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TIF: Wagering Insecurity, Part 9–Alerts

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

Faced with remarkable competitive pressure from the rise of legal sports betting, horse racing is at a crossroads. Confidence amongst horseplayers and horse owners is essential to the future sustainability of the sport. Efforts to improve the greater North American Thoroughbred industry will fall flat if its stakeholders fail to secure a foundation of integrity. Achieving this is growing increasingly difficult after the sport has neglected its core base–horseplayers–for decades.

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

Suspicious betting alerts were generated across five races at one U.S. track in the fourth quarter of 2020.

It was the first time the International Betting Integrity Association (IBIA) registered such alerts on American racing.

The betting they monitor is through licensed European-based betting operators, many of whom are offering bets on American racing at fixed odds. Up until at least the start of the “Wagering Insecurity” series, no U.S. regulators had an information-sharing relationship with the IBIA.

Worldwide wagering requires worldwide monitoring.

While American customers cannot yet legally partake in such wagers outside a few races booked by Nevada casinos, the practice is soon to come to New Jersey residents and it has been a growing business overseas.

One bookmaker estimates the total handle on U.S. racing at fixed odds for European customers in 2020 at more than $1 billion.

No matter where the wagering takes place, regulators and stewards must be attentive to the potential integrity threats facing the sport.

For the complete article, click here.

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TIF: There’s Still Time To Make Handle A Top Priority For Racing

Racing needs a long-term plan which will put the sport on a path to raise handle to nearly $50 billion annually with more than $5 billion held by the industry by 2040.

Sound optimistic?

Falling well short of that goal would still be a monumental accomplishment given we are on track for another year at just $11 billion in handle, and down nearly 50% in the last two decades, adjusted for inflation.

So where are the plans from the industry to start thinking long-term about not just surviving, but thriving, and building a robust, wagering-forward industry?

Horse racing has a tremendous opportunity to lean into a massive culture of betting liberalization, but it has otherwise failed to capitalize on it. Time is still there, and the opportunity is not yet lost.

There is no doubt horsemen should be thankful for the enrichment they've received through purses over the last two decades coming by way of slot machines, video lottery terminals, historical horse racing or other revenue sharing from casino-related operations. In many cases, tracks and horsemen lobbied relentlessly for them. It makes sense that they continue to fight for them, but not at the expense of racing's most obvious source of sustainable revenue – actual wagering on racing.

These significant purse supplements have allowed the industry to minimize the importance of presenting a modern wagering product. Most tracks have not focused on making racing wagering more competitive and most horsemen's groups have not advocated for meaningful improvements to stoke wagering, either.

In some cases, 90% of prize money has come from subsidized sources beyond racing, wagering on the sport has not seemed as important – a reality which is reflected in annual handle figures over the last 20 years. Many owners and trainers within horsemen's groups do not possess a detailed understanding of racing wagering. They don't know what to advocate for to improve their own futures.

This is problematic, because as it relates to prize money for racing, the future is not bright.

Subsidies to racing from gambling beyond racing, in whatever form they take in states that have long enjoyed them, are changing. Some states are in worse shape than others. The pain of the industry's likely contraction will be widespread.

Horsemen cannot just want a bigger slice of a shrinking pie, it must advocate for growing the pie so that the slices grow for all parties.

Existing groups – including TOBA, state THAs, HBPAs and others – must begin to develop a meaningful strategic plan. Transformational steps to ensure the best possible future for racing must be embraced. At the forefront, a radical rehabilitation of wagering on racing is needed. No ideas should be off the table.

The sport is in no position to turn away from unexplored revenue streams or customer bases. Fixed odds betting on American racing is evolving, albeit slowly, and while there is no denying that the cut from fixed odds betting to tracks and purses is smaller than that provided by pari-mutuel wagering, ignoring the fastest growing legal wagering opportunity in modern American history cannot be an option. Racing's path through fixed odds must be navigated delicately and adjusted over time, but racing needs to be co-located with all other wagering opportunities.

Racing can make its pari-mutuel offerings better and get its wagering product in front of far more customers. The question, of course for all of this, is in the specifics. How?

The sport needs short, intermediate and long-term strategic planning, identifying and plotting courses to achieve goals over the next 10, 20 and 30 years.

Racing had no such plan in 1990 when annual wagering was an inflation-adjusted $18 billion and a decade later, topped $21 billion, also when adjusted for inflation. But what has happened in the intervening two decades is a mass legalization of wagering opportunities combined with significant technological innovations and a substantial increase in personal entertainment options. Racing has to compete if we are to preserve our sport, let alone grow it.

Where are the attempts to voraciously advocate for a most robust wagering offering for our sport which will likely rely far more on it in the next 20 years than it has in the past 20 years?

Just because we lack a centralized structure to oversee an industry master plan does not mean that those groups which exist now are hamstrung from starting one. Owners, breeders and all horsemen should be as interested in growing wagering as anything else they do. Many don't have the first clue where to start, and while unfortunate, it's understandable. There should be no further delays in correcting our course.

The Thoroughbred Idea Foundation was launched to advocate for progressive change in racing because we believe it is possible to turn the sport around.

With a concerted effort, racing could double handle in the next ten years, and double it again in another decade, but only if changes are adopted which would offer more realistic pricing of pari-mutuel wagers, complement tote wagering with fixed odds betting, modernize technology, improve access to data and substantially increase transparency across the sport.

Racing must be more open in reporting on the business of betting – where it is coming from, what it contributes to purses and how it has changed over time. This movement should be driven by owners. Racetracks have proven insufficient leaders of the sport and industry organizations have been distracted by other topics. Nothing should be more top of mind than how we fund our business and keep racing viable.

Racing needs a new generation of horsemen's leadership to propel it forward. Those who might not think it is the role of horsemen to relentlessly pursue improving the wagering business should think again – their role is federally protected by the Interstate Horseracing Act and should be the envy of any professional sporting endeavor in the country. Racing needs increased wagering to survive, let alone thrive.

The business of betting has been ignored for far too long. A new future for the sport promotes a modern wagering business at the heart of racing.

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The Week in Review: Before Feasting Upon Thanksgiving Fare, Chew On This

Last week’s headlines had little to do with on-track action. This coming week though, we awaken from the sport’s annual post-Breeders’ Cup snooze with an eye toward decent Thanksgiving weekend racing and on-the-horizon stakes that could add a touch of intrigue to the tail end of the 2020 season.

But before you feast upon the holiday fare, chew on these side dishes that anchored the last seven days of the news cycle (plus a few other tidbits that didn’t land on the front pages):

Last Tuesday we learned via federal prosecutors that more doping charges could be in the pipeline for existing and new defendants in the alleged years-long drugging conspiracy involving now-barred trainers Jason Servis, Jorge Navarro, and a wide-ranging cast of enablers that includes veterinarians.

A key takeaway from that Nov. 17 court hearing is that the lead prosecutor said he now believes that two of the alleged performance-enhancing drug (PED) suppliers were pushing at least some sham pharmaceuticals to Servis that didn’t really do anything to make a horse faster or stronger.

But, the prosecutor added, the government will still be treating those substances as if they were actual PEDs, because the true intent on the part of Servis was to allegedly pump horses full of illicit drugs.

The other main point gleaned from last Tuesday’s hearing is that this case isn’t likely to go to trial until the second half of 2021 because of the voluminous amount of evidence that is surfacing in the discovery process.

So it’s conceivable we could still be batting around this court case over next year’s Thanksgiving turkey.

Meanwhile, on the western front…

The day after the federal doping case hearings, TDN asked California Horse Racing Board (CHRB) equine medical director Rick Arthur, DVM, to identify what under-the-radar substance might be likely to next surface as drug of abuse.

Arthur replied in the Nov. 18 Q&A that “It’s not really under the radar. We are concerned with SARMs [selective androgen receptor modulators]. Those are a class of drugs that have anabolic-like activity, but they are not really anabolic steroids. We’ve seen some of them in testing already [and] that is a group of drugs that I think that we have to pay attention to.”

The following day, during the CHRB’s monthly meeting, Arthur brought up a separate topic about an abused substance that hasn’t been in the headlines lately: Thyroxine.

In introducing a new rule proposal Nov. 19 to curb thyroxine “to the point that it really will not be used any longer within CHRB facilities,” Arthur revealed that since the start of this year, veterinarians on the Southern California circuit alone have reported 287 prescriptions for thyroxine. Incredibly, he added that “over half of the prescriptions” were written for just two trainers, and 80% of that thyroxine was “prescribed by just three veterinarians.”

This despite a CHRB advisory against thyroxine that has been in effect for more than six years warning against its use in horses that don’t legitimately need it because of the drug’s nasty reputation for producing cardiac arrhythmias and atrial fibrillation. Arthur added that “while we cannot assert a cause-and-effect relationship, one sudden death already in 2020 occurred five days after the horse was prescribed thyroxine.”

The CHRB did not disclose the names of the trainers, veterinarians, or the horse that perished after receiving thyroxine. The motion to advance the rule passed, 7-0.

Fixed-odds experiment coming to NJ…maybe

Dennis Drazin, the chairman and chief executive of Darby Development LLC, which operates Monmouth Park and its sports book, predicted to the New Jersey Racing Commission (NJRC) last Wednesday that within five years, fixed-odds betting has the potential to comprise “a significant portion of the handle” in horse racing.

Several commissioners expressed fears about fixed-odds betting cannibalizing the existing pari-mutuel system. Yet despite their repeated lamenting about “last rites” to a model that “will lose out in the end if it has to compete” with fixed odds, no one on the NJRC inquired about what a realistic pricing structure might look like for the new model so it could benefit bet-makers, bet-takers and the horsemen.

Fixed-odds bookmaking, which allows a customer to lock in pricing at the time of the wager, does indeed have theoretical promise to revolutionize, reenergize, and even replace traditional straight wagering in this country (while leaving exotics to be better handled by pari-mutuels).

But when the NJRC voted 4-0 Nov. 18 to approve a fixed-odds pilot program for 2021 that would be limited to bets on out-of-state Grade I races, it didn’t even raise the issue of how the bets would be priced in terms of takeout so that the tracks that fund those races get paid for their product.

Granted, the pilot program wasn’t even the NJRC’s idea. It was handed down by the state’s Division of Gaming Enforcement, which has the authority to regulate fixed-odds wagers. The NJRC was only involved because a provision in the Interstate Horse Racing Act of 1978 requires approval from the receiving state’s racing commission before wagers can be taken on imported signals.

What’s in a name?

It’s great that a smaller track laden with no-frills charm like Fairmount Park will have its lifespan extended thanks to 2019 legislation in Illinois that granted it the privilege to host slot machines, table games and sports betting.

Not so enthusing was last week’s announcement that Fairmount’s corporate gaming partner is “rebranding” (read: obliterating) the name of the storied oval 12 miles east of St. Louis so it will now be known as “FanDuel Sportsbook and Horse Racing.”

Apparently, 95 years of history are getting tossed into the nearby Mississippi River. Sure, the corporate backer is putting up millions of dollars. But FanDuel wouldn’t be there in the first place if it wasn’t for Fairmount hanging in there long beyond most expectations for it to survive.

In the Nov. 16 press release that heralded the erasure of the Fairmount name, the partners also announced that the company will “fund the renewal and running of the $250,000 St. Louis Derby, the track’s signature event, which has not been conducted since 2006 due to financial constraints.”

Actually, the 2006 St. Louis Derby was the only edition of the race ever conducted. It was the legacy of the old Fairmount Derby, which was run inconsistently between 1926 and 1996, with decades-long gaps between some runnings.

But that one and only St. Louis Derby did produce a good trivia question. Can you name the winner of that 2006 stakes? He was a colt who won six straight races leading up to the GI Kentucky Derby. He ran 12th behind Barbaro, and it was discovered post-race that he had been hindered by an ankle chip. After surgery to repair it, this chestnut was pounded to 4-5 favoritism when returning to his winning ways at Fairmount on a muggy Saturday night in August.

Need another hint? A year later, that colt flourished as a Grade I force, sweeping both the Whitney H. and Woodward S. at Saratoga.

Lawyer Ron is the answer. I’ll be rooting for Fairmount to lure another high-profile horse to the St. Louis Derby in 2021.

I just won’t be referring to that appealing old track by its unimaginative new name.

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Woodbine CEO Says Sports Betting Bill Could Devastate Canadian Racing Industry

A bill that would legalize single-event sports wagering in Canada and is now being debated by members of Parliament in the Canadian House of Commons would have a disastrous impact on racing, warns Woodbine CEO Jim Lawson. The bill does not allow for the racetracks to be part of the sports betting universe and, perhaps even more worrisome, it would allow non-racing betting sites to take fixed-odds bets on racing without having to share any of the revenue with the industry.

“This is a real threat to the industry and certainly the Canadian government cannot ignore horse racing in terms of this legislation or they risk, ultimately, putting the horse racing industry under,” Lawson said.

Lawson said that under normal circumstances he wouldn’t expect that the bill, as it is currently written, would go very far. But he fears that the Canadian government is so desperate for money to deal with the numerous expenses that have come about with the pandemic that lawmakers might jump at the opportunity to legalize sports betting and the quick fix it represents.

“This bill has gained momentum,” he said. “The economic realities that COVID has created in terms of health and education costs means it will take years to catch up. Other than increasing people’s taxes, and we are taxed enough in Canada, they have to look for alternative sources of revenue and this is an obvious one.”

According to the website casino.org, the bill has backing from members of the four largest parties in the House of Commons–Liberal, Conservative, Bloc Québécois, and New Democratic–and a member from each spoke in support.

With more and more U.S. states legalizing sports betting in the U.S. and with governments everywhere needing revenue, it is no surprise that efforts have begun to legalize sports betting in Canada. But what sets this bill apart from ones in the U.S. that have made sports betting legal is that it lumps fixed-odds bets on racing in with sports betting. The same firms that are given the green light to take sports bets can also offer fixed-odds sports bets and would not be required to turn over any of the money to the sport.

“We are the producers of the content and we are paying the operating costs of running the races and paying the purses,” Lawson said. “We should be the beneficiaries of fixed-odds betting on horse racing. That’s just common sense. You can’t allow someone else to encroach upon our only revenue source. You can’t take away that revenue source by allowing fixed-odds wagering on a product we are producing and pay to produce.”

While allowing outside firms to profit off of Canadian races is bad enough, Lawson said that it would be particularly troublesome for Woodbine to be left out when it comes to fixed-odds betting, which he believes will be successful.

“Look at Australia, where fixed-odds wagering now accounts for 60% of the wagering on horse racing,” he said. “What if that phenomenon were to repeat itself here and we lost 60% of our wagering? It would put us out of business if we didn’t either control or participate in fixed-odds wagering on horse racing.

“Young bettors, for the most part, don’t like pari-mutuel wagering. They find it complicated. They are used to fixed-odds betting on football. They’re tough to convert to pari-mutuel wagering. Your new audience, new gamblers, it’s likely that they are a fixed-odds person.”

Even if the language in the bill is changed to allow the tracks to operate and profit from fixed-odds wagering, Lawson would not see that as a victory. He wants Woodbine to be among the companies that get a cut of the sports betting pie, which, he reasons, will be so large that it will cannibalize betting on racing. He also sees sports betting as a way to end the need for the subsidies the government is now paying to support racing. In Ontario, the government hands out about $100 million a year to support the sport.

“The Ontario government is subsidizing horse racing through a funding agreement,” he said. “If you want to do the smart thing and totally eliminate any subsidy that we get, let us make up for the money through sports betting. We are not looking for a monopoly. We know there are casinos and others that will be able to take sports bets, we just want to be cut in. We deserve it because of our skill set and our technology. You’d be partnering with a company that is well positioned to conduct sports wagering.”

Lawson said that the solution is for the government to go back to the drawing board and come up with a bill that will include racing’s needs.

“We’ve got a pretty valid argument as to why this legislation needs to just pause and then do it in such a way that it protects the horse racing industry and in so doing allows a company like Woodbine to be a participant,” he said. “Not only would that support horse racing, it would support all the jobs across the country.”

Lawson does not think the bill will be voted on until some time early in 2021. That gives Woodbine and other industry leaders a chance to plead their case and get the language in the legislation changed. But there’s no guarantee that will work, and that is what has Lawson frightened about Woodbine’s future.

“The minute we heard about this bill we put up our hands and said, ‘Wait a second, the horse racing industry and the racetracks have to play a role in this,'” he said. “If not, we could have some very serious problems.”

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