Rainy afternoon on Cape Cod and I had a few minutes to kill, so flipped the channel to TVG for a quick flutter. I selected the filly Just Like Magic, approaching the gate at 7-5 as the recipient of a $10 win wager in the 3rd race Oaklawn (3/28).

She charged up the rail and won. Final odds were 3-5. WTF. Sorry for the crudeness.

Racing will never engage the next generation of punters with 15-27% takeout and NO fixed odds, when they can bet on sports with a 4% vig and wagers that are fixed.

In the UK, an extremely sophisticated betting market, exchange wagering in its 20-year history now handles 85% of wagers, plus or minus.

Further exacerbating the industry's vulnerability is the contents of this article. My takeaway from this article is that Stronach and his friends:

• Own racetracks
• Own offshore betting hubs for friends
• From these hubs, friends receive substantial discounts to wager into onshore pools
• And we can assume the friends are getting late, direct access to track pools… and perhaps entering the pool after the start

Now the late betting is speculation on my part. It feels like it happens. And from the first four bullets, it seems suspiciously like that might be happening.

This insider activity stinks to high heaven, not just regular heaven.

This beautiful sport is bucking these horrific headwinds of scandal and a less-than-competitive product. Yet racing will always have tremendous potential.

But what is the point of one laboring all night on PPs to arrive at a horse that one feels should be 6-5 or 7-5, only to see that selection drop to 3-5 at the quarter pole?

My introduction to racing was with Win Elliot, the Schaefer Circle of Sports, and Fred Capossella. Old timers can place an era on those names. My first Racing Form cost me 50 cents; what are they now, $10? I can make an informed wager on the Red Sox without that surcharge.

Sadly I am not sure that I'm going to ever see the industry make any real progress making horse racing as competitive and accessible as other wagering products.

Thanks for reading.

The post Letter to the Editor: CAW ‘Activity Stinks to High Heaven’ appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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It also turns a spotlight onto a world largely hidden from the public eye-one that industry leaders are generally loathe to discuss publicly, and in which just a few anonymous gamblers can have an outsized impact on the financial fitness or ill-health of the sport.

Last year, Del Mar continued a deal with a player identified as Elite 17 that saw them enjoy a noticeably more favorable rate of play than other high-volume players that wager through the CAW platform, Elite Turf Club, according to detailed wagering reports obtained by the TDN, background conversations with racing officials and figures within the CAW world, along with publicly available data.

At the enormous volumes CAW gamblers play, such deals can give individual players a significant financial edge.

The result was that this one player constituted nearly 47% of Elite Turf Club's total handle on Del Mar last year, according to the reports. Two years prior, Elite 17's play had constituted just over 36% of Elite Turf Club's total handle on Del Mar, according to publicly available California Horse Racing Board (CHRB) data.

At the same time, the amount of money another Elite Turf Club player (Elite 2) wagered on the track dropped off by over $32 million between 2021 and 2023, the reports show-from around $45 million in 2021 to around $13 million last year. In 2021, Elite 2's play came to just over 27% of Elite Turf Club's total handle on Del Mar. Last year, that number had dropped to around 12%.

According to multiple sources familiar with the situation, Elite 2 received a deal similar to Elite 17 in prior years at Del Mar, but not last year.

An individual familiar with the situation-who spoke as a “California racing source” on condition of anonymity-said that, prior to the track's 2023 summer meet, Elite 2 declined such a deal, which would have necessitated paying a “substantial seven-figure up-front payment.”

Del Mar Thoroughbred Club | Horsephotos

When asked if Elite 2 had changed their mind about the deal after the summer meet was underway, the source declined to answer, citing concerns about proprietary business information. “But you can't make an up-front payment after the meet has started,” the source added.

Such arrangements have served as a pre-payment on host fees to be split between the track and the purse account, sources say.

The deals that Del Mar has struck with Elite Turf Club players over the years, while hardly an anomaly among tracks nationally, nonetheless raises questions about the best approach to managing CAW play in a state where purse revenues are generated solely through betting. If purses fuel the sport, getting this equation right is an imperative.

Are deals between tracks and individual CAW players, therefore, a sustainable approach for growing the sport in California? Is CAW play now so vital to the economics of horse racing that every step must be taken to maximize their business? Or should California's tracks be much more focused on incentivizing play from the average punters who generally contribute the biggest slice to purses, rather than pandering to the whales of the betting seas?

While it's difficult to know exactly how such deals might have impacted Del Mar's purse account revenues, the bare numbers illustrate a track facing tough economic headwinds, with serious implications for the horsemen and women in the state.

Purses last fall at Del Mar were reduced by over 10% due to a purse account overpayment reportedly to the tune of $2.1 million. All-source handle at the track's flagship summer meet declined nearly 11% from 2022 to 2023, according to the DRF. Wagering through Elite Turf Club on the track's product has declined from around $167 million in 2021 to around $113 million last year, according to the CHRB.

“As a track with no subsidies from alternative forms of gaming that depends exclusively on handle for purse generation, promoting handle from all segments of the betting market is very important to us. On an annual basis we sit down with the [Thoroughbred Owners of California] TOC to both establish purse levels and to discuss how we best promote wagering on our simulcast signal,” wrote Del Mar Thoroughbred Club president, Josh Rubinstein, in response to a series of questions.

Before the start of each meet in California, the tracks present the TOC with a list of individual host fees charged to each location that receives its simulcast signal. For that track's meet to proceed, the TOC must first sign this document.

“We are proud of our racing product, which has been well-received for the last several years, and confident that our host fees are fair and competitive with other major race tracks. We will continue to work with our partners to balance pricing considerations with the overall demands of the wagering markets,” Rubinstein added.

How takeout is divided from CAW play

BACKGROUND ON RATES AND REBATES
The debate around CAW players typically surrounds the major edge they wield over regular gamblers thanks to their use of sophisticated wagering technologies and the attractive rates and rebates offered to them-inducements not available to the average punter.

When “rates” are mentioned, what is meant are “host fees.” This is a charge wagering outlets pay to track operators for the contractual right to import a simulcast signal. A wagering outlet could be another racetrack, an ADW platform (like FanDuel), or a CAW platform (like Elite Turf Club).

Experts say that CAW host fees for the premium tracks typically vary between 6% and 8%. After breeders' premiums and other minor deductions have been removed, host fees are roughly split 50/50 between the track and the purse account in California.

The entities that pay the lowest host fee, therefore-like CAW players-contribute the lowest per-dollar amount to purses. At the same time, proponents of CAW argue how these inducements are warranted due to the vast amounts these players inject into the betting pools.

The amount CAW players are “rebated” can be broadly calculated with this simple equation:

Rebate = Takeout minus host fee (plus any other associated minor fees). The smaller the host fee and the larger the takeout, then the bigger the rebate.

Let's use the 20% blended takeout rate among the pools. And let's say the host fee (plus other associated fees) that the CAW player pays comes to 7%.

The rebated discount for the CAW players, therefore, could be a maximum 13% on every dollar wagered.

Experts recently told the TDN that the most successful CAW players can consistently win at an average rate of around 92%. At that win rate, a 13% rebate (for example) would see the player enjoy a 5% profit margin.

According to wagering reports reviewed by the TDN, that win rate is an undercount. These reports show how Elite Turf Club players can win at an average rate in excess of 105%, even before their rebate from Elite is factored in. At this rate, the profit margin would be much better than many investment accounts.

It's also important to note how the numerical monikers given to Elite Turf Club players-a company majority owned by The Stronach Group (TSG)-don't relate to just one person.

These players employ a team of potentially dozens of people, including mathematical wizards who create sophisticated computer algorithms capable of analyzing the betting markets for exploitable weaknesses, as well as individuals who place the bets for them.

Insiders consulted for this story describe how these teams of experts can, over time, deduce through the betting markets and through other data sources if rival CAW players receive more favorable rates.

Given the money at stake, the competition can be cutthroat.

ELITE 17'S DEAL
As CAW play has grown exponentially in recent years, track operators have cut deals like that between Del Mar and Elite 17 to attract their business. And the amount these gamblers wager is often so huge, just one player can make up a significant portion of a track's overall handle.

In 2019, when the renowned gambler “Dr. Nick” stopped wagering on Australian racing reportedly due to increased taxes on bookmakers, his exit was projected to trigger a 6% drop in turnover on racing across the board.

Multiple sources for this story said that Elite 17 and Elite 2 were both well-known Australian gamblers.

Scott Daruty | Horsephotos

Scott Daruty, president of both TSG's Monarch Content Management and of the Elite Turf Club, declined to confirm or deny their identities, citing confidentiality agreements.

According to detailed reports obtained by the TDN, Elite 17 wagered more than $650 million on U.S. racing through Elite Turf Club alone last year. In 2021, Elite 17 wagered roughly $60 million on Del Mar's product, according to the CHRB. Last year, Elite 17 wagered some $53 million. Last summer at Del Mar, the amount Elite 17 wagered was roughly 10% of the total handle at Del Mar, using the DRF's all-source handle figures as a baseline.

These numbers don't account for Elite 17's potential play on horse racing through other methods such as fixed-odds providers and exchange options like Betfair in other countries, or on other sports. Some CAW players also have accounts with different CAW platforms like Velocity, owned by Churchill Downs, which enables wagering on tracks whose simulcast signals are managed by Churchill.

At the same time, multiple sources say individual deals are still fairly prevalent among smaller tracks struggling financially, but that they're now unusual among the nation's top-tier tracks.

According to wagering reports reviewed by the TDN, the New York Racing Association (NYRA) offered the same host fee to Elite Turf Club players at Saratoga last year, irrespective of the betting pool. This included Elite 17. The host fee NYRA charged was slightly lower than Del Mar charged the same CAW players (outside of Elite 17), these reports show.

“NYRA cannot responsibly comment or opine on information never provided to our organization,” wrote NYRA spokesperson, Pat McKenna, in response to questions about the wagering reports. The TDN provided to NYRA an overview of the figures in the reports but not the raw data. NYRA's data was independently verified for the TDN. NYRA is a minority owner in Elite Turf Club.

McKenna did, however, stress the steps the organization has taken to manage CAW play, including barring CAW play in the Pick 6, Late Pick 5, and Cross Country Pick 5 pools, and requiring CAW players to place win bets on its races no later than two minutes to post.

California has also taken similar steps to moderate CAW play.

Since Santa Anita's 2022 fall meet, the win pool has been closed to CAW players one-minute to post, or else they must also pay a surcharge of around 3.5% on top of their normal rate if they want to bet to the close of the win-pool. Last year, Del Mar followed suit. Both tracks have also reverted to the traditional Pick 6.

When it comes to Del Mar's deal with Elite 17, the agreement was incumbent upon the player making a substantial payment at the start of the meet, according to multiple sources. Once that up-front payment was made, Elite 17 paid a host fee almost half of that for other Elite Turf Club players, wagering reports show.

But multiple sources familiar with the situation explained how factoring in the up-front payment, Elite 17 paid a host fee on Del Mar's product last year around a percentage point or so lower than the other CAW players.

At the volume CAW gamblers play, just one percentage point difference in host fee can mean a significant edge for one CAW player over all others, along with possible residual effects on all other participants in the betting pools in terms of late odds movement.

Bill Nader | Horsephotos

TOC president and CEO Bill Nader explained that deals involving up-front payments incentivize the player to maximize the amount they wager on the track's product.

“For example, if the player bets over a certain threshold, the player benefits from a high-volume discount. If the player does not reach that wagering threshold, the effective rate would be higher than other CAW players,” wrote Nader.

But could the deal that Del Mar struck with Elite 17 have prompted other CAW players-and Elite 2 in particular-to have curbed their play at the track last year?

The California racing source said that other CAW players were offered similar terms to Elite 17 last year. However, it should be noted that the other CAW players that wager through Elite Turf Club on Del Mar didn't bet to nearly the same volume as Elite 17 last year, and that Elite 2 was the only Elite Turf Club player to wager in the region of Elite 17's handle in 2021.

The California racing source also noted how CAW play is closely aligned with overall handle on a track's product, and that declines in total handle would invariably lead to decreases in CAW play.

“It's hard for us to say with any certainty why player A or B may have reduced his or her volume of play,” the source said. “The best source for that is the player themself.”

The TDN reached out to a representative of the player believed to be Elite 2, who declined to discuss the situation.

Here, it should be noted that at least one Elite Turf Club player increased their play between 2021 and 2023. This was Elite 10, who wagered $4.9 million in 2021 and $6.7 million in 2023 on Del Mar's product.

The TDN does not have access to data showing individual CAW handle on Del Mar's product in 2022. That was the year the California Horse Racing Board (CHRB) stopped making such data publicly available. Even so, California remains more transparent than other jurisdictions about what CAW data it makes publicly available.

Another wrinkle in this story is how Del Mar boasts an attractive wagering product with good field sizes and an impressive safety record. With that in mind, was the deal the right one to strike?

“With the benefit of hindsight, it has been the wrong deal for over 10 years and this is why we need a market correction,” wrote Nader, in response to a series of questions. “We represent the owners and purses are paid to owners, trainers, and jockeys, and there is room for improvement. This is what the TOC hired me to do.”

When asked why the TOC approved the deal last year, Nader wrote how 2023 “was my first full year with the TOC and we needed time to work with our Board members and others, notably the tracks, to voice our reservations and allow for a period of adjustment. This entire exercise has been a work in progress.”

WHY IS THIS IMPORTANT RIGHT NOW?
The issue of shrinking purse revenues amid declining economic benchmarks couldn't be a more pressing issue in California right now, where the industry attempts to piece together a revised racing framework in the wake of Golden Gate's impending closure in June.

At the end of the day, therefore, those arguably most impacted by decisions around managing CAW play are the industry stakeholders attempting to eke out a living from the sport.

When asked for comment on the story, the California Thoroughbred Trainers (CTT) wrote in a prepared statement how, “based on Del Mar's representations and the TOC's confirmation of how the purse account there has been managed, we can only say we're disturbed and confused. In January of 2021, at a CTT Board meeting, we attempted to question TOC leadership at the time about how purse levels were being funded, and were angrily rebuked by those in charge.”

At that point in time, Greg Avioli was TOC president.

“Since purses are the lifeblood of our sport, and are fueled by the public's interest and its confidence in the integrity of pari-mutuel betting, the apparent lack of transparency we're hearing about now has to be remedied immediately,” the CTT added.

Scott Chaney | courtesy of the CHRB

According to CHRB executive director, Scott Chaney, the agency is “keenly aware of the questions, importance and interest surrounding CAWs and plans to place the topic on our meeting agenda in the next month or so.”

Chaney added how “the concepts of purse accounts and structure are also vitally important to racing in California, therefore in order promote understanding and transparency, we are in the process of amending our race meet license application to include additional questions in this area.”

All of which leads to this question: Will Elite 17 be offered the same deal this year?

“No. Negotiations are ongoing across the entire customer sector,” wrote Nader.

“High-volume players will agree that two key deliverables to make their business models more attractive are access and liquidity to commingled pools,” added Nader. “Our racetrack partners should also understand the collective upside and if everyone can take a step back and look at this thing holistically, we can work it out.”

The post Computer Assisted Wagering: Anatomy Of A Deal appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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Santa Anita and Del Mar are high-profile tracks in trouble, but they are not alone. The problem? Host tracks are now receiving very little for their racing content.

Remember Napster, when a lot of people were stealing songs and nobody knew what to do about it?

I'm not Steve Jobs, who saved the music industry from Napster, but I'm going to tell you how to save Santa Anita and Del Mar and the rest of our tracks. When you understand how we came to this situation, you will see how easy it is to fix it.

I started working for the Thoroughbred Record in 1972. Then, the revenue from wagers was split 50/50 between the two “partners” in racing: half for the track and half for the racehorse owners' purse account. Each received about 8% of the on-track wager. It was a simple business isolated to the track location.

Off-track wagering across state lines was legalized with the Interstate Horseracing Act (IHA) in 1978. Although Congress has protected dairy farmers since 1946 with a “price floor” on milk, there was no price floor put into the IHA to protect the host tracks. A huge mistake!

After the IHA became law, Tommy Roberts, who pioneered simulcasting, negotiated a deal between Vegas sports books and some thirty tracks. Tommy told me Vegas said they could pay 10% of the wager to the host tracks. But, Vegas' actual offer was 2%. The tracks caved and accepted 2%, which meant the host track and purse account would only get 1% each and the bet takers in Vegas kept up to 15% of the wager. It was a very bad, upside-down deal.

The Vegas deal of 2% became the effective off-track distribution rate for every off-track bet taker, not just receiving tracks. As OTB's expanded off-track wagering locations, they cut into host track attendance, thus high-profit on-track wagering and concessions revenue dropped. Host track admissions and parking revenue vanished. Today off-track is more than 90% of all handle and host tracks and their purse accounts are suffering.

With the 2% rate in place, the major tracks were preyed upon by receiving tracks. NYRA, Keeneland and Hollywood Park all tried to increase the off-track rate for their races, but the hundred smaller tracks colluded to keep the rate as low as possible because they benefitted as bet takers on the major tracks' races. That was not the intent of the IHA.

The godsend of off-track wagering has now turned on racing and is devouring it. In the early days, most off-track bets were being made at receiving tracks and the money stayed in the sport. That ship sailed with computers and mobile phones. Today ADW's and robots are taking the most bets. What they pay the host tracks is so low they have enough margin to give up to 10% to whales. The money is bleeding out of host tracks and purses.

The first step for any business in trouble: Stop the bleeding.

Breeding, raising and racing Thoroughbreds is an agricultural business and sport. Over the years, Congress has responded with every possible advantage.

To stop the bleeding, Congress can establish a “price floor,” a minimum rate that off-track bet takers must pay host tracks. When Congress moved to save dairy farmers, lobbyists for the milk processors preying on them said the free market should set prices. But, the majority in Congress said “Sorry, we like milk and we are going to protect those who produce it.” There are many in Congress who like and care deeply about the Thoroughbred industry too.

Can we fix it? Yes, if Stuart Janney will commit to a “price floor” being put into the IHA, our tracks, purses and thousands of jobs in the industry will be saved. It is that simple.

Stuart Janney, chairman of The Jockey Club, personally committed to reduce the threat cheating has on the integrity of our sport. He worked with bi-partisan help from Andy Barr (R-KY) and Paul Tonko (D-NY) to pass the Horseracing Integrity and Safety Act (HISA). You need someone who has been successful with Congress to get back in harness and repeat the process.

Congress is the fastest way to save California tracks and all other racing states that do not have casino/slots support. As Mr. Janney related in working to pass HISA, you cannot do it state by state, or track by track. It has to be done at the federal level.

Today, the “partnership” between tracks and racehorse owners is far from simple and far from fair. Tracks have created subsidiaries outside the partnership with racehorse owners to take bets on other tracks' races and exploit the high profit margin. As a result, the percentage of off-track wagers going to purses drops every year. Purses fuel foal crops and ours have dropped from 50,000 to 17,000. Nobody wants track closures to return us to the days of Man o' War with a foal crop of 1,680.

The IHA puts people with feet of clay in position to approve multi-million dollar off-track bet taking deals. Dan Ross's piece told of death threats and extreme pressure on these individuals. To reduce the threats and the grip bet-takers have on the integrity of the wager, we need a “price floor” to protect the people giving IHA approval. The price floor will become the non-negotiable base rate for most approvals.

I don't expect tracks with wagering subsidiaries to support a price floor being put into the IHA any more than we expected all trainers and horsemen to support HISA. I don't expect those receiving rebates now to support a price floor anymore than those who got free music with Napster wanted to switch to iTunes. Most times, leaders have to step up and piss off some people to do what is right for the sport.

I believe a price floor on off-track wagers will allow host tracks to refocus on live racing that people want to see and they will be able to sell their product at a good price in the off-track market, something they cannot do today.

There's nothing magic about taking bets. Lotteries pay gas stations a 5% fee for punching in the customers' numbers and taking their wager. A price floor in the IHA is the first step for host tracks to change off-track wagering from a “buyers' market” to a “sellers' market,” where those producing the racing content drive down the costs of bet taking.

Is it more important for us to save Santa Anita, Del Mar and other tracks, or to let the money from their racing content go to Fan Duel and Draft Kings?

What is the fair rate for a price floor?

I believe it is 10%, meaning 5% of the off-track wager goes to the host track and 5% to the racehorse owners' purse account. Blended with on-track handle and imported handle, the host track and purses could exceed 15% of the total wagered on their races.

With a flat rate of 10%, mandated by federal law taking precedence, the states will not be able to pass laws to get a competitive advantage in the off-track market. We've had enough of that. (NJ passed a law prohibiting their receiving tracks from paying more than 3% to a host track.) Each host track would still have the freedom to negotiate a higher rate than the price floor for their racing content.

That's how you stop the bleeding and allow Thoroughbred racing to be turned around.

I doubt most of you give much thought to track business and off-track wagering revenue. But, in the changing world of Thoroughbred racing, that's make or break for our sport. Take the time to learn how who gets what from racing impacts the breeding shed.

And right now, for Santa Anita, Del Mar and the life you love, contact Stuart Janney at The Jockey Club and voice your support for a price floor of 10% to host tracks on all off-track wagers be put into the IHA. Quickly.

The post Letter to the Editor: First, Stop the Bleeding appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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CAW players constitute a small group of mostly anonymous, high-volume gamblers with an outsized impact on the betting markets–including in California–due to their use of sophisticated wagering technologies and the inducements offered to them in the form of attractive rates and rebates not available to the average punter.

At the time, CAW play was the main source of handle growth in California, which by extension “is contributing the lowest percentage for purses” and thereby presenting “a serious, long-term concern for California and its horsemen,” wrote Cummings.

Cummings's detailed study appears prescient. Since then, several reports have illustrated the extent of California's purse account woes.

To explain the recent 25% purse cuts at Golden Gate Fields, the Thoroughbred Owners of California (TOC) said the track's purse account was over $3 million in the red. Purse cuts at Santa Anita stem from a near $4-million purse account overpayment. During the January California Horse Racing Board (CHRB) meeting, it was explained that Del Mar's purse account was overpaid by $2.1 million.

Pat Cummings | The Jockey Club

A complicated set of factors determine purse revenues. Field sizes, for example, are arguably the biggest architects of how much is wagered on an individual race. But CAW play has grown exponentially as a percentage of overall handle in recent years, giving it a key role in the sport's future in California. Why?

Unlike other states where purses are supplemented from alternative gaming like slot machines and casinos, California is reliant solely on betting to generate purse revenues. In other words, California more than any other major jurisdiction needs to thoughtfully manage its betting revenues–including from CAW–if it's to remain a healthy enterprise long into the future.

The problem with CAW–like so many aspects of the sport–is that it has long been shrouded in ambiguity.

To help peel back this opaque curtain, the TDN sought answers to some basic questions about how leaders in the Golden State manage such an influential part of the industry:

What CAW-related information is shared between whom? What oversight mechanisms are in place? If the state's horsemen and women feel they aren't getting a fair deal, can they leverage what they see as a better one? And where do state regulators fit into the scheme?

What is CAW?

In short, CAW players–frequently registered in offshore tax havens–use sophisticated digital tools and teams of staff to spot exploitable deficiencies in the betting pools, and to scour reams of betting and past performance data to identify winning opportunities at high rates of success.

Even individually, they can bet huge. Indeed, last year the Financial Times estimated that just two individual CAW players each wager “on the order of $1bn a year” on State-side racing alone.

In the U.S., CAW players largely wager through a handful of CAW agents' betting platforms, which in many ways act as glorified ADWs.

The biggest in terms of handle is the Elite Turf Club, majority owned by The Stronach Group (TSG), which also owns the Santa Anita and Golden Gate Fields racetracks in California. The New York Racing Association (NYRA) also owns a portion of Elite Turf Club.

Other key CAW platforms include Racing and Gaming Services (RGS), and Velocity, owned by Churchill Downs.

The bettors who aren't privy to the same rates and rebates as these deep-pocketed gamblers (more on this in a bit) argue that CAW players are driving the average gamblers away from the sport in droves, to the point where it's killing the betting markets and hurting purse revenues. Indeed, if CAW players become too big a percentage of the pools, their impacts become magnified and they essentially “cannibalize” the markets.

TOC president Bill Nader has pinned this tipping point at about 25% of the betting pools. Cummings's June 2023 report found that back then, CAW play in California often surpassed that benchmark.

CAW proponents counter that these well-capitalized gamblers provide vital liquidity and efficiency to the betting pools. Without them, these proponents argue, the sport would be significantly poorer, and that by sheer volume of play, they help prop-up purse accounts.

Indeed, the loss of just one major CAW player could hit a track's handle hard. This also means, however, that the biggest individual CAW players have historically been able to wield no inconsiderable leverage to negotiate their terms of play.

 What Portion of CAW Play Goes to Purses?

To understand what part of the betting dollar goes to purses, there are two terms of note: Host fees and Takeout rates.

“Takeout” is the percentage sliced out of every dollar wagered. This pie is divvied up various ways, including a portion funneled into the purse account. Bets wagered on-track direct the largest slice back into the purse account. Bets wagered through ADW and CAW platforms direct the smallest amounts.

Takeout varies on several things like the host track state and bet type. But takeout is determined by track management and regulators and is non-negotiable. A general rule of thumb is an average 20% blended takeout rate across the different pools.

For CAW play, when the term “rates” are mentioned, what is meant are host fees, and these are negotiable.

Host fees are what any wagering outlet pays to track operators for the contractual right to import a simulcast signal. A wagering outlet could be another racetrack, an ADW platform (like FanDuel) or a CAW platform (like Elite Turf Club).

   TDN spoke with several track and industry executives about the state of CAW play today. These experts said that CAW host fees for the premium tracks typically vary between 6% and 8%.

After breeders' premiums and other minor deductions have been removed, host fees are roughly split 50/50 between the track and the purse account in California.

Therefore, if Santa Anita beamed its signal to a location at a host fee rate of 6%, roughly 3% of the total amount handled on that signal at that location will flow back into Santa Anita's purse account.

Primary Oversight of Agreements

Before the beginning of each meet in California, the tracks present the TOC with a list of individual host fees charged to each location that receives its simulcast signal. For that track's meet to go ahead, the TOC must first sign this document, said Scott Daruty, president of both TSG's Monarch Content Management and of the Elite Turf Club.

“Before the Santa Anita meet opens, we give them a list of every location and price that Santa Anita is sold for,” said Daruty. “They [the TOC] either approve it or they don't.”

The list includes host fees the track charges CAW betting platforms. If the host fee of an individual CAW player deviates from that afforded an overall CAW platform, that too would have to be divulged, said Daruty.

“If there was an individual deal [between a single CAW player and the track], that would have to be disclosed to the TOC,” said Daruty.

Scott Daruty | Horsephotos

TOC president Bill Nader said that he has signed all such agreements since joining the organization in October of 2022.

Nader said he was unable to disclose what the host fees that CAW players receive. All host fees are private (not just for CAW players). But Nader described the negotiation of these fees as a “moving target as to how you get this right and how you get it right across all customer segments.”

Where Do Rebates Come From?

The way Nader and other experts explain it, the amount CAW players are “rebated” can be broadly calculated with this simple equation:

Rebate = Takeout minus Host Fee (plus any other associated minor fees). The smaller the host fee, typically the bigger the rebate.

Let's use the 20% blended takeout rate among the pools. And let's say the host fee (plus other associated fees) that the CAW player pays comes to 5%. The rebated discount for the CAW players, therefore, could be a maximum 15% on every dollar wagered (though more on this in the next section).

It's also important to note that bets with higher takeout rates leave the door open to potentially higher rebates. The seemingly counter-intuitive goal is that this leads to higher overall handle.

Several experts said the most successful CAW players can consistently win at an average rate of around 92%. At that rate, for example, a 15% rebate would see the player enjoy a 7% profit margin. According to Daruty, a 92% win-rate isn't typical.

“That's someone really hitting it out the park,” he said.

The bigger the rebate CAW players receive, therefore, the greater their overall profit. And the greater their overall profit, the more they're likely to wager. As one expert put it, “it's like a high-yield investment account.”

Indeed, former Australian bookmaker Tom Waterhouse recently said he was considering investing venture capital funds into horseracing-focused professional betting syndicates that receive these huge rebates.

“[Gambling] is a three trillion-dollar industry, and most people lose. The edge is against you,” said Waterhouse. “But there are a few groups globally that are able to find an edge.”

These rebates are usually returned daily–typically the following morning, said Scott Finley, former NYRA director of simulcasting with a long career in the pari-mutuel betting industry.

“In some cases, they might be done weekly,” Finley added. “But the general idea is, the quicker you front that money back to the CAW players, they're just going to churn that money and bet more. Remember, there's no credit betting allowed anywhere in the U.S. These are all true advanced deposit wagering accounts.”

The TOC, said Daruty, is not privy to the rebate rates that CAW players receive.

“I'm not sure the TOC has ever made that request,” said Daruty, when asked why this information isn't shared with the organization. “But if they were to make that request, I think our response would be to politely deny it.”

When asked why the TOC hasn't asked Elite for rebate data, Nader said that he can get a “very good idea of what the gross rebate would be” by looking at the takeout on the different bet types. “I can work that out,” he said.

What's in it for Elite?

All of which begs the question: What's in it for a CAW platform like the Elite Turf Club?

According to Finley, CAW platforms typically retain between 0.5% and 1.25% as a commission from the amount their players wager.

“It's all based on individual contracts between the [CAW platform] and their player teams,” Finley explained, about how these commissions are negotiated.

As an idea of what kind of number this commission might generate, Elite Turf Club handled over $180 million on Santa Anita's races during 2022, according to the CHRB's statistical opersion reports. At Del Mar during 2022, Elite handled just over $146 million.

Daruty said he was not at liberty to comment on the Elite Turf Club's commission rate.

When asked how, between the host fee and the CAW commission, it appeared that TSG was essentially double-dipping, Daruty said the company's tracks and Elite Turf Club performed two separate functions.

“It's only double-dipping if you're getting paid twice for doing the same thing. This isn't double-dipping because it's two completely different services. In fact, I think it's to the horsemen's benefit that we're operating Elite because they're getting more visibility and more knowledge,” said Daruty.

“If it was a third-party operator, they might not be getting that, but they'd still be paying the same fee,” Daruty added.

Individual Deals with the Tracks

At last year's Global Symposium on Racing in Arizona, Cummings raised the issue of individual players and their representatives negotiating directly with the tracks to receive favorable host fee rates. Some of these deals were negotiated years ago.

“There is undoubtedly a concern when one or two of the biggest players in the sport go door to door across this country and ask a track operator for a discount. Not a rebate–a discount on the host fee,” said Cummings.

John Woodford, chief executive of GWG Group, a Las Vegas-based LLC that provides domestic and international services to CAW players, said that while GWG does not have any such “bespoke” deals for its individual players, such agreements are unsurprising given the amounts sometimes wagered.

“It's the same for other industries,” explained Woodford, “if you're a significant contributor or participant.”

Last year, the Financial Times reported that just two individual CAW players that wager through the Elite Turf Club–Elite 17 and Elite 2–had significantly increased their wagering on California horse racing over the past 15 years.

Since that story came out, the CHRB stopped publishing wagering data showing individual CAW accounts–which it had done since 2008–and now pools these numbers together under the CAW platform. In fairness to the CHRB, however, no other jurisdiction publicly discloses this individual information either.

In this vacuum of individual player data, however, it begs the question: Are any CAW players still privy to favorable deals directly negotiated with California racetracks? Several sources consulted for this story said that at least one player still enjoys such a deal.

Nader declined to answer the question directly, but said that discussions with the tracks are ongoing, and that over the past year, the TOC had successfully negotiated better rates for its constituents. “Everything is a work in progress,” he said.

TOC Leverage?

If the TOC believes the horsemen and women don't receive a fair deal in these negotiations, it can refuse to sign the document authorizing tracks to send out their signals, essentially causing a simulcasting blackout. Nader calls this threat the “nuclear option.”

When asked if during his time the TOC has considered using this option during CAW negotiations, Nader responded that it should be used only as a “last resort.”

“You never really want to do that. If there's a complete breakdown, perhaps. But it should never come to that,” said Nader.

The TOC has deployed this “nuclear option” before in contentious simulcasting disputes. Back in 2008, the TOC withheld Hollywood Park's signal over multiple weeks to increase the amount ADWs were contributing to the purse account.

Bill Nader | HKIR

The move–which reportedly cost Hollywood Park some $500,000 a day in lost revenues–was deeply unpopular with both the ADW platforms and the tracks.

“It didn't make me the most popular guy in racing to the effect I got death threats against me and my family,” said then TOC president Drew Couto, who explained that during the simulcasting blackout, TVG repeatedly shared on-air his personal and home telephone numbers.

“They encouraged their disgruntled viewers to call and let their disappointment be known,” said Couto. “It also led to several death threats being called into the offices. The TOC had to close down for a few days while we addressed the security issues.”

But the TOC's hard-line stance in 2008 ultimately led to a better rate for the state's horsemen and women.

“They came around because we cut off the signal,” said Couto. “You have to have a strong board that says, 'we will weather the storm. But at the end of that, we will come out with better rates.' And those better rates will help us put on a better product. And that better product will hopefully appeal to players who want to bet eight-horse fields rather than four-horse fields.”

Couto said the Interstate Horseracing Act of 1978 gives the TOC the authority to dictate rates and fees.

“The TOC has used that structure in the past to set the rates, to set access, to determine who has access, and to control the use of our product,” said Couto. “It's not the racetrack's product.”

When asked about this authority apparently afforded the TOC through the Act, Nader stressed the ecosystem nature of the industry.

“I would see it more as a 50-50 partnership between the tracks and the horsemen, especially in a state where there's no other purse-enhancing supplements. That's how the tracks get paid as well,” Nader said.

“I think what makes this sport so uniquely spectacular is the competition on the track and the competition on the Tote,” Nader added. “For us, it's more finding the right balance across all segments.”

CHRB'S Role

The TOC isn't the only guardrail to ensure that CAW fee agreements are drafted with horse racing's long-term interests front and center.

While the CHRB does not routinely see those documents, “The CHRB has full legal authority to review any agreement if that were to become warranted,” wrote CHRB spokesperson Mike Marten in written responses to several questions.

The CHRB, wrote Marten, has not yet exercised that legal authority.

In response to questions concerning betting integrity, Marten wrote that, “We understand that Monarch pays special attention to CAW companies (i.e. Elite and RGS) whereby each of the CAW players undergoes repeated, extensive background checks every six months.”

Marten added that the Thoroughbred Racing and Protective Bureau–a subsidiary of the Thoroughbred Racing Associations of North America–has “performed a thorough investigation of many wagering sites, including Elite and RGS, as part of its service to the racing associations.”

The CHRB, Marten wrote, “also has access to those reports if warranted.” And he added how, “sparked by concerns about the individual locations/operators,” the CHRB “some years ago” obtained an unspecified number of these TRPB reports from its client racetracks.

The review resolved any concerns, “so no was action taken,” he added.

Conflicts of Interest?

Eagle-eyed observers of California's racing product and betting markets might have noticed the ownership makeup of recent GII San Pasqual S. winner, Newgrange.

Since at least September of 2022, Newgrange has been owned by a group that includes Little Red Feather, Rockingham Ranch and David Bernsen.

Bernsen is the founder of GWG Group. One part of Bernsen's role at the GWG Group has been to represent individual CAW players in their negotiations with the tracks, but Woodford said that Bernsen hasn't run or managed the company for the past couple of years, and is now focused on industry initiatives “outside of the CAW sector,” including racehorse ownership.  Little Red Feather's managing partner is TOC chairman, Gary Fenton. Bernsen and Fenton, therefore, appear to sit on opposite sides of the CAW table. Does their ownership connection in Newgrange rise to a conflict of interest on the part of the TOC chairman?

Both Nader and Fenton said it doesn't. Nevertheless, Fenton said that he has recused himself from all CAW-related matters before the TOC since April of 2023 to avoid the appearance of any conflict of interest.

“Incidental co-ownership of a horse isn't considered a conflict by the TOC, but I made sure Bill and members of the board were aware. Still, due to the sensitive nature of simulcast rates, and out of an abundance of caution, when a matter connected with David [Bernsen] came up for the first time, I recused myself. Virtually all owners who serve on industry boards face similar instances,” wrote Fenton, in a statement.

Several experts interviewed for this story described TSG's ownership of both Elite Turf Club and two of the state's racetracks as a dynamic that does indeed rise to that level.

Daruty, however, refuted any conflict-of-interest accusations, and pointed to the historical ownership relationship between tracks and wagering outlets.

Though the nature of these “betting platforms” has evolved over the years–from on-track Tote windows to off-track-betting hubs to ADWs–the racetracks have always been part of the ownership mix, he said.

Daruty added, “This is just one more example of that.”

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But the game he was playing in 2013 is nothing like the game being played today. That, he says, is because of the proliferation of the Computer Assisted Wagering (CAW) players. He's found that he can't compete against them, their algorithms, their ability to bet huge amounts at the very last second and their huge rebates.

In a Tweet posted Sunday, Sumja announced that he was walking away. “They (CAW players) have infiltrated every last pool and after 40+ years I am done feeling and being duped by sketchy practices,” he wrote. “Going to concentrate on other sports I am excited about. They ruined horse racing.”

Ironically, the decision came after he made a winning bet on the 20-cent jackpot Pick Six at Del Mar. The winners paid $5.40, $14, $5.20, $56.80, $6.60 and $4.40 and the bet paid $3,216. Sumja is convinced it should have paid more and that the reason it didn't is because the CAW players swooped in and took home most of the pool.

“It's been a culmination of years of just feeling like something is going on that makes me feel that I am not playing on a level field because of the computer players,” he said. “I don't understand technology, so I don't know how they are doing it. But I do know that when you see late odds changes and they are correct way too often in terms of them winning it seems not possible. It gives me a feeling that I am playing in a game that is stacked against me. You know the old adage, when you feel like you are the sucker at the table it's time to get up. I have read what Jerry Brown wrote in the Thoroughbred Daily News and have followed all the numbers Pat Cummings has been coming up with. It's made me realize I have no edge anymore. If I can't beat the computer players why should I play?”

Sumja said he had been wagering about $500,000 a year and worked with two other horseplayers, one betting $2 million a year, the other $1 million. Both partners have also quit wagering on racing. Sumja's wagering dollars are now devoted to sports betting.

“We're all out, but I don't think the tracks care,” he said.

As is the case with many horseplayers, Sumja got tired of watching the horse he wagered on at 4-1 30 seconds before the race break on top and go down to 8-5. Even when those horses won, it left a bad taste in his mouth and he can't understand why the horses whose odds take a late plunge seem to win far more than their fair share. He is not willing to concede that maybe that's because the CAW players' algorithms are so good that they usually come up with the winner.

“I'm not going with the company line that they are just great handicappers. I don't buy it,” he said.

Sumja wants the tracks to close the pools well before the race starts.

“They have to close the pools off significantly ahead of the first horses going into the gate,” he said. “That would take away the feeling that something isn't quite right. You bet on sports and you take a team at +$350, the game ends and you win you get paid +$350. If you take a team getting four points and if they cover the spread you win. What horse racing is doing would be like them telling you with a football bet we'll let you know what the spread is after the game has started. You might have plus three or plus six. We'll let you know during or after the game. Why would you play that? You wouldn't. Shut the pools down three minutes to post. Shut everything down. Let every player see what odds they are really getting.”

Sumja understands why the tracks willingly accept wagers from CAW players. By some estimates they now account for one-third of all the dollars wagered on U.S. racing or about $4 billion annually. The tracks have made a business decision that it's in their best interests to take their bets. Sumja counters, saying that a lot of players are now doing the same, making a business decision that because of the CAW players it is not in their best interests to continue betting on the sport.

“If that's what racetracks want, to cater to CAW players, that's fine,” he said. “But you have a choice not to play nowadays. There are so many other types of wagering available. I've been making my own football line since I was 15. I love betting on sports. And when I make a sports bet that is paying 7-2 I get 7-2 if it wins and not 6-5. It's a refreshing feeling.

“In his article, Jerry Brown wrote about the myth that horse racing won't make it without the money being bet by CAWS. Horse racing made it for 100 years before anyone ever heard of CAW. I understand games change. If racetracks feel this is what they need to do to maintain their business that's what they're going to do. It also comes to a point where you make your own decisions and when you realize you're in a bad spot you've got to stop playing. That's my position. I'm not playing anymore. Neither are my friends.”

Sumja said that after he posted his tweet he heard from dozens of people who said they also have quit betting on racing and that they were happy that he spoke out. The horse racing industry used to get $500,000 a year in handle from Brent Sumja. Now it gets none. How much longer can this keep happening and how many more Brent Sumjas can it afford to lose before real and lasting harm is done to the sport? These are real problems and so far the sport hasn't been able to offer any serious solutions.

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Patrick Cummings, the moderator of the panel on CAWs, is the Executive Director of the Thoroughbred Idea Foundation, a racing-industry think tank. Cummings took the panel through a brief history of parimutuel wagering and the changes the industry has seen before landing at the crux of the subject matter: CAWs.

“The CAWs are individuals with well-resourced staffs, developing couture models assessing vast amounts of data,” said Cummings. “They deploy finely-honed algorithms to efficiently place bets, often at the last possible second, all while receiving significant rebates for their play.”

The rebates, he said, while sizeable, were only one of the challenges that CAWs present to racing. The other is their ability to bet large amounts of money at the last possible second before the race, which gives them an advantage over regular players.

Pat Cummings | Skip Dickstein

“In pari-mutuel wagering, betting late has always been beneficial,” Cummings said. “But, when all betting was done on-track, betting late came with the risk you might not get your bet down at all.

“That's not a concern now, especially for the CAWs, who've been given the ability to place batch bets, dumping vast amounts in the final cycle of betting. The impact of that is witnessed every day, in nearly every race and across almost every pool.”

That impact, he said, has led us to where we are now: CAWs have grown from 8% of total handle in 2003 to around 33% of handle today. At the same time, when adjusted for inflation, non-CAW wagering is down by nearly two-thirds over the same time period. That's a concern because the money returned to racing in the form of purses is much greater from normal bettors than from those receiving huge rebates. So while handle may be up, “the greatest source of growth has been a handful of high-frequency bettors,” who pay less back into the system.

“How the evolution of CAWs is managed and how we support the existing customers we still have might be key to the future of wagering on racing in today's tech-forward world–one with unfathomable processing power, machine-learning, AI and more,” Cummings said.

Cummings led a Q-and-A session with Joe Longo, the General Manager of Content Managing Solutions for NYRA, which owns an ownership stake in the Elite Turf Club, one of the largest computer syndicate operations; and Dr. Marshall Gramm, a horse owner and professor at Rhodes College.

Gramm said he had written models with partners based on statistical probabilities. He started receiving rebates in 2011, and said that doing so not only allowed him to turn a profit, but to increase his handle enormously, from $49,000 in 2010 to $25 million in 2015. He has gone on to be a major racehorse owner, with 116 horses he now owns alone or in partnerships.

Gramm said that some in the industry have come to believe that rebates are all negative, but that his churn had increased exponentially because of it.

Love it or hate it, though, CAWs are here to stay, said Gramm.

“There's no walking back from it,” he said. “The computers aren't going away. You can't step back in time.”

Neither panelist addressed the issue that Cummings talked about in his introduction and that was covered in Jerry Brown's TDN op/ed, Existential Crisis, that because in parimutuel markets, players are playing against one another, regular people are effectively paying more, and leaving the game.

Longo discussed how NYRA has become the only racing organization to ban CAW bettors in the win pool within two minutes to post in order to negate the late odds fluctuations which have become so frustrating to horseplayers. Longo said that while no other organization had followed that lead, he felt that others eventually would.

HISA Panel Discusses Adjustments to New Rules

Trainers Jena Antonucci and Ron Moquett served as panelists, along with Ben Mosier, Executive Director of the Horseracing Integrity and Welfare Unit (HIWU), and HISA's Lisa Lazarus on a Q-and-A panel moderated by Jim Gagliano, the President and COO of The Jockey Club, on how trainers were adjusting to the new HISA regulations.

Gagliano asked the two trainers how their life had changed under HISA.

Trainer Jena Antonucci | Skip Dickstein

Antonucci said that she was already running her business along the lines that HISA requires in terms of record-keeping, but acknowledged that that part of the business had been a learning curve for other horsemen. Moquett said that, “as a Thoroughbred trainer, there's a new set of rules to follow and we're going to adapt to those rules, but primarily, we keep the priority on the horse.”

Antonucci acknowledged that there were concerns and bumps in the road as the program has gotten underway, but urged people to come forward with those problems so that the solutions could be found. But the benefits, she said, were dramatic.

“I may be a minority in this thought,” she said, “but I find it has been the great equalizer. It isn't a secret that there is availability of different levels of pharmaceuticals on different levels. Really smart chemists, and people looking to gain an edge. So I feel the biggest benefit has been to probably the hardest hit of this industry, which is the middle and the smaller side, where it has allowed a level playing field and where that guy or gal who busts their butt 24/7 can walk into a race and not feel like they're going to watch another horse re-break at the top of the stretch. That their plied trade and their skill set will have an opportunity to shine, where that eight-percent trainer historically, where it looks like I can't train a racehorse? All of a sudden, he's winning more, or she's winning more, and it's not because we've done anything different in our practice. And you know what? What I do, I do darned well, and my horse–whether it's in the Grade I Belmont Stakes or a $12,500 maiden–is going to have the chance to march down that stretch and compete eye-to-eye with the horses next to them, and there's not a pharmaceutical in our way.”

The crowd gave her an ovation after the comment.

“There are a few parts of it that have been very challenging,” said Moquett. “You're dealing with a large group of people who are now just getting introduced to technology. I'm helping people who are sometimes my competitors try to understand and navigate the system.

“I wear a number of hats,” he said. “I train horses. I own horses. I'm a member of the HBPA, and I'm on the HISA Advisory Committee. I'm constantly a sounding board. People come to me and say this is unfair, and I come to [HISA]. It's new. There are going to be problems, and they're going to have to listen to horsemen. It doesn't matter how good [Lisa Lazarus] is at her job, we need the Bill Motts and the Steve Asmussens. My job is to say, `look, I understand what you're trying to do, but we need to do a better job of explaining to people what the differences are between accidental contamination, an overage of an allowed medication and someone trying to gain an edge.' I'm basically representing 4,500 people that have to go through every regulation that HISA believes is okay. So [Lazarus] and I will get together, we'll battle, and we'll come to a solution. I will say we don't always get along that great, but she has been very good about hearing me out.”

Lisa Lazarus said, “One of the things we heard a lot was that if the public hears that a trainer has a medication overage, they think that they're a cheater. That they don't understand the difference between true doping substances, and medications that are allowed, but just not on race day. And so, one of the things that the [AMDC] does is distinguish very clearly between allowed substances and banned substances.” Violations for each were very different, she explained. “We're there to protect the 99% of trainers who are competing cleanly, so that they get a fair race.”

Safety, and The Traceability of Thoroughbreds

Tracing what happens to a Thoroughbred when it leaves racing or breeding has long been a problem for the industry, an issue that Kristin Werner, the Senior Counsel for The Jockey Club, addressed in her report on Thoroughbred Safety.

“I am pleased to announce that the `Transferred as Retired from Racing' process has gone digital,” said Werner. “The permanent removal of a horse's eligibility to race is beneficial to the retiring racehorse, but the process requires thoughtfulness and transparency on the part of the seller and buyer to avoid contractual disputes or other disagreements. To that end, the previous process required a notarized signature and hard-copy form to retire a Thoroughbred from racing. With the assistance of digital signature verification, we are now able to confidently collect the required signatures through the Interactive Registration website, which will make the process easier for everyone involved.”

Kristin Werner | Skip Dickstein

Werner also reported that the ease of traceability is increasing due to the replacement of hard-copy certificates with digital ones starting with the foal crop of 2018. This, she said, “will allow The Jockey Club to follow up with the certificate manager to try to trace a Thoroughbred that has exited the racing or breeding population with an unknown outcome. When this system is in place in 2024, an automated prompt will be triggered when a horse has not been reported dead and has no racing activity, no breeding activity, and no Thoroughbred Incentive Program number for a specified time period. The communication will explain why the prompt was triggered and will ask the manager to indicate the horse's current status.”

For foals born in 2017 and prior that had made a start in the past 10 years, she said, The Jockey Club would be reaching out to the last connections to try to determine their status.

Werner also addressed racing's safety issues.

“In 2022, data analysis from the 14th year of reporting to the Equine Injury Database (EID) showed a decrease in the rate of fatal injury in 2022 to 1.25 fatalities per 1,000 starts,” said Werner. “This is the lowest cumulative fatality rate since the EID was launched in 2009, and is the fourth consecutive year that the rate has decreased. While 99.88% of Thoroughbred races were completed without a fatality last year, clusters like those that occurred in April and May of 2023, unfortunately, cast a shadow over the good news and bring equine fatalities back into the headlines of national media,” she said, referring to the fatalities during the week leading up to the Kentucky Derby.

Werner said that the advent of the EID had allowed them to identify 35% of the risk factors which put horses at increased risk for breakdown during the running of a race. Those factors include a horse's vet list history, the race distance, and the time a horse has spent with a trainer. Long races, and longer time with a horse's trainer make that horse statistically safer.

The Safety Committee is also calling for the dissemination of information regarding the consistency and maintenance of track surfaces. “The Thoroughbred Safety Committee today calls for that information to be frequently measured at periodic distances and made available to the public,” said Werner. “Working with other key industry stakeholders, especially the Horseracing Integrity and Safety Authority and the Racing Surfaces Testing Laboratory, The Jockey Club recommends exploring the best methods for providing the racing surface data to the horsemen and public, including through an app, website, or other electronic feed. As with all of its recommendations, The Jockey Club will help provide resources to ensure this recommendation is met.”

Analytics in Sport

Michael Lopez, the Director of Football Data and Analytics for the National Football League, is a Saratoga resident who used to teach at Skidmore College in town, and a long-time horse racing fan. He talked about how the NFL uses data to drive decision-making, and ways in which he felt horse racing could do the same.

Michael Lopez | Skip Dickstein

And while the sports are completely different, there were several interesting parallels.

Wearable technology has been an interesting new potential safety tool for horses, designed to measure things like their regular stride to detect any changes that might indicate a problem. The NFL is doing the same.

“Recently,” said Lopez, “all NFL players are now wearing RFID chips in their helmets, shoulder pads, and cleats, small enough so that the players don't feel them, but enough so that a signal is emitted each time they step onto the practice or game field. The burden is heavy–this data is messy and the tracking cumbersome–but the idea of a cleat specific to a running back on turf, or a helmet specific to a quarterback who likes to scramble–gives the league plenty to work on. And each practice, each club is required to wear tracking devices that give insight into a player's load, distance traveled, speed, etc., which enables sports scientists to evaluate performance, if players need to tone down, or injury recovery.”

Moreover, the NFL is timing the replay review process to ensure that a coach's challenge in a more prominent game is treated the same way that it would be in a less-prominent one. After the non-disqualification of Forte (Violence) in the July 29 GII Jim Dandy S. prompted much discussion over whether a less well-publicized event would have merited a DQ, the topic struck home. “The horse racing corollary is obvious,” said Lopez. “When, why, and how stewards decide for or against a disqualification, because a possible DQ at Del Mar should have the identical decision-making process to one at Saratoga.”

Engagement With Racing

Lindsay Czarniak | Skip Dickstein

Lindsay Czarniak was just a baby when her father Chet took the job as the first-ever horse racing reporter for USA Today in 1982. Today, she is a sports broadcaster who anchored SportsCenter for six years and who works as a Fox Sports sideline reporter. She is a studio host for NBC's summer and winter Olympics. She is also an influencer with America's Best Racing and a West Point Thoroughbreds partner who was one of the co-owners of Jace's Road (Quality Road) in this year's Kentucky Derby. “My goal was to give folks that pay attention to my content the VIP access,” said Czarniak. “I had so many people pulling for Jace's Road because they knew we were in the big race.”

Her advice for racing? Lean into storytelling and access; just because it feels normal to people within the industry doesn't mean that it is to fans. “There is a family aspect, a necessary aspect, a high-stakes aspect to this sport that your average sports fan would consume.”

She also advised racing to place itself where young people consume content, i.e., streaming platforms, digital and social media, etc., and to communicate the safety steps that have been taken.

Racing and Data

Kyle McDoniel was named the President and COO of Equibase on June 1, 2023, and comes from a sports and data background, having most recently served as vice president of U.S. Strategic Partnerships for SportRadar, a sports technology company.

McDoniel talked about the challenges inherent in GPS tracking of horse racing, and said that Equibase is now producing tracking at 28 tracks across the U.S. and Canada, representing over 75% of North American handle. In addition, he said the company was continuing to invest in graphical representations of past performances, including those that illustrate stride frequency and length averages, among other things.

Janney's Closing Remarks

Stuart S. Janney III | Skip Dickstein

In his closing remarks, Jockey Club Chairman Stuart Janney said that the advent of HISA had done a lot to secure racing's future.

“Four years ago, at this program, a great Australian breeder-owner, John Messara, speaking about the proposed federal legislation, said, `You've got everything to unleash your monster of economic rewards if you were to join the rest of the world in this harmonization in terms of the drug rules.' John was right and we are here today and it's now time to capture that future.”

To do so, said Janney, “I have two suggestions. First, we have to embrace the international aspect of the sport. Racing is global and thankfully, in many parts of the world, the sport is thriving.”

His second suggestion, he said, involved marketing. “We need to get past the concerns that we are constantly in turmoil, rocking from one crisis to the next. Another Round Table speaker from the past, David Fuscus, [who] discussed crisis management, said, `If we come together as an industry, negative perception can be turned. There is hope we can come through these dark days, but to do so, the public needs to understand what we're doing and believe we are on a path to success.'”

Entire Conference Available Online

To watch the entire Round Table conference, click here.

The post Technology, Engagement, and the Future the Focus of Annual Round Table Conference appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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1-First, the basics. Betting handle is the lifeblood of our industry. It directly funds purses, creates all the jobs in our business, and indirectly funds the commercial bloodstock industry—no (or less) purse money to run for, and eventually yearlings will have the market value of show horses, and stud fees will follow them down.

2–The parimutuel pools are a market; horseplayers compete against each other, not the house. CAW is not just someone using a computer to handicap. Yes, there is a handicapping element, and if someone creates a good handicapping model, good for them. But the important part is this—CAW “players” are being given a massive advantage over regular horseplayers. They get electronic access and a last split-second look at the pools, which gives their computers the ability to assess the situation in a microsecond, and automatically make hundreds of targeted and incremental bets, totaling tens of thousands of dollars per “player,” right at the bell. No human can do that, or compete with it.

3–Because CAW is responsible for so much handle, and because many of the CAW “players” have banded together to negotiate, they receive gigantic rebates. So in effect, they are playing into a much lower takeout than the general public, and that, combined with the advantage they have been given, enables them to basically vacuum the pools. And since it's a market, if they're siphoning off money, someone else is losing it. More on that in a moment.

4–In our industry, we publish handle figures, not profit and loss. But remember: CAW “players” get gigantic rebates. That means the industry gets to keep much less of every dollar they bet—roughly speaking, it takes $3 of CAW handle to equal $1 bet in the backyard at Saratoga. So if overall handle stays the same, but CAW handle is replacing non-CAW handle, for purses, and for everyone else in the industry, it's like handle going down. And CAW is now responsible for about one-third of national handle.

5–The overall retail blended takeout on racing is normally about 20%. But with the CAW “players” making money as a group, it means the horseplayers who make up the other two-thirds of the pools are in effect paying the entire takeout. So for them, the takeout is up to roughly an onerous 30%. Now, horseplayers are not like the people who buy expensive yearlings. They generally work for a living, and as a group have a finite amount they can lose over the course of a year, or lifetime. So as the takeout has gone dramatically up, one of three things has to happen:

A) Horseplayers bet the same amount, and tap out faster. That reduces churn on handle, and handle overall goes down.

B) Horseplayers reduce what they bet as they lose more, to make their money last longer. Handle goes down.

C) Horseplayers stop betting or switch to legal sports betting, which has a takeout of between 5-10% (and no learning curve, since most of us grew up with these games, and there are no odds changes after you bet). Handle goes WAY down.

In other words, CAW isn't just disguising the drop in non-CAW handle, it is CAUSING it.

I know many serious, lifelong horseplayers who now only play on big days, or who have quit the game entirely.

6–So here it is; figures courtesy of Pat Cummings:

As CAW handle has gone from about eight percent of the pools to about a third over the last 20 years, non-CAW handle has nosedived. To give you an idea of how short a time period we're talking about, Smarty Jones won the Derby in 2004.

ADJUSTED FOR INFLATION, ORDINARY (NON-CAW) HANDLE IS ABOUT ONE-THIRD OF WHAT IT WAS JUST 20 YEARS AGO.

Do I have your attention now?

Almost all of that drop came before the advent of legal sports betting. And remember, the non-CAW handle is the oxygen-rich blood that nourishes everything. CAW is not just taking money out of the pockets of ordinary horseplayers; it's killing horsemen and the industry as a whole.

This is an existential crisis, without exaggeration. Since only handle figures are published, the picture has been obscured to the public, but we are not talking about a long horizon–I think major cracks will start becoming visible within the next year or so, because the downward spiral is accelerating rapidly now that there's sports betting. And as ordinary handle goes down, CAW will as well–the robots adjust their bet size to the size of the pools, so that they aren't killing their own prices. These guys aren't in our game for fun, like horseplayers are, they're here to suck money out of the pools. And when they no longer can, they will leave.

7-So, what can be done? Finally, some good news: because the industry makes so little from a dollar of CAW, eliminating a portion of their handle will not have anywhere near the same effect as eliminating the same amount of ordinary handle.

The first thing that has to happen is that the unfair advantage has to be taken away from the CAW players. Their special access to the pools has to be shut off with three minutes to post, like NYRA did with their win pool. But it can't be just cosmetic. It has to happen in all pools.

The second thing is to reduce their rebates. If you make twice as much from each dollar bet, even if CAW handle is cut in half, it's a wash. And if those two actions erode their edge to the point where they bet much less, good; that's the idea. We need to knock that third of the pools figure down by quite a bit, to salvage what's left of the non-CAW handle, and hopefully create more.

I'm using “salvage” advisedly, because we are hemorrhaging customers, and once they are gone, it is hard to get them back. Since I wrote the first draft of this letter one of those cracks has appeared. Golden Gate is closing, in an attempt to triage California racing. We need to stop the bleeding. And we need to do it right now.

Jerry Brown is the president of Thoro-Graph, Inc. 

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Using data from Del Mar, Cummings concluded that CAW players are betting more each year and that the amount of betting from “everyone else” is declining.

“Not only are the sharks growing, but the minnows are declining,” he said. “For the first time in this paper, were able to really separate how the CAW play has grown and how all other customers have in almost every pool shrunk. Total handle figures are often marketed in the industry press releases, they're touted. It looks like on an annual basis that not a whole lot has changed. That's not telling us the accurate picture. For years now, the Thoroughbred Idea Foundation has wanted to really dive into who's betting, how are they betting, how are they participating and how is the market changing? What we're seeing now more clearly than ever before is what's happening with all other customers. We're talking about people that may bet $10 a year or maybe even $2 million a year. They are a smaller percentage of the pools and declining.”

When asked if this could lead to a “doomsday” scenario, whereby the “sharks” have driven all the “minnows” out of the game, Cummings said that is in fact a concern.

“I'd call it a real threat,” he said. “And I would suggest that some of the biggest sharks are eating some of the smaller ones too.”

He estimated that CAW players now account for 33% of the total handle in U.S. racing

Cummings is not in favor of banning CAW players. He recognizes that if they go away overall handle would plummet, which could be catastrophic. The answer he says is to find ways to level the playing field when it comes to the sharks versus the minnows, starting with the takeout.

“Takeout rates have not come down commensurate with all of this money coming in (from CAW players) at low price points and driven by technology,” he said. “That's the opposite experience that investors have had in almost all other areas, where we have seen costs for customers come crashing down. The days of the $35 stock commission are long gone. And yet 50, 60, maybe even 70% of all trading on the stock market now is high-frequency trading. Ordinary investors in 401Ks and IRAs, regular mutual fund holders, exchange traded funds, different products have been created to allow ordinary investors to buy and hold. And their costs have come down from where they were 20 years ago. We have not seen that same evolution in American horse racing wagering, which remains one of the most expensive gambles out there.”

Cummings also called on the industry to end all jackpot bets. He has found that not only do they keep money out of circulation by cutting down on churn, but that the CAW players often come in and take home a disproportionate amount of the pool at the expense of the regular player.

“If you run a parimutuel wagering business and your goal is to keep collecting commissions on parimutuel wagering, then why introduce a bet that limits the number of times that a customer can keep coming back to your window and churning their money?” he said. “You're going in the complete opposite direction to all traditional business logic, which is you should drive customers back into your wagering pools. Yet, tracks continued to persist with these bets. The jackpots need to go as quickly as possible. Tracks need to revert to a traditional play, get that daily payout, get that churn up. The sport needs churn. It's better for every stakeholder along the way.”

Elsewhere on the podcast, which is also sponsored by Coolmore,https://lanesend.com/  the Pennsylvania Horse Breeders Association, Kentucky Thoroughbred Owners and Breeders,  1/st Racing, WinStar Farm, Lane's End, XBTV.com and https://www.threechimneys.com/ West Point Thoroughbreds, the team of Bill Finley, Randy Moss and T.D. Thornton, took a look at the win by Two Phil's (Hard Spun) in the GIII Ohio Derby and his subsequent injury and retirement. There was a look back at the Royal Ascot meet, where one of the highlights was the win by the U.S. based 2-year-old filly Crimson Advocate (Nyquist) in the G2 Queen Mary S., and a look ahead at Saturday's GI Stephen Foster S. at Ellis Park. The podcastwrapped up with a discussion on a new proposed rule by the New York Gaming Commission which would require all horses to undergo checks by a veterinarian 72 hours prior to a race or a workout.

Click here to watch the Writers' Room podcast or here for the audio-only version.

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“I've spent over 40 years of in and out of government, thinking about and writing about the gaming and horse racing industry,” said Brown, a former advisor to New York's Governor Mario Cuomo and an attorney that lives just south of Albany. “I want everyone to come away from this conference having learned something interesting, but most of all, I want them to have fun.”

As the director of the what will be the third installment of this hybrid conference that will be held at the Hilton in Saratoga Springs, New York from Aug. 14-16, Brown and his planning committee have put forth yet another stellar card. Once again, those in attendance will take in cutting-edge topics under the umbrella of racing and gaming with an ambitious schedule just out this week.

This year's slate runs the gambit when it comes to angles and there is something for everyone that is interested in the intersection between these two worlds. “We've got something for lawyers, thorny issues, where the little guy fits in and how technology shapes and impacts the racetrack and the casino,” said Brown.

After an opening reception at the Adelphi Hotel on Monday, Aug. 14, the conference shifts into high gear Tuesday with experts that will speak on the following topics:

• New York Casino Expansion to New York City and Surrounding Counties: Is the Finish Line in Sight?
• Consolidation of Gaming: Status and Implications
• Tribal Digital Gaming: Has the Moment Finally Arrived?
• Technology and Gaming: New Challenges, New Solutions
• The Implications of Exclusion for Racetracks and Casinos
• Consumer Protections and the Federalization of Gaming

Pat Brown | courtesy of Brown and Weintraub

“We want this conference to not be so New York-centric,” said Brown. “The way you do that is by thinking broadly and topics like tribal gaming, regulatory issues and legal questions like exclusion, are all applicable across state lines.”

Sandwiched within day one is a lunch lineup which includes an address by Stacie Clark Rogers of the Thoroughbred Aftercare Alliance and a keynote delivered by Joe Asher, President of IGT Sports Betting. “Joe's is coming to keep us energized, entertained because I think lunch needs to give everyone a break from the conference,” Brown said.

On day two, the conference concludes with four sessions that deal with aspects of racing and wagering, including:

• Harness Racing: An Industry in Decline–or in Transformation?
• Historical Horse Racing Machines: The Tail Wagging the Horse?
• HISA–Legal Limbo and Regulatory Reluctance
• Racing's Changing Customer Base, CRWs and the Future of Betting

Each of these hot-button issues draw from an arc of past precedent and are extremely significant to the future of the horse racing industry. “Not everything is about Thoroughbreds,” said Brown, who has also owned shares in racehorses. “We want to expand the vision to harness racing because it has much to teach us about statutory issues concerning aspects like the minimum number of race days.”

Brown knows that a panel concerning HISA is important, but he wanted to find a way to zero in on something specific. How state regulators are handling the current situation seemed appropriate. He also understands that conference attendees will be particularly keen to hear about the impact of Historical Horse Racing Machines and the power behind Computerized Robotic Wagering groups. “I have no doubt that those sessions will generate some interesting questions and debate, especially when everyone is talking about the impact on track handle,” said Brown.

Wrapping up the conference, some 50 attendees who purchase tickets will have the opportunity to take in the Saratoga meet along The Spa Veranda. Pat Brown's idea of fun, indeed.

Click here for more information concerning registration and hotel information for The Racing & Gaming Conference at Saratoga.

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“The Thoroughbred Idea Foundation's analysis of data from Del Mar between 2018 and 2022 showed on an inflation-adjusted basis, per-race (or per-opportunity basis for certain bet types) CAW betting, from what is believed to be 17 accounts, has grown tremendously in the last five years-up 46% in the superfecta pool, 49% in trifectas, 78% in pick fives, 128% in the show pool and a staggering 403% in the pick six pool,” reads the report, concluding, “The trend for all other customers is disturbing.”

This trend is problematic; the report concludes that major problems is that the increases in CAW betting, due to rebates, does not make up for the handle decline from other sources. That has a deleterious effect on purses, whose soul source of funding in California is through wagering.

The report, “Sharks & Minnows–Managing the Growing Imbalance in Racing Wagering Markets,” is available on the TIF website, racingthinktank.com.

CAW bettors receive rebates on the takeout because of the large volumes they bet, but they quote Del Mar president Josh Rubenstein as saying that those rebates will be limited at the Del Mar summer meet–at least in the win pool.

“We get that late odds fluctuation is frustrating to players,” Rubinstein said, referring to the fact that CAW players place their bets based on their perceived value in the odds close to post time, which creates major odds shifts–often after the horses have left the gate.

“Beginning with our upcoming summer meet, [we] will be implementing new protocols for CAW players that are designed to limit participation in the win pools at two minutes to post. Based on what we've monitored and analyzed from other tracks, we believe these protocols will reduce late odds changes.” TIF reported that the largest rebates will be given to bets made with more than three minutes to post, a smaller amount at two minutes, and the smallest rebate at under two minutes. Non-rebated customers pay 15.43%, the report says.

“Limiting CAW guardrails to merely a rebate change in the win pool, while potentially helpful in reducing some late odds changes, amounts to little more than window dressing for mainstream customers,” TIF concludes. “CAW betting in Del Mar's exotic pari-mutuel pools, particularly the trifecta, superfecta, pick three, four, five and six pools has been substantial. Play from Elite (Turf Club, a top CAW) and RGS (Racing and Gaming Services, another) customers exceeded 32% of total handle in each of those bet types last year and was 38% of pick five handle.

“CHRB data does not delineate how much is staked on the early pick five, with its friendly 14% takeout to mainstream bettors, and how much is on the high takeout late pick five, with a 23.68% takeout rate. It is reasonable to expect the percentage of CAW play reflects their enormous pricing advantage over the public on the late pick five. Total handle figures do not tell the most accurate story. In nearly every pool offered by Del Mar, all non-Elite and RGS handle is declining.”

To read the full report, click here.

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