“They spread like rabbits,” said Majority Floor Leader Senator Damon Thayer of the games that got their name because, when it comes to legality, they operate in a gray area. “Before you knew it they were everywhere. These were mom and pop small businesses who were basically running illegal casinos in the back rooms of their gas stations, convenience stores, bars and restaurants.”

“This was their business model,” Thayer continued. “They'd come into a state where the games were illegal but there might have been a loophole in the law of a gray area in the law that gave them enough impetus with local businesses to go in and install the machines.”

The American Gaming Association (AGA) estimated that there are 580,000 gray games machines nationwide, including 67,000 in Pennsylvania, another state where the racing industry is dependent upon revenues from legal slot machines at its racetracks. The AGA also estimated that gray machines generated $27 billion a year in revenue. In 2021, the games were banned in Virginia, another state where racing benefits from revenue generated by HHR machines.

To Thayer, a staunch supporter of horse racing, gray games were a problem that was about to get much worse as the number of the machines in the state continued to climb. Not only did he believe that the machines were illegal but he recognized the threat they posed to racing. Purses have exploded in Kentucky in recent years, in large part because of the success of Historical Horse Racing (HHR) machines. The gray games machines gave HHR players another outlet, a place to spend their gambling dollars that would be of no help to horse racing.

“On behalf of the 60,000 jobs and billions of economic activity our signature horse industry provides, I proudly vote aye,” Thayer said when casting his vote in favor of the ban.

During the 2022 fiscal year, a total of $4.5 billion was bet through HHR machines in Kentucky.

“We went through so much to get HHR legalized and the machines are very popular and have led to huge purse growth that we all predicted,” Thayer said.  “And along comes this illegal threat to pari-mutuel wagering on horse racing as well as charitable gaming and the lottery. The gray games machines were viewed as an existential threat to all forms of legalized gambling in Kentucky.”

The problem was solved on March 16 when Kentucky Governor Andy Beshear signed House Bill 594, which outlawed the machines.

“They're entirely unregulated,” Beshear said after signing the bill. “I don't believe that they were legal, yet they came into Kentucky and just set up and were taking dollars from Kentuckians and taking them out of State with zero regulation, zero taxation, zero system to help those that might develop any issues from using them for gambling.”

Despite having key politicians like Beshear and Thayer in favor of a ban, nothing came easily when it came to gray games. Just two weeks before Beshear signed the bill a plurality of lawmakers voted to table the bill. That group wanted to create a state gaming commission to regulate and tax the machines. And in 2022, the Kentucky House passed a bill to ban the machines, but it got sidetracked when the Senate amended the bill and the House would not agree to the changes. Thayer said that gray games were gaining such momentum that he feared that if they weren't banned when they were their proponents were going to find a way to make them, officially, legal.

“They wanted to go another year with the machines continuing to multiply,” Thayer said. “They knew that if they made it another year with no ban there wouldn't be much the state could do to get rid of them. There was a real sense of urgency to pass a bill.  The feeling was if there was another year of uncontrolled growth of these machines they'd be here for good. That's because the more businesses that installed the machines the more advocates they would have calling representatives and senators to convince them not to ban them.”

Gray games had their advocates, primarily from the businesses, many of whom were, as Thayer described them “mom and pop” operations, who said they could not stay in business if the revenue they received from the gray games disappeared. Thayer said the gray games operators and manufacturers had “an army of advocates” and spent heavily on lobbyists and campaign contributions.

“You had this big freewheeling group of gray game operators spending an incredible amount of money on lobbyists and campaign contributions” he said. “Of all things, they aligned with group of Southern Baptist legislators who voted against HHR who were arguing to keep the gray games going. They did so because they had people in their district who owned places where they had the gray games machines. It was a strange group of bedfellows, one of the weirder things I have ever seen.”

The bill banning gray games goes into effect July 1, at which time they will disappear from a state where the horse racing and breeding industries can usually count on support from the state's lawmakers.

“There were a lot of reasons to be against gray machines,” Thayer said. “Everyone who voted to ban the machines had different reasons for doing so. There certainly was a big group of legislators who thought it was an illegal form of gaming that was a big group that saw it as a threat to horse racing.”

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On Wednesday, Pat Cummings, the TIF's executive director, told an audience at the Global Symposium on Racing hosted by the University of Arizona Race Track Industry Program in Tucson that this incident was one of more than 60 purported pool manipulations he has documented at North American racetracks since the spring.

“The reason we wrote about that particular incident was because it was easily the biggest of more than five dozen incidents that we've tracked in the last six or seven months affecting, really, a significant number of racetracks, most of whom don't seem to know any of this is going on,” Cummings said.

And in the cases where regulators and racetrack operators do acknowledge that pool manipulation exists, Cummings said, they often believe the practice is victimless, without harm to the sport, or beyond their power to change.

All of those ideas are incorrect, Cummings said in a panel discussion titled “Illegal Betting's Threat to the Racing Industry.”

“I've approached regulators across America with this,” Cummings said. “And they say, 'Well, it is handle, right?' I mean, the tracks want this money…”

Cummings trailed off midsentence, giving the impression that industry bigwigs often shrug when faced with evidence of pool manipulation (Gulfstream, however, did discontinue quinella wagering days after becoming aware of the Nov. 11 pool irregularities).     A recent report titled “The State of Illegal Betting,” compiled earlier this year by the Asian Racing Federation, exposed the proliferation of unlicensed and unregulated online horse racing and sports wagering companies. The report found the global demand for online wagering is increasing faster than industry's ability to react. The suspicious betting patterns detected by the TIF in American pools may have a connection to non-pari-mutuel bookmaking.

Wednesday's panel, which also included global perspectives from Matt Fowler, the London-based director of integrity for the International Betting Integrity Association, and Martin Purbrick, the chairman of the Asian Racing Federation's Council on Anti-Illegal Betting and Related Financial Crime, outlined some major threats and discussed what actions could be taken going forward.

But it was the presentation by Cummings–who isn't even a regulator or investigator, but is more akin to an ombudsman for U.S. wagering–that hit closest to home for most stateside racing stakeholders.

Cummings said the first fundamental step is to recognize that pool manipulation is never going to be eradicated entirely. It's not even explicitly illegal. A good chunk of it, he said, occurs with the aid of the “vast” gray-market global bet-booking business whose handle is “far in excess of the legal market, and it has infiltrated American racing. There is absolutely no question.”

Cummings gave an overview of how a manipulator might work, using show pools as an example. (If you want to read a more in-depth TIF writeup on the process, click here.)

A manipulator might bet $2,000 to show on a horse or horses who look certain to finish in the money at a track where the fields are uncompetitive and/or short and the show pools are miniscule. But instead of betting that money in the pools, he instead spreads it across a number of different offshore bookmakers in smaller increments. These are bets he intends to win, and it's important to note that the offshore outlets don't often “lay off” this money into the mutuel pools.

In the same race, the manipulator then bets, say, $4,500 into the show pool on one of the longest shots on the board, and this money does go through the mutuels, making a horse who is unlikely to hit the board based on past performances the overwhelming favorite in that pool. This bet he intends to lose–it's a business cost whose sole function is to abnormally drive up the show prices on the more likely horse(s) to hit the board that he backed with the offshore bookies who pay the on-track prices.

If the race unfolds as the manipulator envisioned it will, the hapless heavy show favorite runs out of the money, while the more talented horse(s) he backed via bookmakers cruises home in the top three, triggering something like a $21.00 show payoff.

“So they sacrificed $4,500 to win maybe $21,000,” Cummings said. “The manipulator is spreading his or her risk, likely across multiple accounts, because the offshore operator may not pay them. That's just part of the risk.”

Cummings continued: “I don't see a lot of [bettors] talking about this or noticing it. And the reason is, if you bet an even-money shot to show thinking you were going to get $2.20, and [instead] got $21.20, who's complaining?”

That's an obvious example that should stand out, Cummings said. But this pattern occurs with more subtlety using smaller dollar amounts, he explained, like when a manipulator might be content not to make a single big score, but instead routinely inflate 1-to-5 shots in the show pool so they pay off like a 4-5 shot would.

And occasionally, the horse who was supposed to be a dud wins or hits the board, Cummings said. That's when bettors do speak up and complain about the pools not being on the level, because the big long shot they legitimately bet in the mutuels returns a vastly underlaid show payout.

That can lead to image and integrity problems, Cummings said.

“You do not want a bad name associated with your product. And every time someone manipulates your pool, if it's noticed, it's bad for your product,” Cummings said.

Beyond creating bad perceptions, Cummings said, rampant pool rigging could also encourage manipulators to get a bit bolder with their actions, perhaps by spending a bit extra to bribe participants to ensure desired outcomes in races.

“If someone's willing to bet $4,500 to show in a race where the winning jockey is earning $900, what's an extra $500 to make sure they don't run in the money?” Cummings said. “Or an extra $500 to the trainer to tell the jockey to maybe be a little slow out of the gate today.”

Cummings stressed that to his knowledge, there is no current evidence that pool manipulators are reaching out to arrange fixed races.

“That's a good thing–for now. But it's out there. And it happens. And there is no reason that others might not try to copy this,” Cummings said.

Cummings explained that he's a proponent of the “best defense is a good offense” strategy to try to keep pool manipulation at bay. The industry can do this, he said, by recognizing that our pari-mutuel system is ripe for being controlled in the manner he described, and by increasing stewards' awareness and oversight so there is a better focus on pool-watching.

A fixed-odds system might be a better long-term solution. But that style of betting is not completely immune from manipulation, either, Cummings said.

Reinventing our wagering menus could be an option, Cummings said, with an eye on pruning off the low-volume pools.

“Should a track that has offered win, place and show betting for the last 60 years continue to do so when the place and the show pools only average $1,200?” he postulated.

In that case, maybe the solution is to get rid of the place and/or show pools.

The proliferation of rolling horizontal wagers on practically every race card on the continent is also a hazard waiting to happen, Cummings said, because those bets, too, draw very little mutuels action and have low base-bet increments.

“We have to rethink the way we're doing this, because every small pool is a way to manipulate the outcome, to corrupt a participant, to help exact these sorts of outcomes,” Cummings said.

Cummings said he has spoken with various groups of officials and regulators over the past year about the problem of pool manipulation.

Their reactions?

“Interested, but [there was] very little they thought they could do about this,” Cummings said.

“This falls back on track operators. It falls back on horsemen's groups,” Cummings said, pointing out that the idea of looking the other way when pool manipulation occurs is not justifiable simply because it increases handle and thus fuels purses.

“If you don't recognize it, [or] if you bury your head and say, 'I don't want to hear about it–not interested,' it's going to keep happening,” Cummings said.

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He's great at getting publicity for himself and his stores, but never had he seen anything like what happened with this bet, the story of which became a huge hit on social media. In particular, B/R Betting, an arm of Bleacher Report, followed McIngvale from Game 1 of the World Series through the team's victory parade and captured the agony and ecstasy of each moment from someone who had $75 million at stake based on the outcome of a baseball game. Mattress Mack content amassed 75 million video views on B/R Betting, which posted the content on Twitter, Instagram and TikTok. McIngvale figures he got millions of dollars in free publicity out of the B/R Betting posts.

It just goes to show that when it comes to promoting his business and himself, McIngvale has no equal. Because of his bet and the publicity it received, McIngvale became as famous as the Astros star players. So what advice does this master promoter have for horse racing and how can it better promote itself? Those were the questions we had for Mattress Mack.

TDN: In what areas should racing focus its attention when it comes to improving the visibility of the sport?

JM: People love gambling stories. Horse racing needs to do more to play on the gambling aspect because these young kids are fascinated by it. When I went to Philly and got into that famous confrontation with some Phillies fans, which was not my finest hour, everybody up there knew me. They all know me from all the exposure I was getting with places like Bleacher Report. Horse racing needs to have more connection to young people through gambling and find ways where people can win a lot of money. Absolutely, we should promote gambling more. In Philly, everyone knew Mattress Mack and knew about my bet on the Astros. They knew me because they saw me on B/R Betting or the Action Network or whatever. What's better? Horse racing or the lottery? There's no comparison. Horse racing is a much better gambling game and they need to get the word out about that.

TDN: You won $75 million on your Astros bet. There is no way for a person to make that kind of money betting on a horse race, even at the Kentucky Derby. What's your answer to that?

JM: No, you can't make that kind of money betting on racing, but you can make racing a better product for the bettor. Do whatever it takes to get bigger fields and lower the takeout. Figure out a way to get 15- or 20-horse fields like they have in England. You do that and all of a sudden you have a different game, a better game. We see far too many races and stakes that have five-horse fields with big favorites. People don't want to bet on that. Increase the size of the fields and give people a chance to gamble on a good product. That's all people want. People are fascinated with gambling, particularly with sports betting. You've also got to lower the takeout to compete. It's 5% when I make a sports bet. In racing it's four times that.

TDN: What did you think of the decision to retire Flightline (Tapit)?

JM: You have to have superstars. Retiring Flightline. I get it. They had to make the money. But what a shame there wasn't a way to keep him around longer. Football has Tom Brady and a bunch of other high-profile players. Baseball doesn't do a good job promoting its stars, but basketball certainly does. You have to create household names and get people excited about a horse appearing here or there. To me, that's really important. They have to find a way to keep these horses running longer so they have a chance to become household names. The game has to figure out how to keep these horses around as long as they are sound because everyone wants to see a superstar. Pay them an appearance fee. Pay them money to just show up, whether they win or lose. That's one way to get horses to stay around. We need more superstars like Zenyatta, who was still running when she was six. She stuck around and built up a huge fan base.

TDN: What's your opinion of fixed-odds wagering on horse racing?

JM: Going to fixed odds would be would be outstanding. When you bet at 3-1 and the horse goes off at 4-5, that's hard to swallow. I get fixed odds on my Astro bets. Fixed odds are the way to go so that way people know what they are going to get for their money. I think fixed odds would be a great benefit because pari-mutuel betting is too complicated for the average person out there.

TDN: What are some of the problems you see with horse racing as it is now?

JM: No. 1, it has to be more transparent. The optics on horse racing are not good when these guys get slapped on the wrist for these drug positives. That's horrible. You can't have people thinking a horse won because it was drugged. We've also got to do more to keep these horses safe. They've got to improve the technology. Dr. [David] Lambert has this device you can put on the horse and it tells you when it's going to red line and something is going to pop. That needs to be done in workouts and when they race and it needs to be done everywhere. When those horses red line and are about to pop they need to stop on those horses. All that stuff is doable. Dr. Lambert and I are working on what we call the Runhappy Wellness program. We want to get the racetracks to put these monitors on the horses so they can tell when something is going to go wrong. They monitor the baseball players and they monitor football players, so why can't we monitor these horses and make it as transparent as possible? The more transparent the better.

TDN: What are other sports doing right that racing isn't?

JM: Take a look at F1 (Formula 1 racing). F1 came to Austin, where my daughter runs a restaurant for us. They had the biggest two days in their history while F1 was in town. Five years ago, F1 was nothing. I asked a sports marketing friend of mine, how did F1 go from nothing to something, from the bottom of the heap to the top? It all comes down to a deal they did with Netflix. They told the story of F1 on Netflix and look what happened. It has turned into one of the hottest sports in the world. Racing needs to come up with some creative ideas like that. If F1 can do it, why can't horse racing?

TDN: Tell us about your experience with B/R Betting.

JM: It was incredible. Those guys do a great job. The guys from Bleacher Report followed me the whole time during the World Series. We also have our own social media team that runs our sports website, Gallerysports.com. The amount of hits was just incredible. They know how to make this work. You put something on TikTok and it blows up exponentially. It's just unbelievable. People like to see the agony and ecstasy of the big bet. They loved the story.

TDN: Your bet on the Astros was tied into a promotion you do at your stores, where people got mattresses for free if the Astros won the World Series. You had to give away an awful lot of mattresses. Did you come out ahead?

JM: I won $75 million and we sold over $70 million in mattresses. It's the greatest promotion ever. After the Astros beat the Yankees, that Sunday was biggest day we've had in 43 years. The following day, Monday, which was a non-holiday Monday, we did 25% more than that. I had to cut the promotion off because I had reached the max in insurance money, which is what I call my bets. I was filled up to capacity. If I had kept going through the World Series, we would have sold another $40 million worth of mattresses. I got $100 million worth of publicity off this Astros bet. The brand awareness of my business increased tenfold in the last two weeks. When I was on that victory parade with the Astros players going through downtown Houston, people were chanting 'Mattress Mack, Mattress Mack.' There were two million people there. How the else do you achieve something like that?

TDN: Are you optimistic about the future of racing?

JM: Yes, because there is so much opportunity to make things better.

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Through August, U.S. purses were $843,635,983, an increase of  12.29% from the corresponding 2021 figure of $751,274,418. During August, U.S purses were $130,206,874–up 3.66% from the August 2021 figure of $125,611,453.

Comparing year-to-date figures from 2022 to 2020, wagering on U.S. races is up 17.76% and purses are up 62.57%.

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This simple declaration was part of the National Thoroughbred Racing Association (NTRA)'s five-year strategic plan covering 2006 through 2010, and published in 2005.

Approaching two decades later, there has been little progress on the topic, and recent wagering incidents in the summer of 2022 highlight the long-term failure to address these problems.

If you think the stewards are always in charge of stopping wagering when the race begins, think again. A new revelation suggests that primary control of some bet types resided exclusively in the hands of a single, off-site tote company employee, potentially in violation of wagering rules in numerous states while also exposing a staggering vulnerability.

Click here to read the rest of this piece from the Thoroughbred Idea Foundation.

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In the letter, Amy Cook, the Texas Racing Commission's executive director, invokes various statutes in the Interstate Horseracing Act, the Texas Racing Act and the Texas Rules of Racing to substantiate this approach.

“Since the Texas Racing Commission regulates all aspects of Texas horse racing, including, in particular, pari-mutuel and simulcast wagering in Texas, the application of federal law pursuant to HISA in any aspect of horse racing regulation for a particular race or meet will necessarily preclude the Texas Racing Commission from full compliance with the Texas Racing Act and will, therefore, necessitate that no such affected race shall be allowed to conduct on-site pari-mutuel wagering or provide simulcast export signal,” Cook writes.

“Any such request will, of necessity, be denied by the Texas Racing Commission,” Cook adds.

In an article for horseracing.net, Cook is quoted as explaining how Texan tracks will, pending race-date approval by the commission, be permitted to run after July 1, but that imported and exported wagering signals will not cross the state line. In other words, “Texans supporting Texans,” Cook is quoted as saying.

To discuss some of the legal implications of Texas' approach, TDN spoke with Frank Becker, a noted equine lawyer and former adjunct professor at the University of Kentucky College of Law.

The following is a mix of written answers and a recorded conversation, slightly edited for brevity and clarity.

TDN: As I understood, the federal HISA supersedes state law. Am I wrong in thinking that?

Becker: No.

TDN: And so, this includes Texas?

B: HISA goes so far as to state it preempts inconsistent state law. Texas obviously has its haunches up by the federal government's intrusion into what it considers state business.

TDN: Cook is reported as saying that when it comes to pari-mutuel betting, only in-state wagering will be allowed come July 1. She also states that under the Texas Racing Act, no pari-mutuel wagering on live or simulcast races is permitted on races the state commission does not supervise. What are your thoughts about the arguments and the approach? Are they legal?

B: The federal government's authority is limited by the United States Constitution. Typically, the federal government justifies its constitutional authority for pervasive regulation on the 'commerce clause' of the constitution. The 'commerce clause' provides that the federal government has jurisdiction over 'interstate commerce.'

HISA's purported jurisdictional authority is based on the commerce clause. Thus, it relies on 'interstate commerce' as its justification. HISA attempts to codify the authority in the definitions of 'covered horse,' 'covered persons' and 'covered horserace.'

Texas appears to be attempting to be excluded from the definition of 'covered horserace.' That definition is: “The term 'covered horserace' means any horserace involving covered horses that has a substantial relation to interstate commerce, including any Thoroughbred horserace that is the subject of interstate off-track or advance deposit wagers.”

Although Texas attempts to avoid its races being covered horseraces by eliminating 'interstate off-track or advance deposit wagers,' that may not fully solve the problem because a Texas track might be considered to be otherwise having a 'substantial relation to interstate commerce.'

The federal government often takes a very expansive view of what constitutes 'interstate commerce,' and might argue that many other aspects of horseracing involve 'interstate commerce' such as the presence of horses, participants, and even equipment from other states.

It will be up to a federal court to ultimately determine this issue, although some courts have recently taken a dim view of regulatory overreach attempted to be justified by an expansive view of 'interstate commerce.'

TDN: Let's take the hypothetical scenario that Texas takes this approach on July 1. What you're saying is, if trainers, owners and jockeys and such who are registered with HISA, and compete in states under the supervision of HISA, if they also try to compete in Texas, that potentially could yolk Texas to the Interstate Horseracing Act?

B: Even if Texas succeeds in avoiding HISA for horseracing conducted in Texas, are horses and participants nevertheless subject to HISA, even with regard to activities in Texas? We look to HISA's definition of 'covered horse' and 'covered person.'

A 'covered horse' is any Thoroughbred from the time it begins a workout at 'a racetrack that participates in covered horseraces or at a training facility' and ends 'when the horse has been retired.'

The federal government might take the position that any Thoroughbred horse that has ever done a workout at any track outside of Texas, or any training facility anywhere, remains subject to HISA even while in Texas.

And because the definition of 'covered persons' is very expansive and applies to those dealing with 'covered horses,' the federal government might take the position that all racing professionals and owners are subject to HISA, even while racing in Texas, if the horse involved ever worked out outside the state of Texas.

If the federal government takes this approach, it appears that the only way to avoid HISA is for horses and participants to conduct activities exclusively in Texas.

Thus, Texas' effort to avoid HISA may end up excluding horses, trainers, owners, and other participants from being involved in racing in Texas, unless they confine all of their activities to Texas.

TDN: I know you're not a self-professed expert in the economics of the industry, but just on a common sense reading of the threatened scenario, how impactful could this be to the industry there? Is Texas shooting itself in the foot?

B: It could have a dramatic negative impact on Texas horse racing. It's hard to imagine it wouldn't.

I don't think it takes an economics expert to say, 'gosh, eliminating simulcasting is one thing, but if Texas has to keep out participants from other states, that's going to have an extremely deleterious effect.'

TDN: So, what do you think is driving this?

B: Do you want me to answer this?

TDN: Sure.

B: It doesn't appear to be difficulty in complying with the regulations. It appears to be somewhat philosophical. Texas has, traditionally, been averse to federal regulatory overreach into what it considers state business.

TDN: What do you think about the other argument Texas is making, that they're doing this to slow down HISA's implementation so as to better manage some of the problems that have arisen, and are expected to still arise?

B: It seems to me that the slowing down may be their main goal here. It's hard to say. I mean, [if so], it's a pretty drastic action to get them to slow down.

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“For more than a century, horseplayers have never received a full winning dividend and today the General Assembly in Kentucky affirmed that it is beyond time to change that and respect horseplayers anywhere betting on races from Kentucky,” said Patrick Cummings, Executive Director of the Thoroughbred Idea Foundation (TIF), which has championed the cause dating back nearly four years.

“Across just the last three decades or so, approximately $1 billion has been retained from winning bets across America. The passage of HB 607 will put some of this money back in the pockets and accounts of winning bettors from future bets.'

“We are thankful for the leadership of bill's House sponsors, Representatives Adam Koenig and Al Gentry, and Senator Damon Thayer in guiding its passage.

In addition to the favorable breakage rules, HB 607 calls for taxation on pari-mutuel wagers at 1.5%, the same rate assessed on Historical Horse Racing (HHR) machines. The standardization of taxation means that bets made through and ADW by Kentucky residents will be taxed at 1.5%, up from 0.5 %.

“Horse racing must relentlessly pursue every method to make its product as competitive as possible,” said Bernick. “The market pressure on racing is stronger than ever with the rapid legalization of sports betting across the country. We hope that operators realize the importance of retaining all customers and driving their participation through the presentation of competitive racing with competitive pricing.”

HB 607 was sponsored by Representative Adam Koenig. A house committee approved the legislation Mar. 16 before referring it to the Senate for its consideration. The bill now returns to the House for concurrence, but it is expected to sail through and head to the desk of Governor Andy Beshear for his signature.

The Kentucky Equine Education Project (KEEP) released a statement Tuesday, applauding the General Assembly for the passage of HB 607.

“A tremendous amount of work went into crafting this new tax policy and KEEP is grateful to the legislators who served on the Pari-Mutuel Wagering Taxation Task Force for the time and effort they put into fully understanding the economic structure of Kentucky's horse industry,” the statement read. “We would also like to applaud Senate Majority Floor Leader Thayer and Representative Koenig for their leaderships as co-chairs of the task force. The resulting legislation was able to strike a delicate balance between increasing revenue for the state, while at the same time not arbitrarily raising tax rates in a way that would damage the economic success of the industry.

“The entire horse industry was engaged in this process and KEEP was proud to work closely with legislators to ensure that they had access to the full picture of what economic benefits the industry has on the Commonwealth.

“KEEP will continue working on behalf of Kentucky's entire horse industry and community to advocate for policies that benefit everyone within the industry's economic ecosystem. Growing the success of the industry's more than 60,000 jobs and $6.5 billion economic impact on the state benefits all Kentuckians.”

Once signed off on by Beshear, the provisions of the bill are due to take effect come August.

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Representative Adam Koenig, whose district in Northern Kentucky is near Turfway Park, is a primary sponsor of the bill, which also has the capacity to significantly increase revenue to the state General Fund while allowing horse racing to thrive.

“In a couple of years, we're looking at a $27-million increase, probably at a minimum,” Koenig told the committee, noting that's in addition to the $62 million projected to flow to the state from pari-mutuel taxes in 2022. “So the money is coming in from the industry. I think I found some creative ways generating additional money without hurting the product.”

The bill is the product of last year's legislative interim task force on pari-mutuel wagering that was chaired by Koenig and Kentucky Senate Majority Leader Damon Thayer, a long-time supporter of the Kentucky racing industry. Created following the passage of legislation that protected Historical Horse Racing (HHR) in the state, the task force was charged with identifying ways to increase state revenues without negatively impacting purses and without discouraging racetracks from investing in HHR operations and associated capital projects.

Penny Breakage A Positive Development…

A key element of HB 607 is the virtual elimination of so-called breakage, where tracks round down winning payoffs to the nearest dime based on a $1 wager. Under HB 607, tracks would be required to pay off to the nearest penny, resulting in greater amounts of money returned to horseplayers. Koenig cited the example of 2018 Triple Crown winner Justify paying $7.80 to win in the GI Kentucky Derby, a figure that would have been $7.92 with penny breakage.

“That is the bettors' money,” Koenig said. “I've been very interested since last year's HHR debate in making sure the bettors are taken care of. We took care of everyone else. Everyone is getting healthy on this except for the bettors, and this is how we're going to help the bettors. They're going to get paid to the penny rather than every 20 cents. In addition to taking care of the bettors, it will make Kentucky the place in North America to wager. If you're someone who wagers a lot of money, why would you bet anyplace else?” (Click here to watch Adam Koenig on a recent episode of the TDN Writers' Room podcast).

Also easily passing the “L&O” committee Wednesday were bills that would legalize betting on sports in Kentucky and provide funding for problem gambling.

Additionally, HB 607 calls for the taxation of pari-mutuel wagers at 1.5%, the same rate assessed for HHR gaming. The bill raises the current rate for bets placed through ADWs from 0.5%. The tax rate on simulcast wagers placed at a Kentucky track on an out-of-state race would drop from 3%. The majority of bets are now placed through ADWs, while simulcasting has shrunk considerably as horseplayers opt for the convenience of wagering online.

KTDF Supplements Expanded…

Currently, money from the Kentucky Thoroughbred Development Fund (KTDF) is restricted to non-claiming races, but HB 607 cancels that stipulation, a policy change that has been strongly advocated for by the Kentucky HBPA in an effort to raise purses for the lower-level races in which many horsemen compete.

Rep. Al Gentry, a member of the pari-mutuel wagering task force, called making claiming races eligible for KTDF supplements “very, very important and one of the big pieces of the bill.”

Given that HHR has helped Kentucky to be in a position to offer some of the highest purses in the world, and with HHR revenue expected to grow with the expansion of satellite facilities, HB 607 also stipulates that after KTDF money reaches $40 million and the Kentucky Standardbred Development Fund its $20 million in a year, the rate going to purses would decrease, with the difference channeled to the state's General fund.

“We believe in two or three years, when the Historical Horse Racing facilities are more mature, that we're looking at $20 million additional in the General Fund,” Koenig told the committee. “The increase in the ADW tax from one-half to 1 1/2% will immediately generate $4 million a year. That's the growth area, so that will continue to go up over time.”

Chair @repkoenig talking to press following successful Committee votes including pari-mutuel tax and breakage reform. pic.twitter.com/hACv8RpbrW

— Pat Cummings (@PatCummingsTIF) March 16, 2022

The bill also:

• Provides funding to the equine programs at the University of Kentucky and Bluegrass Community and Technical College. The University of Louisville business school's Equine Industry Program already receives funding from pari-mutuel wagering.

• Eliminates the 15-cent per person admission tax racetracks currently pay even if they don't charge admission (which is every track except Churchill Downs and Keeneland).

• Requires tracks to maintain a “self-exclusion” list–where individuals such as problem gamblers can say they don't want to be allowed into a track or HHR facility for a given period of time–to be shared with the racing commission and the other tracks and HHR properties.

The post Pari-Mutuel Bill Approved by Kentucky House Committee appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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“We can fill that void a lot of times during the day so that they don't have to play table tennis from China or cricket from Australia–things that people have no idea about,” Basler, the executive director of the Ohio HBPA, said Thursday during a morning session of the National HBPA Conference at Oaklawn Racing Casino Resort. “That's not just attractive to sports books, that's attractive to horsemen and racetracks for the opportunity to increase our revenue.”

Eric Hamelback, CEO of the National Horsemen's Benevolent & Protective Association, at the 2018 conference cautioned horsemen that sports wagering was coming and the racing industry needed to be prepared. Shortly thereafter, the U.S. Supreme Court struct down the ban on sports wagering. Thirty states now have passed such legislation, including Arkansas.

Now, he says the U.S. racing industry must turn its attention to implementing fixed odds. That's a divergence from the pari-mutuel industry that currently is the linchpin of American horse racing, while sports betting is based on fixed odds that allow players to lock into a price in advance of an event.

“It's here, it's on us,” Hamelback said. “Now we need to really move and pivot and focus on how to deal with it.”

The panel also included Louisiana HBPA executive director Ed Fenasci. Sports betting began in Louisiana last fall, with an online component starting in January. Basler's home state of Ohio is scheduled to start sports wagering Jan. 1, 2023 after passing the enabling legislation in December.

“Pari-mutuel wagering is not going to be in the sports books,” Basler said. “Fixed-odds wagering will be. So we need to take advantage of that ability to bring in customers and get our product in front of millions and millions of potential new fans.”

Fenasci said sports books have the ability to be more creative than pari-mutuel wagering, including with parlay bets.

“Who knows what is going to become the popular wager, right?” he said. “Two grays will win today at the Fair Grounds. This trainer is going to win a race and this jockey will win two races. You can marry a hockey game with the fifth race at the Fair Grounds and marry that to maybe a college football game betting on LSU.

“This is the future of horse-race wagering in the United States. Not this year, five years from now. This model of sports book wagering has competed very well with other forms of gaming. The parimutuel model has been eroding over the last 30 years. It's not standing the test of time when other forms of gaming come in and capture the attention of the customer base.”

Fenasci said the apps for betting online with sports books is “the type of interaction that is going to appeal to 20- and 30-year olds…We want shelf space on these new e-commerce sites. We want horse racing to be there prominently displayed for people who may not have had the opportunity in the past to consume that product.”

Basler said fixed odds could make “an unbettable race now a bettable race.”

“There's a graded-stakes race with six horses and a 3-5 shot in there,” he said. “There's a good chance the bookmaker will take the 3-5 shot out of the pool entirely and price everybody else as if that horse weren't in the race. There are a lot of things that we don't have the ability in parimutuel pools that fixed odds can offer and perhaps enhance our product.”

Former Ladbrokes executive Richard Ames is CEO of British-based Sports Information Services and president of its U.S. subsidiary SIS Content Services Inc., both of which provide content and production services to the betting industry. He said Australian racing went from being overwhelmingly parimutuel to a decade later seeing “probably 55, 60 percent” of wagering through fixed odds.

“We know consumers like the idea if they place a bet at 6-1, that's what they're going to get,” he said.

Panel moderator Michele Fischer, an industry consultant who spent years working for the tote-betting company Sportech Racing and now serves as vice president of SIS' American operation, said some horsemen are surprised to hear that U.S. races already are being distributed in overseas sports books. While the Stronach Group-owned GWS is the largest exporter of U.S. content, she said SIS is the world's largest horse-racing content distributor in the world. It is fairly new to the American market, however.

SIS currently distributes on a 24-hour cycle more than 30,000 horse races and 38,000 greyhound races a year at 118 tracks in 16 countries.

“The sports book wants to have a volume of content,” Ames said. “They want to have access to thousands of races.”

He said there are different models on how racetracks and horsemen are compensated for having their races in sports books, including a fixed fee, revenue-sharing or getting a percentage of betting proceeds.

“Why should we consider this?” Fischer asked rhetorically. “Horse racing had a fabulous year in terms of handle in 2021, the highest it had been since 2009. In some states, we have a false comfort. Purses are very high–you look at Kentucky with HHR (historical horse racing) booming there. It's doing well in Virginia. But when you look at the big picture across the United States, the simple answer is horse racing is not self-sufficient. We're using alternative gaming to support our purses.

“This is an opportunity to become more self-sufficient, because we're betting on horse racing–not betting on a VLT machine or HHR machine.”

   Rees is a horse-racing communications specialist in the horse-racing industry, including working for the National and Kentucky HBPA.

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Yet, for reasons unknown, this six-furlong race stood out to some gamblers playing the nine-race Sunday program.

The $193,956 in win, place and show bets exceeded every other race on the card. So did the $198,851 in the exacta pool – fully $54,034 (37%) higher than the second biggest exacta pool on the day. The $127,460 in trifecta bets and $90,433 wagered on the superfecta also were the largest pools of the day for those bet types (the trifecta was higher by 38% and the superfecta by 26%).

Combining straight bets with these three exotic wagering pools, there was $610,700 bet on this maiden claimer, $114,210 (23%) more than the day's feature race, an allowance/optional claiming event with a field of nine.

In fact, of the 177 races run at Gulfstream Park in the previous month, beginning with Sept. 3, only five other races had larger exacta pools and only four trifecta pools were bigger than Sunday's fourth race. Keep in mind that Saturdays almost always out-handle Sunday cards.

The race was won in front-running fashion by Rubysa, a 3-year-old Gone Astray filly making her third start and first since March 26. Rubysa was 15-1 on the morning line and bet down to 2.70-1. First-time starter Sade Purse finished second at 17.90-1 with 1.5-1 favorite J D's Vista third and Princess Tereska, the 4-1 second choice, finishing fourth.

Both the winner and fourth-place finisher were making their first starts for trainer Juan Reviriego, who less than five months earlier returned to training to run his first horse since 2009 and proceeded to win with three of his first five starters. He then lost with his next 12 runners going into Sunday's fourth race.

Rubysa and Princess Teresko are owned by Long Trail Stables LLC, an entity registered in Florida by Felice Iadisernia,  the brother of horseman Giuseppe Iadisernia. The latter trained horses for more than a decade, sending out his last runners in 2016, and he and other family members are registered agent for a number of equine-related businesses, including Nelson Jones Farm and Training Center of Ocala, Northwest Stud, and companies that supply shavings and feed to Florida horsemen.

Rubysa was ridden by Jose Morelos, who came to Gulfstream Park earlier this year from Panama and has won with 29 of his first 268 mounts. Carlos Lugo, who had ridden trainer Reviriego's three other winners this year, had been aboard Rubysa in her two previous starts. Lugo rode Princess Tereska in the Oct. 3 race. Breaking from the No. 5 post position, Princess Tereska showed very little from the outset as Rubysa was hustled to the lead from the two post and would draw off by 4 ¾ lengths.

Francisco D'Angelo, a leading conditioner in Venezuela who began training in the U.S. in 2015, had previously trained both Rubysa and Princess Tereska but has not started a horse since Aug. 20, according to Equibase.

Rubysa paid $7.40 to win and combined with 17.90-1 longshot Sade Purse for a $1 exacta payoff of $82.80. The 50-cent trifecta, incorporating the 1.50-1 favorite J D's Vista in third, paid $84, while the 10-cent superfecta paid $111.29 with Princess Tereska in the fourth spot.

The post Go Figure: Wagering Spikes On Gulfstream Park Maiden Claiming Race appeared first on Horse Racing News | Paulick Report.

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