The topic of fixed odds wagering on horse racing took center stage on Wednesday in Kentucky’s Interim Joint Committee on Licensing, Occupations, and Administrative Regulations.
Patrick Cummings, Executive Director of the Thoroughbred Idea Foundation, discussed the future of fixed odds betting on horse racing following the TIF’s white paper on the matter was published in February.
The Committee, which includes 15 members of the Kentucky State House and 11 from the Kentucky State Senate, oversees “matters pertaining to professional licensing not assigned to other committees,” which includes horse racing in the state.
“I am incredibly appreciative of Chairman Adam Koenig’s invitation to speak with the Committee in consideration of horse racing’s involvement in any future sports betting legislation, or even a standalone revision to existing regulations that would enable racing betting in Kentucky to be more than just a pari-mutuel endeavor,” said Cummings. “The reception and feedback today was positive and constructive, and I took that as a very positive sign for racing.”
“For the future interests of horse racing in America, and naturally here in Kentucky, it would be concerning if racing was not part of a modernization with fixed odds bets to complement pari-mutuel wagering. It just makes sense to meet the demand of customers with products that are presented to them in other sports, and I think Kentucky is prepared to lead the way on this.”
In his full remarks to the Committee (published below), Cummings noted that horse racing is facing threats from grey operators, offshore bookmakers legal in some jurisdictions, but not American states, who are meeting the demand of the market with fixed odds bets on racing.
“If someone seeks advanced odds on the Kentucky Derby or Breeders’ Cup, an offshore, fixed odds bookmaker is one of the top search results in Google. In fact, Churchill Downs’s own legal, online wagering platform, TwinSpires, which has handled more than $1 billion in pari-mutuel bets in the first two quarters of 2019, is outranked on Google by one of these platforms when searching for the term ‘Kentucky Derby odds.’
“The legal alternative to fixed odds bets on racing is incredibly limited. Outside of the few days when Churchill Downs offers a future wager via a limited pari-mutuel pool, with just 23 individual betting interests on the Kentucky Derby, American customers cannot place a bet on the Derby until either Oaks or Derby day, and they won’t know their potential return until the betting has stopped and the race is underway.
“That is, unless they have been reached by an offshore operator’s marketing arm, consuming information which their recognizable content creators are producing, establishing an account and wagering via illicit channels.”
Cummings added: “These gray operators do not contribute to the sustainability of American racing, plain and simple. Horse racing should be presented to customers in formats that meet the direction of the market, and as of now, the only ones really doing that are the offshore books. It is within the power of these legislators to start changing that and enabling tracks in Kentucky to take the lead in diversifying the wagering options for customers to included fixed odds. This would a tremendous example to other states and would benefit the state, horsemen, the betting public and anyone affiliated with the thoroughbred industry.”
Below are the full remarks in the Cummings testimony to the Committee:
My goal today is to speak with you for a few minutes about the hopes of boosting the prospects of the thoroughbred industry even farther, setting an example for the rest of the country and showing them a new way forward for our sport. Specifically, this is as it relates to helping the wagering side of horse racing modernize and help us catch up with the swift development in sports betting in both neighboring states and around the country.
Horse racing does not have to be ONLY a pari-mutuel bet.
My hope is that you will consider taking action to ensure this – either as part of any sports betting expansion you consider, or amending previous language to indicate that wagering on the sport is not exclusively pari-mutuel.
The benefits will be quite obvious – it will help modernize a struggling industry which is a tremendous source of jobs, agribusiness and has a substantial economic impact, it will domesticate a business which American racing operators are already tapping into internationally, and very importantly, it will serve as a legal volley against the growing, illicit, offshore operators who are poaching customers – from Kentucky surely, but hurting horsepeople and our industry, nationwide.
The Thoroughbred Idea Foundation was launched just more than a year ago, and is, quite simply, a privately-funded think tank for thoroughbred racing. Our aim has been to advocate for meaningful change in the thoroughbred industry, improving the future for the main financial participants in the sport – owners and horseplayers…bettors.
While there are some bright spots in the sport and greater industry, the overall financial metrics of racing are down. The foal crop is at its lowest point since 1965 and wagering on the sport across America, all of it of the pari-mutuel variety, is down nearly 50% over the last 15 years when adjusting for inflation.
As you know, revenue from wagering is a key driver of prize money, the most significant incentive for owners to continue participating in the sport. The trickle down beyond that is obvious.
Over nearly the last 80 years, American thoroughbred racing has been presented to betting customers as a pari-mutuel game – meaning a centralized tote system combines all money to one pool for each bet type. There has been little innovation in this approach.
In February, our organization published a white paper advocating that lawmakers and regulators consider horse racing as part of this sports betting evolution – embracing change, seeking growth for the industry, meeting the needs of present-day customers.
Several leading jurisdictions around the world already offer their customers diverse betting options, with complementary offerings of pari-mutuel and fixed odds betting.
Now as we hear of it today, the method of sports betting as it is generally discussed is all at “fixed odds” – a type of bet where the operator or bookmaker sets a bet at a fixed price. Customers can choose to take the bet at the established, fixed odds and if they are successful, will know exactly their return. The odds can change, but only for future customers.
Whatever the odds were at the time one placed a bet is what one receives if successful.
As has been the case in Nevada for decades and more recently in an increasing number of states, customers engaged in sports betting are enjoying the opportunity to make “fixed odds” wagers – either on a single game or set of games, or future bets. For example, the Bengals may be 500-1 to win the Super Bowl at a casino in Pennsylvania. The Indiana Pacers may be 20-1 to win the NBA title at a West Virginia sportsbook.
With future bets – the actual result is days, weeks or months in the offing, but a customer would know exactly their return if they were correct. Applied to horse racing, the marketing value is compelling on its own. With its current PARI-MUTUEL future bets on the Kentucky Derby, Churchill Downs offers wagering on the world’s premier racing property for just about ten days a year. Imagine a future where Derby betting was open for ten months a year. Sadly, in some nefarious ways, it is, but I will get to that in a moment.
All of the development of sports betting in America is on these types of wagers, and others similar to it.
The American market for sports betting is rather widely estimated to be between $80 and $150 billion a year. And all of it – on fixed-odds bets. Bets where customers know exactly what they’ll get. Bets where customers will stay engaged in the sport or games if they know they still have a chance.
Horse racing in America, which again has experienced serious overall wagering declines over the last 15 years, does not have much in the way of fixed odds betting at present. To meet this challenge, horse racing must be considered eligible for fixed-odds betting, a necessary modernization to keep pace with growing influence of fixed odds sports betting.
While Kentucky has an existing set of pari-mutuel regulations, enabling fixed-odds bets on horse racing would be different – a different business model, different pricing to customers and presenting the sport to modern audiences in a way in which the market is already meeting their expectations with other sports.
As closely tied as Kentucky is to the thoroughbred, one major question comes to mind: If Kentucky does not take the lead on this, then where?
Since the Supreme Court’s decision enabled the growth of legal sports betting by the states, only New Jersey has offered fixed odds betting on horse racing, doing so in limited opportunities, but they have indicated there is a desire for more in the near future.
In my presentation materials, and here on this slide, I am providing you with the remarks of Bill Knauf, Vice-President of Operations for Monmouth Park, which operates a sportsbook in partnership with bookmaker William Hill. Presenting to the Jockey Club’s annual Round Table Conference, Knauf asserted that New Jersey believes fixed odds betting on horse racing represents new revenue streams – for horsemen and the state.
In Bill’s words, “We think there is a massive audience out there that bets sports that has never tried to bet horse racing and we want to engage that customer.”
Again, if not in Kentucky, then where?
New Jersey’s legacy, connection and economy is tied far less to the horse and the sport than here in Kentucky. This is clearly an opportunity to develop a complementary product for racing’s existing customers, while introducing a modern form of betting to new ones as well.
This opportunity should be embraced, with Kentucky leading the way.
However, some rogue elements are attempting to exploit this already, totally beyond the reach of the industry, horsemen and the law.
Offshore entities are attempting to cash-in on the growth in fixed-odds betting overall. One site, Bet US Racing, which is based in Costa Rica and licensed in Curacao, actively recruits and markets to American horseplayers, even hiring several award-winning journalists to produce content for their platform.
Bets made by Americans through Bet US Racing are technically illegal. No percentage of the wagers go to American purses or horsemen – in other words, Bet US Racing serves American customers with fixed-odds bets on racing, including future bets on the Breeders’ Cup and Triple Crown races – but the industry gets nothing in return. This is the opposite of the legal business model which we advocate, and that exists today.
If someone seeks advanced odds on the Kentucky Derby or Breeders’ Cup, theirs is one of the top search results in Google. In fact, Churchill Downs’s own legal, online wagering platform, TwinSpires, which has handled more than $1 billion in the first two quarters of 2019, is outranked in Google searches by an offshore, fixed-odds bookmaker when searching for the term “Kentucky Derby odds.”
The legal alternative to fixed odds bets on racing is incredibly limited.
Outside of the few days when Churchill Downs offers a future wager via a limited pari-mutuel pool, with just 23 individual betting interests on the Kentucky Derby, American customers cannot place a bet on the Derby until either Oaks or Derby day, and they won’t know their potential return until the betting has stopped and the race is underway.
That is, unless they have been reached by Bet US Racing’s marketing arm, consuming information which their recognizable content creators are producing, establishing an account and wagering via illicit channels.
Bet US Racing is a grey operator – legal in some jurisdictions, but not all, and most certainly not here in Kentucky or any other states. However, they are serving a market that undoubtedly exists. Racing needs to keep pace.
Bet US Racing’s advertising rests along-side other legal, approved and revenue-sharing wagering platforms easily recognized – such as TVG and TwinSpires. They are a real and present threat to established legal operators, but offer a product – fixed odds betting on racing – that is not served by groups like TVG or TwinSpires because the laws have not enabled them to do so.
Many American track operators fully recognize the value in fixed odds betting, and are earning revenue from it. They have deals with European fixed-odds bet takers to offer American races at fixed odds to European customers.
Here is an example, where Ladbrokes is offering UK customers fixed odds prices on a race from Belmont Park. The vast majority of American tracks are enjoying small revenue streams which come from presenting European customers with a product in a wagering format with which they are very familiar.
If that sounds like a good business practice, it is.
As Kentucky customers become more accustomed to fixed odds bets on sports of all types, certainly at facilities in Indiana, Tennessee, West Virginia and more, there resides horse racing, continuing to operate generally as pari-mutuel sport, under current regulation.
That should change.
Make no mistake, there are clear differences between racing as a pari-mutuel option and a fixed-odds option to customers, the business model is different.
In a pari-mutuel setting, the house is a guaranteed a cut, as are horsemen. In a fixed-odds, or sports betting option, the operator must manage liabilities. Horsemen are deserving of some share, as has been the pari-mutuel agreement for decades. These elements must be considered. There is every expectation a fixed-odds bet on racing would have a higher takeout than a traditional sports bet. But there should be no denying that this type of wagering on horse racing is more modern, engaging and present than a single, pari-mutuel option.
The flexibility in federal law, under the Interstate Horseracing Act of 1978, might even permit interstate fixed-odds betting on races, something which could propel Kentucky’s established racing product, and certainly its horses, to an even wider audience, in a format that is being met by other sports in other jurisdictions.
There are, undoubtedly, plenty of considerations, and the opportunity to offer a modern approach to horse racing betting, a truly homegrown industry here in Kentucky, rests with you.
On behalf of the Thoroughbred Idea Foundation, and the greater horse racing industry, I am asking you today to specifically remember horse racing when considering any potential bill on legalizing sports betting, or potentially amending existing regulations that limit racing to a pari-mutuel bet.
Thank you for your time today and your commitment to this worldwide industry centered here in Kentucky.
I am happy to answer any questions you may have now or in the future and I look forward to seeing you at the races.