But the first thing we need is an engaged gambling public, and they should be at the top of the list.”

Scherf said he is “somewhere in between fear and welcoming” Betfair into the industry. “We had no master plan for how ADW would fit in and now we are trying to retrofit it, which is causing a lot of angst and problems. We need to spend more time developing a strategy (for exchange betting), though it's difficult to do that when you have a wide disparity throughout the industry in resources and markets.” 

Lonny Powell, an industry consultant based in Lexington, Ky., who previously served in executive positions with racetracks (including head of Santa Anita Park), the ADW company Youbet.com and as president of the Association of Racing Commissioners International, said BetFair has done a good job of “mainstreaming themselves” in recent years by sharing more of its profits with the racing industry in Europe. 

“It's here to stay,” Powell said of Betfair and exchange betting. “When I was in the ADW world, I wished they would just go away, but I don't feel that way anymore. We're like an ice cream store that only sells vanilla, but you can go over to Baskin Robbins and get 33 flavors. We need variety.” 

Powell, who said he is optimistic the industry will find a solution to its present challenges, believes racing interests should look at developing their own betting exchange. “If the industry could somehow take this wagering crisis a little more seriously and rather than find ways to kill something, find ways to make it work, we can grow the gambling dollar,” he said. “A Betfair type of platform can be operated by U.S. racing interests. The economic model that Betfair offers is flawed, but we all agree our current model is flawed, too. I've got to believe a Betfair type of platform would work. Our product is stale, and our wagering levels are stale.”


The reason for declines in handle go beyond a limited product line, said Mike Maloney, a professional gambler in Kentucky who has become an outspoken advocate for horseplayers at industry conferences and who served as an ad hoc member of a Kentucky Horse Racing Commission Task Force. “We are at a very significant crossroads in racing,” Maloney said, “probably the biggest one in my lifetime. The financial crisis is magnifying our problems, but the problems have to be dealt with before racing can recover. The economy may improve, but racing's problems will still be there.

“Our customer base is aging, and they've lost a lot of their faith in the integrity of racing,” he said. “As they age, they aren't being replaced. The second problem is the takeout is too high. We can't attract new players and are having a hard time holding on to existing ones. It's exacerbated because the takeout keeps going up. With competition from other gambling opportunities, you can't get away with that any more. It's roughly 5% in other forms of gambling – sports, table games, trading options – but it's 20% for us. New York just raised takeouts; trifectas are 26% now, and I just refuse to play it. Kentucky wants to raise takeout. What other business in this economic climate would consider racing prices? 

“Third,” Maloney said, “racing integrity problems are real, and they are not exaggerated. If anything, they probably are underplayed. Trainers who use drugs to cheat; unsecured wagering pools with outdated technology; unregulated participants allowed access into those pools. People are just beginning to learn about some of the problems in these areas. In the last couple of years the light is being shined on them. These are serious problems that need to be dealt with. Big players realize they can't trust the pools they are playing money into.”

Finally, Maloney said, the corporate mentality of many racetracks has hurt the game. “There is a disconnect with customers with some of these racetrack holding companies. They don't really understand their business, and there's too much short-term bottom line thinking; cutting costs, worrying about the next quarterly report, and too little thought about long-term improvement of the product.”

Maloney, who called betting exchanges a “two-edged sword” because of how they would cannibalize pari-mutuel betting, said the industry has had a wake-up call after being “rocked by betting and drug scandals and threatened” by the federal government. “This crossroad we're at, what we do from here, will determine the fate of racing.”  

(Do you have an opinion on how the industry reverses the trend in declining handle? We're interested in your comments below and in your thoughts about betting exchanges, the subject of the Daily Paulick Poll, which can be found on the left-hand column of the Paulick Report home page.)

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  • acts of desperation will not provide the leadership nor the solutions to horseracing’s problems

  • Gavemylifetoracing

    Racing fans know they are getting a raw deal, but keep on playing until the money runs out. You can’t beat a 26% takeout and insider betting among horsemen, vets and all the owners and friends that they let in on who is “live” and who in not. Your fans are not leaving voluntarily, the game is priced and regulated so that they don’t have a fighting chance. Find one serious horseplayer that doesn’t think the pools are being hacked. We play anyways, I consider it an additional takeout. Mike Maloney stood up about the pools staying open past the start, guess what, it use to happen five times a day in Kentucky. I was betting at a private self serve terminal the other day, with a witness standing beside me and a Calder two turn race went to the 1/4 pole before the pool locked out. Nothing ever gets done in racing. Same old people ignoring the same old problems.

  • GA

    Betting Exchanges are the most corruptible platforms in UK racing. It’s just not right that you (as an individual) can offer a price and accept a bet on a horse loosing – when you know the horse is going to lose.
    Betting Exchanges have resulted in Owners, Trainers and Jockeys being banned in the UK because they have defrauded bettors.
    Exchanges take their commissions of between 2%-5% from the bettor, it’s from that they pay 10% back into racing. Accept this module and you’re going to be putting less money back into racing.
    Surely, at a time when American racing is making an effort to clean itself up both on and off track the notion of accepting exchange revenue is plain stupid.
    The argument that the exchanges are good at policing themselves with regard to suspicious betting activity, is crazy. If they weren’t there, they wouldn’t need to be policed!

  • Al

    Racing needs to shape up before intelligent bettors and astute handicapers will come back. When you analyze a race and see 8 entries, 6 with trainers that have been suspended in the last couple of years, then you see several jocks with “records”, and most of the horses have been claimed back and forth like unwanted stepchildren, you just go on to find another race. Then you see the same thing, again and again until you end up making just 1 or 2 reasonably calculated wagers for the day totally eliminating what the parimutuel system relies upon; CHURN. Without profits from earlier bets being pumped back into new wagers the system doesn’t win. I remember a track owner/operator explaining to me what an easy business it is when he can get me to play the $200 I brought to the track 3 or 4 times that day if I happened to win a bit early in the card.

    My conclusion is that the lack of betting integrity, for all the reasons Mike Maloney states above, has driven guys and gals looking for an honest bet out of the game. Horsemen, venue operators, regulators and leaders of the countries multiple Alphabet Agencies, (TJC,NTRA,TOBA,ARCI,TRA,RMTC,HBPA et al.) please wake up, make the changes and lets get on with better business.

  • Betfair would provide the final nail in the coffin of U.S. racing. It thrives in a system rife with medication and corruption so that you can make big money on betting on a horse to lose. It is anathema to all that sport stands for. Please, you greedy, desperate gamblers who have no concern for the horse at the root of the sport, take your money and go somewhere else. Slots, poker, I don’t care. Leave racing alone, and it will be better off for it.


  • Ghostzapper

    Betfair has tried for years to enter the US market. For years they have been sent packing. Ray Paulick should know better than to highlight this on his blogsite. This is a fear tactic embraced by most media wanna be’s. No different then the bail out bull we read daily in the consumer media platforms. Sure the industry sucks right now. So does the housing, auto, consumer goods, lending, stock market etc. In times of crisis the media always overplays the plight. It sells. The problem is it contributes to the underlying problem by driving home the fear factor. Instead of jumping to drastic measures (Betunfair) that would be the demise of our industry, we need to rethink the way we put on the show. Direct on line wagers to the track conducting the race, a new innovative policy with the TV networks, adoption of a horse race lottery, to name a few. People, do not let the equally depressed media groups scare you into a paradigm shift that will spell doom. And that is spelled….BETunFAIR.

  • Craig

    When a racetrack like Churchill Downs finally decides to be the rebater to the big gambler instead of giving their signal away to the ADW company so that they can rebate the big gambler then racing will begin to get on the right track. These big gamblers should be provided with an incentive to attend the racetrack and bet. Build a hotel at the track, comp all of their accomodation and food, fly them in if they are going to bet a certain amount through the track account during their stay, give them an exclusive floor in the club house. Then provide them with a rebate on their bets. The track could double or tripple its revenue in a short period of time. I am sure that the horsemen, the government and the Shareholders in Churchill Downs would be prepared to give up a percentage of their take to provide the rebate to the big gamblers if the revenues were going to triple for all of these entities. We would be better off getting 12-15% take out on track than we are getting 3-6% through the ADW’s. Maybe all on track gamblers should be charged less for their bets. Have a player reward program for all on track patrons to provide them all with a rebate if they bet on track, we would also then know who our customers are and be able to target our marketing dollars correctly.
    We need to forget the current way of doing business and make significant changes to the way the racetrack interact with the bettor or we are going to continue to loose them. If we think more like our competition (the Casino’s) and use the tools that they use to attract the big gamblers then we may be able to compete beter for the gambling dollar.

  • Italian Stallion

    Honestly, you have to be an idiot to bet at the track or through any of the legal ADWs these days. There are many off shore rebate shops that are easy to fund and withdraw from, betting exchanges that don’t care if you are a US citizen etc… Why get raped and pillaged by this industry when you can wager at places that give you a fighting chance of success.

    The economics of racing are preposterous and the leadership is totally brain dead. That much is obvious.

    There is only one solution.

    1. The racing industry is not viable with such high takeouts in an era of computer poker and sports betting with much lower takes.

    2. Most racetracks must be closed because they aren’t economically viable with a lower and competitive take.

    3. If all the horse gambling money went towards a handful of remaining major racetracks (which it would), the take could be drastically lowered, purses could be raised, investments could be made, and government could still get a piece because a small piece of gigantic pie is still a lot of money. Costs do not rise much as handle increases per track.

    That’s the solution.

    This industry needs MASSIVE consolidation! Until people grow up and realize that there has to be reduction in employment, breeding, trainers, jockeys, horses and all other costs in racing, there is no chance of turning things around. Each and every day more and more people will take their gambling money overseas or switch to other forms of gambling.

  • GA, you even state that owners, jockeys and trainers have been banned thanks to their shenanigans on Betfair. I think it is great that corrupt individuals are caught. The fact is that Betfair plays ball with investigators and has done more to clean up the sport than anything I’ve seen in North America.
    When was the last time you saw an owner, trainer, or jockey in North America get banned because of gambling. And don’t tell me they don’t know when they juiced a horse or did the work, and perhaps knew that another contender wasn’t going to try today.
    Betfair puts the cheese out there by letting corrupt rats bet against their horses, but greed takes over and they usually foul up by making things obvious to investigators.

  • Italian Stallion, I disagree with point 2, because betting will increase dramatically for any track that lowers takeout as offshore money comes onshore just to give an example.
    I don’t think consolidation is necessary, just a complete reversal of mindset where racing first and foremost tries to genuinely compete with other forms of gambling.

  • GA


    The simple fact is, that since exchanges came into England, the perception of racing has fallen thanks to high profile court cases and TV investigations.

    I agree with you about people getting caught, but allowing the exchanges is a huge price to pay to catch what I would hope would be a small band of cheats. You’ve also got to remember that racing in England suffers due to poor purses so it’s a sad fact of life that some people with few morals view the exchanges as an opportunity to commit fraud.

    I think that racing needs to be tougher on penalties for cheats and make them stick. I hope you share that opinion.

  • I have been following the exchange in the news for several years. I admire a place that can grow from zero members to over 2 million in only seven years; and who considers racing their number one sport.

    The arguments against the platform have been trudged out by old time racing for years. Last year in Australia the high court made it legal for exchanges to be offered there. Old time racing went nuts with scare tactics and fear mongering. It was comical, since the arguments were used by bookmakers in the UK a few years earlier to no avail.

    After being there for a year, the head of racing in a newspaper piece in Tasmania said ‘none of the concerns about betfair doing business here have been seen’

    It is a marvelous platform that brings racing into a whole new demographic. They are currently funding racing in the millions of pounds, are promoting new races, have financed studies on all-weather and a ton more.

    Racing needs not fear what is successful in other parts of the world, they must embrace what is successful in other parts of the world.

  • Craig

    Shrinking a business significantly is considered a Depression in that industry. We don’t need to shrink the business but we do need to change the way the business operates to attract a larger customer base. I know of a very large international company that was told the market for their product was saturated at 9 units in a metro area by an expensive research firm. He told the executives to keep building units until they stopped selling. That was 129+ units later. If you change the product to satisfy the customer then there is unlimited potential in the growth of that market. That man is now a Billionaire. Right now the racing industry is not selling the right product to its current and potential customers. Much of the industry does not even know who their customers are or even what they really want.

  • PS: Ray, a little mistake when you said “1 millionth customer”. That must have been from an article earlier in 2008. In October of this year they announced their 2 millionth customer. They went from 1 million to 2 million in ten or so months. It’s tough to keep track. I had no idea they hit that number so quickly.


  • Pull the Pocket…Thanks for that note about the number of customers. My information is from the BetFair corporate Web site, which apparently has not been updated in some time.

    Ghostzapper…As for highlighting BetFair on the site, I appreciate your concern but want to say that I am reporting the news in this article that Thoroughbred Owners of California has signed a letter of agreement with the company, and getting feedback from people in the industry on BetFair’s business practices and revenue model.

    Reporting on news is not an endorsement, and ignoring BetFair won’t make them go away.

  • Picksburg Phil

    Pari-mutuels are the worst possible system for the players. You make the bet without knowing what the payoff will be. I would love to see fixed odds betting. It would get me interested in racing again. I watch and follow racing, but consider it foolish betting into pari-mutuel pools with 20% takeouts.

  • Ray,

    Like I mentioned I would have never known they hit 2 million without following the news. They have a good thing going.

    As for cannablization, in Australia this has not happened; in fact betfair did a deal with the pari-mutuel system so people (if they can not get a price on the exchange, or if they want to bet exotics) can bet directly into the pools at the Aussie takeout of 16%. Tote betting was UP in 2008. compare that to here.

    As Phil above says, this attracts a person who does not like the parimutuel model – stock trading types, fixed odds bettors who play with an odds line, players who hate a horse and want to go short, and so on.

    Here is a screen shot of a betting interface. This looks like an Etrade interface, not a racetrack. Betfair read the book “the Long Tail” by Chris Anderson before he even wrote it. This does not appeal to all bettors of course, but it does seem to appeal to about 2 million of them who will not bet the pari pools.


  • Tony C.

    Adopting Betfair typs markets in the U.S. is the biggest single positive step that could be taken right now in the U.S.

    Those who argue that Betfair is somehow a security risk because it is possible to “lay” horses have it exactly wrong. Such an account requires that the bettors identities be known, so anytime there are suspicious betting patterns, they can be directly traced to specific accounts. This allows for a much tighter form of security than the long-standing system currently in place. It has, in fact, and contrary to what some other commentators have suggested, reduced corruption in UK racing. The main reason that you have heard about corruption cases in the UK in recent years is because Betfair has helped to identify the cheaters.

    Furthermore, it is nonsense to focus on the fact that Betfair would allow bettors to bet on horses to lose. Every time a bet is made in the current system, that is the case. If someone wants to make money by betting against a favorite, all they need to do right now is to stop the horse, and bet gimmicks (which give tremendous leverage vis-a-vis win betting) without using the horse. And that can be done without anyone knowing the bettors’ identities!

    So, ironically, Betfair is actually a big step forward in terms of security. It would also create huge new markets – precisely what is needed to help wean the U.S. industry off of the slots teat. It would also bring people back to the beauty of finding value in simple betting, rather than the focus being on the lottery type gimmicks which are sure to tap out the vast majority of the participants.

  • GA

    Tony C – I think you work for Betfair!

    If there were no exchanges in the UK then there would have been no corruption cases. As the cases showed, there were networks of people used to commit the fraud using different accounts. It was only after time that their links to one another were pieced together. How many innocent bettors were scammed in this manner?

    Perhaps you could explain as to how Betfair would increase handle to make it all worthwhile for US horsemen? I’m still at a loss as to how it could be good for racing when 2-5% of every wager is taken by the exchange, in the UK they then give approx 10% of their gross profit on the 2-5% to racing. The figures simply don’t add up!

  • GA,

    We can’t fall into the trap of listening to people about what might happen who have vested interests in the status quo, we have to look at what does happen. This is what has happened since betfair has been licensed in Australia. This was in 2008, where we are getting slauhgtered.


    “Fears that the licensing of Betfair in Australia and licensing the Darwin-based corporate bookmakers to operate on Victorian racing (see previous Online-Casinos.com/InfoPowa reports) would affect the traditional wagering provided by Tabcorp have proved to be unfounded, judging by the results so far over the spring carnival.

    In fact, Tabcorp’s win and place wagering figures have been on the increase since Betfair resumed operating on Victorian races from last July. There is little doubt that, rather than affect it, Betfair had stimulated Tabcorp turnover.

    Twaits said this week that there was no doubt that the opening up of Australia’s wagering industry, particularly Internet wagering, had led to increases in turnover by all providers, including Tabcorp. The disclosures have disproved dramatic claims by traditional horse racing associations and politicians who opposed Betfair’s licensing that it would impact adversely on the industry.”

    Ironically despite this growth and increases of funding of purses, the old guard is still change.

  • Tony C.

    GA –

    There is no suggestion – or need – for Betfair to use exactly the same model here in the U.S. The reason that it will benefit bettors is because it will give them superior opportunities to actually make money. Owners and trainers will benefit because handle will increase dramatically.

  • Tony C – Sorry, owners and trainers will not benefit because Betfair gives back next to nothing to the sport. It’s 1 percent in Britain. This sort of greed should not be allowed. A bigger handle in this case benefits only one company: Betfair.

    Those screaming for lower takeouts clearly have no idea the vast sums of money required to own and run a racing yard. I’m not talking about making money, I’m talking about breaking even. If you don’t think beyond your own wallets, there will be no more sport for you “intellectual” gamblers to bet on.

  • GA

    Tony C

    So what model will Betfair use in the US?

  • GA

    Pull The Pocket

    Australia already has bookmakers and isn’t 100% pari-mutuel.

    I’m not being synical but the casino operator has always been at odds (please pardon the pun) with the pari-mutuel operators (just look at Nevada casino operators v TrackNet playing out at the moment), so therefore it might be fair to suggest that the source of your story is going to be ever so slightly biased in favor of the casinos and alternative gaming operators. It’s in their interest.

  • Hey GA,

    The source is that handles are up; both at betfair and at the tote (parimutuel). I dont care who tells me that.

    I can give you several other references from papers, including from the head of racing in Tasmania if you like. I have been following this story for quite some time on my blog. It interests me. Hell, I am an optimistic person. I’d rather follow something that works rather than the gloom and doom here.

    Our world view in racing is for the status quo. Primarily, government help, or slots funding. I am a proud horseowner and bettor and I love the business. I don’t want handouts, I want handle to go up and racing to grow in popularity. This is one way to try and get more people interested in racing.

  • You can tell a horsemen or racing exec from someone who understands gambling. Lets say Betfair gives 1% to the horsemen and track, that 1% is equal to 25% of the take. Or the equivalence of a 5% signal fee which is pretty much average in today’s environment.
    But as stated previously, I would rather see the tracks get together and open up their own version of Betfair. That way they get the whole pie minus costs to operate the system.
    One percent of 1 million matched is 10,000 for the track and horsemen to split. In a win pool that attracts 50,000 track and horsemen split 2500 in signal fees (just one way of looking at it)

    Another reason why parimutuels go up when Betfair shows up is that a lot of times people jitney bets. In other words, they may bet book a horse on Betfair at 2-1, but find his odds near post time are 3-1. So the person bets the horse at the track and has a free bet, if the horse wins.

  • Tony C.

    Gina –

    Why do you insist on commenting on aspects of racing of which you are obviously ignorant? We all get that you are a small trainer, and that your myopic focus is purses. And, for a variety of reasons, I hope that purses will increase as well. But with exceedingly rare exceptions, owners become involved in racing in order to enjoy it – not because they believe that it is likely to be a profitable venture. Furthermore, if racing is to thrive, there must be a further attrition of both tracks and trainers. As I’ve pointed out before, it is badly diluted with cheap horses, and no business can thrive when it puts its worst foot (or hoof) forward.

    Now, with regards to the specific topic at hand, no one – including Betfair – is suggesting that their takeout structure will be the same in the U.S. as it is in Britain. And even if their gross takeout is significantly higher under a U.S. model, meaning that they will in fact contribute a substantial portion to purses, the type of wagering platform that they offer will be extremely attractive to many existing, and many new customers. Then, when handles rises substantially, which it would if a Betfair market was installed, there will be even MORE money available for purses.

    Changing the distribution of a rapidly falling handle is, even setting aside all of the other problems that the U.S. industry faces, a classic example of rearranging the deck chairs on the Titanic. Yet that is what you are essentially what you propose.

    The only way to actually strengthen the industry is to improve the product, improve the marketing, and increase the handle. A Betfair type market is the biggest possible step forward in that regard. Yes, there are other issues which need to be addressed, but you are the one, ironically, who is failing to see the big picture.

    Finally, your crack about “intellectual” gamblers neatly sums up your failure to grasp of the complex issues which are at play.

  • Bench Jockey

    Could someone explain what types of bets BetFair takes on racing? Are there trifectas and pick 3 and pick 4 bets like we have? Or is it more win-place-show? If just WPS, will our players adapt, since most of the pools go into exotics?

  • I’d have no problem with proposition betting (a la BetFair) or fixed odds bookmaker style betting, as long as (a) there’s serious drug regulation, and meaningful penalties, and (b) the betting operations are regulated and return enough to the horsemen and the tracks to keep them operating. Gina Rarick is absolutely right; unless you understand that horse owners and trainers have to have at least a decent shot at breaking even, you’re not seeing the whole picture. Most trainers I know are losing money. Until this year, they could finance the losses by refinancing their houses (I’m not kidding). Most of us in the game do it because we love the horses and will do most anything to stay near trhem, but we can’t be expected to bankrupt ourselves and our families in the process.

  • Tony C.

    First, serious drug regulation and meaningful penalties should be instituted irrespective of what kind of betting options exist. As I’ve mentioned, Befair (or any similar platform) would be a net plus in the security area, so that objection is a non-starter.

    No one is suggesting that the owners and trainers’ interests shouldn’t be addressed. I fully support raising purses as much as is reasonably possible. But let’s be clear about a few things:

    – raising purses via slots is a short-term fix, and a recipe for long-term disaster.

    – racehorses have been wildly overvalued for a long time, and breeders have, in large part, been breeding to sell. As the market corrects, it gives owners much bigger bang for the buck, and a much better opportunity to do well – even if purses were to remain stagnant.

    – t’s completely ridiculous to offer fat purses for bad horses, which is exactly what state-bred programs do, with the exception of KY and (to a lesser extent) FL. State-bred runners should receive bonuses for competing in open company, and perhaps have a few stakes races written for them. They obviously should not have restricted allowance races available to them, as that both rewards mediocrity, and has the opposite effect on breeding that it is supposed to have. If you reduced state-bred purses to appropriate levels in places like NY, CA and IL, you would see an immediate and meaningful boost in all of the regular purses. The best horses should race for the most money, and the industry should stop subsidizing garbage.

  • Bench Jockey, win and show, place if the race has less than a certain amount of horses (no show in that case). It also takes football parlays, so exactors definitely wouldn’t be out of the picture, but right now it is mainly win and show.

  • Mike

    Chris Scherf, executive vice president of the Thoroughbred Racing Associations of North America said in the article, “The problem is we’ve got tracks and horsemen both saying they need more money in this economy. But the first thing we need is an engaged gambling public, and they should be at the top of the list.”

    Wow…someone in the industry that “gets it”

    Scherf is my new hero.

  • Tony C – I’ll stick to something I DO know something about: I completely agree that the U.S. breeding program has been completely disconnected with the sport for the past couple of decades. Everyone in the industry knows that breeding to sell and breeding to race are two different things, and American breeders, seduced by completely ridiculous yearling prices (thanks, Sheik Mo), have been breeding worthless animals. I also agree that the best horses should run for the best money. The claiming system you have over there is shameful and a nightmare for the wellbeing of the horse. As for consolidation, you’re probably right, but I don’t know the U.S. numbers so I can’t intelligently comment.

    But as for Betfair, I disagree completely. I realize that as a gambler it’s fantastic, but for the horse side of the business, it’s evil – just offers new ways to cheat and pays back nothing.

  • bullring

    do you guys realize that it is 2009?

  • FoolsMoney

    I agree with much of what has been logged here and with about half of the comments. I did notice that many recite takeout percentages. This is NOT the real picture. Takeout is actually between 30% and 35% on almost all wager pools. Everyone is forgetting about the legalized theft of funds through breakage…

    Breakage is the downward rounding of the odds on the toteboard that occurs at every track in the United States. In certain situations it can have a signifigant impact on the effective takeout rate you get at the track and thus can hurt your overall profits.

    All tracks in the United States currently use dime breakage which means that the fair odds on a horse are always rounded down to the nearest tenth. For instance if the odds on a specific horse were 6.73/1, they would be rounded down to 6.7/1 before calculating payoffs. Since you need multiply the odds by two and add $2.00 to get a payoff, dime breakage has the effect of rounding payouts down to the nearest multiple of 20 cents.

    Without breakage, it wouldn’t be uncommon to see win payoffs such as $3.43 or $14.36. Instead when you see prices on the toteboard they are always rounded off. The two prices listed above would show up as $3.40 and $14.20 respectively.

    The impact of breakage can be even more pronounced in place and show pools. When a heavy favorite finishes in the money, you may have to pay up to 7.9% of the fair payout.

    Go to http://horseracing.about.com/library/blbreakage.htm to see chart and entire article by
    Miles Michelson.

  • FoolsMoney….
    Good point, though New York Racing Association tracks round off to the nickel on breakage.

  • FoolsMoney, breakage does not account for nearly as much of an addition to takeout as you give it credit.
    I certainly agree that at least on online accounts breakage should disappear completely.
    Lets say breakage accounts for an extra 5-10 cents (depending on whether a track pays down to the dime or 20 cents) on every bet cashed on average. When you take all bets into consideration, the average payoff is probably over $20 (I’m guessing) probably a lot more. But even at $20, breakage adds around 3% on average. If the average payoff is $50, again on average, we are looking at an extra 1.5% in takeout.

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