Month: May 2021

This is Part 9 of the Thoroughbred Idea Foundation's (TIF) series “Wagering Insecurity.”

Faced with remarkable competitive pressure from the rise of legal sports betting, horse racing is at a crossroads.

Confidence amongst horseplayers and horse owners is essential to the future sustainability of the sport. Efforts to improve the greater North American Thoroughbred industry will fall flat if its stakeholders fail to secure a foundation of integrity, along with increased transparency of the wagering business and its participants over time. Achieving this is growing increasingly difficult after the sport has neglected its core base – horseplayers – for decades.

“Wagering Insecurity” details some of that neglect, and the need to embrace serious reform. Fortunately, there are examples across the racing world to follow.

PART 9 – ALERTS

Foreign bookmakers accepting bets on American racing have recently identified suspicious betting on U.S. races themselves.

According to the International Betting Integrity Association (IBIA), a consortium of mostly European-based bookmakers, 270 suspicious alerts were generated across all sports by their monitoring platform in 2020.

Five of the IBIA's alerts were generated on U.S. racing, all in the fourth quarter of 2020, the first time the group has identified any suspicious betting activity on North American races.

The IBIA told TIF that five races from one American track were the source of the alerts, all of which had one consistent characteristic among them. As for the specific details, no more information could be shared due to data protection requirements.

The suspicious activity originated with customers outside of America whose bets were regulated by a well-respected, international gambling regulator. The suspicious activity was reported to this regulator at the time of the relevant races.

However, the IBIA does not have information-sharing relationships with any North American racing jurisdictions, and up until now, their betting operators had not generated any alerts on U.S. racing.

IBIA Director of Integrity Matt Fowler offers more detail.

“If there were agreements, or memoranda of understanding between IBIA and American state racing regulators in place, we definitely would be reporting it directly to them. We do have relationships with other American sports authorities, so it would not be unusual for us to reach out to an American entity and provide information.”

There is no reason to wait until the recommendation phase of this series – such agreements or MOUs should be struck as soon as possible.

Prior to publishing this series, TIF connected one major state regulatory agency to IBIA and has learned other groups have reached out since the summary of “Wagering Insecurity” was published with these details.

The IBIA's 2020 annual report showed 12 suspicious betting alerts were generated from American tennis matches, up from eight in 2019 and 3 in 2018. Prior to 2020, tennis had been the only sport to generate suspicious alerts from American events available for betting across the IBIA's membership.

The IBIA noted that unusual betting patterns alone do not generate suspicious betting alerts. Fowler continued:

“There are many factors that go into declaring a suspicious alert. This goes well beyond just an unusual betting pattern or unexpected price movement. There is a process in place to getting to the 270 alerts we issued in 2020, which is much less than the total number of incidents which were reviewed. We take very seriously the business of declaring an alert.”

BOOMING BUSINESS

International customers are legally betting North American racing at fixed odds through licensed bookmakers.

They are betting a lot of money.

XB-Net, owned by 1/ST (formerly The Stronach Group), “is the exclusive provider of international wagering” on more than 70 North American tracks at fixed odds to foreign customers. It sells North American track signals to international sites, along with a variety of services to bookmakers, including data.

Under the radar, American racing is doing big business with mostly European customers to enable fixed odds betting. A representative of one major European bookmaker told TIF that the annual market for U.S. racing at fixed odds to only European customers, almost exclusively enabled by the XB-Net sale of signals, is more than $1.4 billion, or the equivalent of nearly 13 percent of all pari-mutuel wagering on U.S. races in 2020.

Another bookmaker told TIF that at the height of the pandemic-related shutdowns, European bookmakers were handling the equivalent of between $690,000 and $1.38 million per race at Will Rogers Downs in Oklahoma, far outpacing the pari-mutuel totals recorded from America's own domestic customers on those races in what was, undoubtedly, an unusual period.

But over the long term, the foreign fixed-odds business on American racing continues to grow.

One track executive, who requested anonymity, told TIF that his track had experienced a 500% increase in revenue from these international fixed odds agreements over the last six years.

Lay betting on American racing – that is betting on a horse to lose – is also available via exchanges like Betfair.

Across races three through five at Aqueduct on Thursday, February 25, 2021, the pari-mutuel win pools totaled a combined $343,344. But those with access to the European-based Betfair exchange were trading the race too, with more than a combined $70,000 matched, roughly 20% of the pari-mutuel win pool on the races.

As referenced in previous installments, the monitoring of wagering in foreign jurisdictions has traditionally identified suspicious activity on such exchanges. If North America is doing this, they are doing so without any public acknowledgement.

MONITORING ALL WAGERING MARKETS

In Hong Kong, although its own business is exclusively pari-mutuel, the choice is clear: it needs to monitor all betting markets where its racing is offered. Measures to monitor legal, gray and illegal markets were key in their 2018 actions against jockey Nash Rawiller, leading to a 15-month ban and his expulsion from riding there.

The South China Morning Post captured the insight of HKJC Chief Executive Officer Winfried Engelbrecht-Bresges in the aftermath of the Rawiller ban.

“The Jockey Club has developed technology to gather data for illegal gambling sites and employs a stipendiary steward whose job is to watch for suspicious betting patterns. People should know we have an extremely vigorous system and that we can uncover things that perhaps others can't…

“We monitor markets, both legal and illegal, in Hong Kong and around the world, and we have a dedicated team that does that. We can use the data we find to be more specific in investigations and we identified this as a significant case. The analysis we do of markets, both legal and those overseas, helped us identify a pattern. We had sufficient evidence we could start the investigation.”

In contrast to Hong Kong, American racing lacks proper oversight of its wagering systems and has little transparency on incidents involving the integrity of racing through wagering.

How can American regulators police illegal markets if it has negligible control over the legal market?

The enormity of the challenge should not render it unconquerable.

Americans are betting through unregulated operators beyond its shores. While some of these platforms may be licensed by some jurisdiction, they are not legal for Americans to transfer and receive funds and they do not share information with regulators about incidents which may threaten the integrity of racing.

These sites exist not only because they enrich those who run them, but in some cases, for more nefarious reasons. Regardless, they offer customers opportunities to wager in relative anonymity beyond the reach of regulators.

Several prominent American horse owners have boasted about their play through such channels. Another illicit betting platform is using familiar, credentialed racing writers to create unique content in the hopes of attracting more Americans to wager.

At one point in time, there was hope that America could learn more about international markets which were betting on U.S. racing, some through legal arrangements and others illicitly.

In the National Thoroughbred Racing Association's 2005 publication of its strategic plan of work for the next five years (2006-2010), it detailed the need for the NTRA to work with the international racing community to understand the role of illicit betting operators, while also interacting with law enforcement to pursue avenues to curtail U.S. citizens betting on U.S. races outside the legal markets. Establishing relationships with licensed operators to share information was a goal.

After much research, TIF concludes this never materialized.

Coming Thursday, May 13: Part 10 – Grey

Miss a previous installment? Click on the links to read more.

Part 1 – Expectations

Part 2 – Intertwined

Part 3 – Volponi

Part 4 – Confidence

Part 5 – Bingo

Part 6 – Proof

Part 7 – Z

Part 8 – Damage

Want to share your insights with TIF? Email us here.

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