“One of the most urgent issues facing our industry is that of improved electronic security for the pari-mutuel wagering system.”
This simple declaration was part of the National Thoroughbred Racing Association's (NTRA) five-year strategic plan covering 2006 through 2010, and published in 2005.
Approaching two decades later, there has been little progress on the topic, and recent wagering incidents in the summer of 2022 highlight the long-term failure to address these problems.
If you think the stewards are always in charge of stopping wagering when the race begins, think again. A new revelation suggests that primary control of some bet types resided exclusively in the hands of a single, off-site tote company employee, potentially in violation of wagering rules in numerous states while also exposing a staggering vulnerability.
A QUICK LOOK BACK
After the industry spent months strategizing a way forward with American racing's approach to wagering security, then Del Mar president Craig Fravel said the following in 2005 at the University of Arizona's Racing Symposium:
“I think to allow customers to have sufficient levels of confidence in us, we have to demonstrate that not only are we capable of reviewing [wagering], but that there is a sufficiently independent and authoritative organization out there that can be the ultimate arbiter of those kind of decisions.”
The NTRA's 2005 plan stated “the industry must make improving the tote infrastructure its top priority.”
The improvements suggested were to include a new transaction-based betting protocol where all betting details are transmitted to the host track, as well as “development of a secure database of wagering information to allow for real-time monitoring of suspicious activity and historical review of wagering data by regulators and appropriate industry representatives.”
Also included, the plan sought to embrace “technological advances to eliminate or substantially reduce late odds changes.”
The issue remains.
Not only did a central, industry-wide organization overseeing this never materialize, but industry consolidation hastened and track operators also launched ADWs, purchased bet processing companies and even bought major portions of an offshore, high volume betting services firm.
A March 2022 column by Ray Paulick confirmed the source of the majority of offshore, robotic wagering on U.S. racing, which comes from Curacao-based Elite Turf Club, is owned in part by both 1/ST (formerly The Stronach Group) and NYRA Bets.
For perspective, data from the California Horse Racing Board, obtained by the Thoroughbred Idea Foundation, showed 17 accounts at Elite and two at Saint Kitts-based Racing & Gaming Services (RGS), were responsible for more than $373 million in bets across races at just Del Mar and Santa Anita in 2021.
The destructive impact of late odds changes, facilitated in large part from these super high-volume bettors, persists.
SUMMER 2022
TIF has found dozens of instances of pari-mutuel pool manipulation in recent months, incidents which tie unusual and unexpected legal betting to illegal, offshore, unregulated markets. But in just the last two weeks, three incidents have further exposed a lack of evolution in wagering infrastructure and some of the integrity systems supporting it.
Most recently on August 1, Ed De Rosa of Horse Racing Nation reported that bets emanating from TwinSpires, processed by United Tote, for a new Mid-Atlantic Pick 4, a cross-state bet linking races from Monmouth and Colonial Downs, were refunded to customers after they did not merge properly with Monmouth's pari-mutuel operator, Global Tote.
On July 21, the New York Racing Association announced a deviation from existing New York State Gaming Commission rules related to surface switches and multi-race bets. Exactly how or why existing rules were ignored is unknown, but TIF published a piece on the incident and is still awaiting a response from the NYSGC.
But of prime concern, the betting pool for the NYRA-hosted Cross-Country Pick 5 on July 30, connecting races at Ellis Park and Saratoga, reportedly remained open for nearly two minutes following the start of the sequence. David Grening of the Daily Racing Form reported on this incident, with NYRA's vice president of communications Pat McKenna confirming roughly $2,600 of bets were taken after betting should have closed.
“Wagering on Saturday's Cross-Country pick-5 was not stopped until after the first leg of the wager had been run.
The error resulted in a 90-minute delay of calculating the payoffs…
“The original pool…was $138,110 which included approximately $2,600 of wagers after the first leg of the pick-5, the seventh race from Ellis Park, went off and before wagering was stopped, according to Pat McKenna, who is NYRA's vice president/communications.
“On Sunday, Am-Tote, the company that processes wagers for NYRA, in a release admitted that, due to human error, wagering on the Cross-Country pick-5 closed 1 minute, 46 seconds late. It took 1:41.16 to run the seventh from Ellis. On Sunday [July 31], Am-Tote, the company that processes wagers for NYRA, in a release admitted that, due to human error, wagering on the Cross-Country pick-5 closed 1 minute, 46 seconds late. It took 1:41.16 to run the seventh from Ellis.”
A similar incident occurred almost four years ago and this reoccurrence highlights the ongoing lack of innovation in pari-mutuel bet processing despite assurances that processes would be updated.
In October 2018, Bloodhorse's Frank Angst covered that story and reported the New York State Gaming Commission fined AmTote a total of $10,000 for various transgressions resulting from these incidents.
“AmTote president Keith Johnson said after examining what happened with the Oct. 13 [2018] wager, some protocols have been changed to prevent such an error going forward, specifically with multi-track wagers…
“[Johnson said] 'In short, these types of separately hosted special or promotional wagering events inherently involve unique and more complex configuration and coordination…After in-depth review of these elements between AmTote and NYRA management, the late stop-betting command incident with the 'Cross Country Pick 4' last week uncovered some standard role responsibilities, with related processes and safeguards, that were compromised and will be applied moving forward for any future special events between AmTote operations and NYRA management.”
It seems that in the years since the first reported incident, the “unique, more complex configuration and coordination” issues have not been solved entirely.
To their credit, NYRA and AmTote preemptively added $50,000 to the July 30, 2022 Cross Country Pick 5 pool in an effort to cool customer concerns.
Grening reported that without the additional contribution, the bet would have returned $564 for every winning $0.50 stake. With the unexpected bonus, it returned $769. How much went to tickets that were entered after betting should have been closed is not yet public.
Regardless, fixing the antiquated pari-mutuel infrastructure in North American racing will require far more than $50,000.
STEWARDS BYPASSED ON STOP BETTING FUNCTIONS
In our April 2021 series, “Wagering Insecurity,” TIF reported backward steps were taken as recently as December 2020 to codify the ability to close betting pools remotely.
It might be worse than it seemed then.
The Totalisator Technical Standards (TTS) are overseen by the Association of Racing Commissioners International (ARCI) and intended to “establish the concept of 'baselines' for software and equipment involved in critical operational activities” related to pari-mutuel wagering.
The TTS were updated in December 2020 to enable backup devices for stopping wagering to be operated remotely, away from the track and direct oversight of stewards.
“If the tote system backup is operated remotely,” the TTS document reads, “a protocol for the remote operation shall be submitted to the racing commission for approval.”
But as it relates to cross-track bets like the Belmont-Yonkers Pick 4 in 2018, the Cross-Country Pick 5 last week, or potentially other multi-track bets facilitated by AmTote, it seems that the primary stop betting function has been in the hands of an individual AmTote employee, based off-site.
David Grening's coverage of the July 30 incident revealed the surprising new information.
“Unlike all other wagers at NYRA, where the stop-betting function is automated [by the stewards], the stop-wagering function on the Cross-Country pick-5 is done manually by an off-site AmTote employee, according to McKenna.”
The on-track stewards are not in direct control of stopping betting on all legal pari-mutuel wagers on their race. That alone is likely a violation of various states' regulations, including Kentucky where the first race of the bet occurred, designed to protect the interests of customers and eliminate instances of potential fraud and specifically, past-posting.
Nearly $5 million has been staked in “Cross-Country” bets hosted by the New York Racing Association since April 2021, but far more than that dating to at least 2018. Presumably, the bet has operated throughout that period with a remote tote employee as the arbiter of when betting is stopped.
“McKenna said that NYRA and AmTote are going to try determine a way to automate the stop-wagering function on the Cross-Country pick-5,” wrote Grening.
“Toward that end, that wager will cease for an indefinite period following next Saturday's Cross-Country pick-5, McKenna said.”
Bettors beware.
WAITING FOR CHANGE
Customer confidence is a necessity for racing's sustainability. Incidents such as these and many others cited in TIF's “Wagering Insecurity” series damage the confidence of horseplayers.
That lost confidence needs to be rebuilt through active steps to modernize racing's wagering security infrastructure.
Little has been done.
Despite years of planning in the early 2000s, vastly increased processing power and countless technological innovations in nearly every other part of the gaming space, pari-mutuel wagering remains well behind modern expectations for customer protections.
“Automated bingo card devices in church basements have more independent monitoring than the tote systems,” Kevin Mullally, vice president of government relations and general counsel for Gaming Laboratories International told TIF for “Wagering Insecurity.”
“It cannot be understated how surprising the details in this incident are if you understand the history of racing wagering integrity in North America,” said TIF Executive Director Patrick Cummings.
“A lot comes into question when it is acknowledged that the licensed officials overseeing the race do not have control of stopping all legal wagering connected to it.”
“This is probably the most notable exposed vulnerability in the human oversight of wagering since the Breeders' Cup Fix Six.”
Racing commissions across the continent, and particularly those where races in their jurisdiction started cross-track exotic bets, likely have many questions too.
“Did racing commissions know about this casual setup? If so, for how long? Everything about this single incident raises questions both for the commissions and about the commissions in their roles approving bets and regulating wagering.”
Customer protection is paramount. With it, comes customer confidence.
The racing business knew it had wagering integrity issues in the aftermath of the Breeders' Cup Fix Six scandal in 2002 and spent years attempting to adopt changes. Some changes were made, and security did improve.
But most of the grander plan to enhance the wagering integrity infrastructure fell flat soon after the NTRA's five-year plan was published in 2005.
“Wagering should be a driver of value to all facets of the racing industry. The values of professional sports franchises, in some part thanks to the rise of legalized sports betting, are growing at astronomical levels,” Cummings said.
“Racing has had betting forever, including a veritable domestic monopoly in legal, online betting for the entirety of the internet era, and our handle today is nearly 50% lower today than it was 20 years ago when adjusting for inflation.
“One of the reasons to be optimistic about the future of American racing is that for the best part of the last two decades, it's like we haven't even tried to compete. Bet pricing is too high, transparency in many areas is in short supply, data is expensive and cumbersome, and it is clear our approach to wagering integrity is insufficient.”
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