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Wagering Insecurity: Gen Z’s ‘Ethical Consumerism’

This is Part 7 of the Thoroughbred Idea Foundation's (TIF) series “Wagering Insecurity.”

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

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

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

PART 7 – Z

Transparent oversight of racing has been defunded over decades and customer protection remains weak. North American Thoroughbred racing in the 2020s is saddled with a regulatory infrastructure designed for a sport in the 1970s.

Racing has to change.

Ten years ago, Jockey Club research conducted by McKinsey showed that a minority of racing fans, just 46% of those surveyed, said that they would recommend the sport to others.

“Thoroughbred fans are almost twice as likely to recommend baseball (81%), football (73%), or basketball (77%) to others as they are to recommend Thoroughbred racing.”

There are many reasons for racing's waning appeal among its own fans but the gambling experience is certainly a key one. Simply getting more eyes on racing is not going to be enough to sustain interest amongst future generations.

While many of racing's existing American customers have long been accustomed to a sport with substandard, haphazard and insufficient oversight, the next generation might not be as forgiving. A 2019 piece by Julie Arbit, Global Senior Vice President, Insights at VICE Media Group, highlighted this burgeoning need among Generation Z, whose oldest members are now in their mid-20s.

“Gen Z is coming of age in a world of infinite choice, and this affects everything from how they define themselves to how they love and how they buy…

“If brands want consumers to be committed to them, brands need to be committed to consumers. What brands say and do should demonstrate this dedication — showing that the satisfaction and happiness of their customers is of utmost importance. Trust is also paramount in relationships, and brand relationships are no exception. Authenticity, transparency and two-way dialogue with consumers are essential.”

The topic has been raised in racing too.

Dr. Jennifer Durenberger, Jockey Club Steward at the New York Racing Association, has served as both a regulator and regulatory veterinarian, among many other roles across racing. In a 2019 presentation at the University of Arizona's Global Symposium on Racing, she highlighted the growing interest consumers are showing in the values of companies they patronize.

“Ethical consumerism is when a consumer consciously chooses or avoids a product, or an experience based on the perceived ethics of the processes that are used to produce them.

“…this is not just a Millennial or a Gen-X phenomenon…this is consumers who actively consider company values when making a purchase and remember these are purchases of inanimate objects.”

How can American racing hope to compete in the future for market share if newer potential customers are turned-off by the sport's poor standards of oversight? Sports betting customers in America generally have confidence in the betting systems and oversight of major sports for which wagering is accepted.

At the time of this publication, 26 states and the District of Columbia, accounting for more than 45% of America's population, reside in a state where sports betting is legal. Nearly all of those states are currently accepting bets at present while others will launch soon.

While American horse racing is a laggard, others in the racing world are staying relevant and accomplishing this far better.

COMPREHENSIVE REVIEWS LED TO UPGRADES

North America is an outlier when it comes to monitoring wagering and uncovering malfeasance.

Two other major racing jurisdictions – Australia and Great Britain – have aggressively promoted racing and wagering integrity during the same two decades (2002-present) while America has floundered on such issues.

The British Horseracing Authority (BHA) has been a leader in monitoring wagering as a key component of its integrity services. Australia, which operates a state-by-state regulatory system similar in basic structure to America, has created independent statutory authorities to enhance integrity across all facets of racing.

The British racing industry studied the matter across 2002-2003, published the Neville Review in 2008 which, among other things, “assessed the role and procedures racing and sports governing bodies should adopt when dealing with matters that may involve breaches of the criminal law as well as its own rules in relation to corruption connected to betting.” In 2016, it followed-up with the Brickell Review.

In the foreword of the Brickell Review, then BHA chief executive Nick Rust outlined quite clearly the importance of the topic to the sport's regulators.

“It should come as no surprise that one of my priorities is to continually improve our integrity work to make sure we have the confidence of participants and the racing and betting public.”

Confidence is good for business.

Australia's focus is similar, but approaches it differently.

Victoria is Australia's second largest state and its capital, Melbourne, is home to one of the great racing festivals, headlined by the Melbourne Cup.

In 2007, Victoria's Minister for Racing commissioned Judge G.D. Lewis to:

“…lead a process of consultation with racing industry Controlling Bodies and stakeholders, with the objective of identifying options to ensure that integrity assurance within the industry is of the highest standard.”

“For the purposes of this Review, “integrity services and systems” were deemed to include: overall stewardship and associated investigations, race-day operations, betting compliance and regulation, veterinary services, drug control, licensing and registration.”

The finished product, known as the Lewis Report, can be read in its entirety here.

American racing has not seen anything similar to the Neville Review, the Brickell Review the Lewis Report, or a 2018 Australian update, the Wood Review.

That is part of the problem, according to global sport and racing integrity expert, Professor Jack Anderson:

“Thoroughbred racing in the U.S. urgently needs the equivalent of a Lewis Report and one that would follow a similar methodology to the integrity reviews undertaken [by both the BHA and Victoria].”

Anderson says that such reviews offer an opportunity to reset expectations and prepare the industry for a major boost to integrity that is most needed. For him, two key principles emerged from these reports:

“The greatest threat to the integrity of racing in the U.S. and elsewhere (be it race rigging for gambling purposes, doping, animal welfare) often comes from poor but engrained practices and culture within the sport itself and not external threats.

“The first, and most prominent recommendation in the Brickell Report, is related to engagement with participants in the industry and the need to consult continuously with the sport's stakeholders to better ensure 'buy-in' from the sport for integrity initiatives.

“Rewarding good behavior in the industry, consulting them on education initiatives and better communication between regulators and the industry's participants perpetuates long term trust and confidence in the integrity of the industry as a whole.”

“Second, and similar to the Lewis report's recommendations in Australia, it is unlikely that any review of the thoroughbred industry in the United States would recommend either that the status quo in, or piecemeal reform to, current integrity services in the sport nationwide would be the way forward.

“Radical, comprehensive and, likely, federally mandated statutory reform is needed to better promote the integrity of thoroughbred racing in the U.S.”

While it is unlikely that the Horseracing Integrity and Safety Authority (HISA) will take-up wagering systems integrity, bet monitoring and understanding wagering's role in rules violations and potential criminal infractions is a basic practice around the world. Communication around such incidents is routine.

Measures of transparency from international racing regulators far exceed America's standards at present.

Coming Thursday, May 5: Part 8 – Damage

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

Part 1 – Expectations

Part 2 – Intertwined

Part 3 – Volponi

Part 4 – Confidence

Part 5 – Bingo

Part 6 – Proof

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

The post Wagering Insecurity: Gen Z’s ‘Ethical Consumerism’ appeared first on Horse Racing News | Paulick Report.

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Wagering Insecurity: ‘Trust Us’ Isn’t Enough

This is Part 6 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.

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

PART 6 – PROOF

Past-posting is the act of placing a bet after a race has started because the wagering pools were not properly closed. Professional horseplayer Mike Maloney had suspected past-posting was happening with regularity and pleaded with a variety of officials for years to clamp down, but to no avail.

Paul Bowlinger, then Vice-President at the Association of Racing Commissioners International (ARCI), a trade group of racing commissions, recounted his 2007 observations of Maloney in a 2008 conference at the University of Arizona.

“He basically came and told this audience [one year earlier]…I past-posted and I did it to show the industry how easily and how frequently it can be done.' “

Mike Maloney is a member of the Thoroughbred Idea Foundation's Wagering and Integrity Issues Steering Committee and documented his experience uncovering past-posting opportunities in the 2000s at the end of his 2017 book “Betting With An Edge.” After engaging, or attempting to engage, with a plethora of track executives and even the NTRA, Maloney realized there was almost no traction to securing wagering systems.

He wrote:

“To make people in racing realize what's going on here, I don't just need proof…I need to drop a bomb. At Fair Grounds in 2007, I found one.”

After months of trying to understand the issue while betting the races, Maloney explained how he identified that betting pools were not closing appropriately. Tracks maintained little to no record of when races actually started and a series of issues with time syncs between tote betting machines and the host track made it increasingly challenging to prove when there was an actual problem.

What Maloney knew, for certain, is that if the mechanism to stop betting at the host track and all other simulcast and online sites was being used, it was not always functioning correctly.

Stewards at tracks are provided a mechanism to close the betting pools for a race under their supervision.

This mechanism, known as a “stop wagering device,” is supposed to lock all wagering on that race from on-site and at all other locations off-site, and online, where bets are accepted. Maloney noticed that the act of closing the pools was replicated in individual betting terminals with an audible notification to live tellers.

THE BEEP

With an established “office” for wagering at Keeneland, and with a semi-private teller to enter Maloney's bets, he began to notice the “beep.”

“The beep is just an alert to the teller. I began to listen for the beep. In the vast majority of races, it came at the proper time. The gates would open, within two seconds I would hear the beep, and I knew the race was properly closed.

“If I was betting that track, my tickets would stop coming out. But that's not how it was all the time, and I noticed that certain tracks were a lot worse than others.

“Fair Grounds was really bad about it. Golden Gate was really bad about it. Aqueduct was really bad about it. The Florida tracks had issues. As I watched this, I no longer suspected that past-posting was possible, I knew with certainty it could happen.”

To prove the point, Maloney bet on a race at Fair Grounds where wagering remained open during the race, well after the start.

“We were over 50 seconds into the race when I heard the beep and wagering finally closed.”

Following these startling revelations, Maloney thought an investigation would be forthcoming and wagering security bolstered.

“I got a visit from the TRPB…I was hoping I'd be able to help them investigate the incident, but that was naïve. They were more interested in investigating me.”

While Bowlinger simplified Maloney's actions in his 2008 remarks, Maloney clarified his intent in a 2021 interview for TIF.

“I certainly wasn't doing it for fun. Despite regular pleading with some officials, very few believed it was happening and said they did not have actual proof.

“So, I showed them the proof from my bets and all of the other legwork I did to expose this for them. I thought that would be enough for those in charge to realize that there was a real problem with the tote systems and that now it could get fixed.

“Instead, I was called before two Commission meetings to show cause as to why my racing license shouldn't be revoked.

“It seemed that more than anything, they wanted to intimidate me and interrogate me, almost like I was a criminal for revealing to them their own systems' failings.”

A June 2008 past-posting incident came to public attention after it was learned customers at Tampa Bay Downs were able to bet on a race at Philadelphia Park (now Parx) after the race was over, clearing more than $13,000 from $2,000 in bets made after the race.

The TRPB's Curtis Linnell told the Paulick Report at the time “it didn't look like it was widespread.”

Paulick wrote:

“This issue begs the question of who is minding the tote, a patchwork, less-than-state-of-the-art wagering network that handles the approximate $15-billion in bets each year and flows through racetracks, hubs, guest hubs, off-track betting sites, account wagering systems, and off-shore rebate shops?”

WHISTLEBLOWING

More than 18 months after Maloney's first proof and exposure of past-posting, and seven years since the Breeders' Cup Fix Six, Maloney was contacted by a tote employee “who didn't trust his company to report” such an incident properly.

The race in question was the Grade 3 Los Angeles Handicap at Hollywood Park on May 16, 2009.

“Rather than immediately report it myself and initiate the usual industry cover-up, I decided to wait and watch what the tracks and regulators would do…

“I was hoping the higher-ups at Hollywood Park would inform the betting public of the failure of the tote system. Then I hoped to see the California Horse Racing Board, since it regulates all wagering and racing in the state, issue a press release regarding a potential investigation.”

But there was no immediate reaction.

Maloney blogged about the incident, which was then picked-up by Paulick Report. Wagering on the race at 33 locations had not been closed properly, enabling patrons there to continue betting on the race even after the results were known.

Tote officials recognized the issue and did not honor winning bets placed at the 33 locations for the race, though they never raised the issue to the public, until Maloney blew the whistle.

“The Hollywood incident summed up the industry response to all of the tote problems.

“First, the industry doesn't want anyone to know about the issue, because it makes them look bad. Then, when they're called on it, they deal with it in a way where they don't even acknowledge the systematic failure that led to the people who fund the game being cheated out of their money.”

Maloney's quest continued for several years, with more incidents identified. Many horseplayers recall the incidents and remain concerned about past-posting, though tote experts, who wished to remain unnamed, told TIF that the specific issues Maloney identified about past-posting were rectified.

While he backed away from the fight in 2012, as Maloney explains in the book, he remains steadfast to this day that the wagering systems for American racing still lack some of the basic security provisions they need.

A STEP BACK FOR INTEGRITY IN 2020

In December 2020, ARCI adopted an update to its Totalisator Technical Standards (TTS) document. This document contains the requirements for North American pari-mutuel wagering operators and bet-takers, and is supposed to be adhered-to by members.

In its most recent update, the document included an adjustment to the requirements of the stop wagering device. As it describes, tote vendors “shall install two separate devices that activate the stop wagering function.”

The device closes wagering on a race and provided all downstream receivers of the signal from the device are calibrated, it stops the occurrence of past-posting as painstakingly identified by Mike Maloney over years.

According to the TTS document:

“The stop wagering device shall be the judge's console and a tote system backup located at the racing association.”

That is, the host track where the race is taking place.

The primary device is in the possession of the stewards overseeing the race itself. But the 2020 update amends the backup device's requirements.

“Said tote system backup may be operated by local racing personnel and/or racing stewards, and also remotely operated by tote personnel not physically located at the racing association.

“If the tote system backup is operated remotely, a protocol for the remote operation shall be submitted to the racing commission for approval.”

In other words, the main device is still with the stewards, but the backup device can be operated remotely, out of control of the track and stewards. This has flabbergasted Maloney, who offered the following comments in 2021:

“I can't imagine a system where an update of these protocols would bring us to, hypothetically, a less secure operation of the stop wagering function in 2021, but that is what seems to have happened.

“The same general lack of concern I felt the industry showed horseplayers in 2007, seems to still be in place now. The betting infrastructure is ancient. How can a reasonable observer look at what we have in place and not think it is in need of monumental upgrades to protect honest customers?”

If technology had evolved across the American pari-mutuel wagering landscape and centralized backup remotes were implemented with transparent oversight, then confidence might be warranted.

But that does not seem to be the case.

Instead, while other gambling technologies continue improving over time, tote technology seems to remain much the same.

“TRUST US” ISN'T ENOUGH

Alarmingly, some of the same “late scan” functions which Chris Harn and his conspirators exposed in the Breeders' Cup Fix Six remain in place.

Maloney documented in 2017 that the method by which tracks identify winning superfecta bets across all North American races still uses the “late scan” approach for verifying winning tickets.

Instead of submitting the full details of every superfecta bet to the host track as it is placed, the remote bet taker only communicates to the host track the dollar amount of superfecta bets they have taken before the race begins. Once the race is run and order of finish confirmed, then the host track requests that the remote betting sites provide detail on how many winning superfecta tickets should be paid to them.

Defined as a process “used after the winners are known” by the Inter Tote System Protocol (ITSP), a shared resource used by tote companies, tracks and remote betting sites, every superfecta bet on North American racing is processed as a late scan.

Maloney said:

“The 2002 pick-six scandal happened for a variety of reasons, all well-documented. To the best of my understanding, the only update that has been made to the ITSP is for the pick six, or any multi-race bet like it, which the industry calls 'Pick-N' bets. They've moved from late scans to early scans.”

The ITSP identifies an early scan is “used after the winners are known from leg to leg of Pick-N pool types.”

The total Pick-N play, with combinations and wager amounts, is still not secured and transmitted to the host track before the betting sequence begins. In 2017, Maloney called these situations “vulnerabilities without reasonable oversight.”

These processes still exist today.

TIF questioned the TRPB about the unusually low superfecta result of the 2019 Kentucky Derby in the weeks following the race. That year's race was unofficial for more than 20 minutes before stewards demoted Maximum Security and promoted Country House, at 65-1, to the win. The longest-priced winner of the race in modern times, which holds America's largest field and largest superfecta pool, produced a superfecta return which was surprisingly low in comparison to other combinations in the past, at just $51,400.

There may be a plethora of reasonable explanations, but none have ever been provided.

“Trust us” isn't enough.

The 2005 remarks of then Del Mar Thoroughbred Club President Craig Fravel, now the Chief Executive Officer for 1/ST Racing (formerly The Stronach Group), questioned the ability of the tracks themselves to properly ensure the security of wagering. Keep in mind that the one entity which exists in this capacity, the TRPB, is a wholly owned subsidiary of a consortium of racetracks.

“We [track operators] are a little suspect simply because we are maybe overly confident at times.

“I think to allow customers to have sufficient levels of confidence in us, we have to demonstrate that not only are we capable of reviewing things, but that there is a sufficiently independent and authoritative organization out there that can be the ultimate arbiter of those kind of decisions.”

North American racing is still waiting for one, some 16 years after Fravel's remarks, and 19 years since the Breeders' Cup Fix Six.

The lack of oversight is a flashing red light to both existing and new racing fans. In our next installment, we will look at other racing jurisdictions which are tackling these topics and seeking to keep pace with the ever-changing world.

Coming Tuesday, May 4: Part 7 – Z

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

Part 1 – Expectations

Part 2 – Intertwined

Part 3 – Volponi

Part 4 – Confidence

Part 5 – Bingo

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

The post Wagering Insecurity: ‘Trust Us’ Isn’t Enough appeared first on Horse Racing News | Paulick Report.

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TIF: Wagering Insecurity, Part 6–Proof

This is Part 6 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.

One professional horseplayer suspected betting pools at tracks across America were not closing when they should.

After his pleas were ignored for months, he proved “past-posting” was possible. He bet one race approximately 50 seconds after it had started.

“I thought that would be enough for those in charge to realize that there was a real problem with the tote systems and that now it could get fixed.

“Instead, I was called before two Commission meetings to show cause as to why my racing license shouldn't be revoked. It seemed that more than anything, they wanted to intimidate me and interrogate me, almost like I was a criminal for revealing to them their own systems' failings.”

In 2020, officials changed one long-standing rule which left the past-posting horseplayer flummoxed:

“I can't imagine a system where an update of these protocols would bring us to, hypothetically, a less secure operation.”

Vulnerabilities remain.

Saturday's Kentucky Derby will feature the largest betting pools of the year in American racing. That includes the superfecta pool, which in 2019 topped $16.5 million.

The “late scan” protocol which was exploited by Chris Harn and his conspirators in the 2002 Breeders' Cup Fix Six is still in place today when someone places a superfecta bet on a U.S. race. The full bet detail of each superfecta ticket is not secured by the host track, but rather held back by the bet-taker with only the amount of each bet transmitted.

For the complete article, click here.

The post TIF: Wagering Insecurity, Part 6–Proof appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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Wagering Insecurity: Tote Monitoring In Racing Falling Behind To Bingo

This is Part 5 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.

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

PART 5 – BINGO

The NTRA-led initiative to bring wagering integrity to North American racing had failed. Independent oversight was falling apart. The frustration was palpable in December 2008. The University of Arizona Racing Symposium (click here to read the full transcript) convened a panel to discuss the state of these initiatives.

Paul Bowlinger, a long-time horseplayer, attorney, former regulator and then the executive vice president for the Association of Racing Commissioners International (ARCI) found it Shakespearian.

“…The real genius of that soliloquy of Hamlet is not 'to be or not to be,' whether that is the question. He goes on to say, 'To die, to sleep, perchance to dream, aye, there is the rub, for in that sleep what dreams may come?'

“Because what Hamlet is really quite simply saying is, what we may discover is scarier than what we already know.”

Later in the session, Bowlinger highlighted that the complexities of the industry, compounded by other issues, distracted the evolution of integrity measures.

“…We no longer have to dream about what's on the other side of an unmonitored pari-mutuel pool…

“The second part in that soliloquy is, 'Whether tis nobler in mind to suffer the slings and arrows of outrageous fortune,' and what has bothered me is that since 2002, the Pick-6 scandal, it was the topic du jour, it was the topic du everything.

“Now granted, there have been other issues that have taken our time, medication issues, the tragic Eight Belles, Barbaro, the steroid issues, they've all come into place and they've diverted our attention and rightfully so in many ways.

“But I think our betting public is fed up with taking the slings and arrows of outrageous fortune.”

When TIF reached him in February 2021, Bowlinger's recollection of the time was unchanged.

“The industry's complete lack of interest was so frustrating.

“We met with everyone, tried to make it work and we had all the numbers in place for it to work. All of the executives started out by saying 'yes, yes, yes,' and when it came down to executing, they ended up saying 'no, no, no.'

“I owned a nightclub for a long time and I would not possibly think of ignoring my actual customers. Racing is run as if its betting customers don't exist. I would not walk into my club and not notice my customers.

“Instead, racing goes to its distributors and asks them how they are doing. It's a remarkable way of doing business.”

Bowlinger left ARCI in 2010, returned to private law practice and has been out of the racing business ever since.

At the time of the 2008 Arizona Symposium, Bowlinger's fellow panelist Isidore Sobkowski had been out of the NTRA's Office of Racing Integrity for several years and was running his own company, Advanced Monitoring Systems (AMS), described by Bowlinger in the session as “specifically created to meet the pari-mutuel industry's need for cyber security of wagering pools and wagering accounts.”

Sobkowski lamented the lack of accomplishments to that point.

“There's a lot of talk about wagering integrity but so far I think precious little has been done.”

WITHOUT CONTROVERSY

Kevin Mullally provided an external perspective. After 12 years with the Missouri Gaming Commission, Mullally was early in his career with Gaming Laboratories International (GLI) as Director of Government Relations and General Counsel. He had recently served as Vice President of the North American Gaming Regulators Association (NAGRA). Given his broad experience in gaming regulation, he used his time at the 2008 panel to express his bewilderment at how racing could be such an outlier regarding its regulation of technology.

“This is my third consecutive conference.

“I came here two years ago to learn a little bit more about why the racing industry had managed to be the only component of the gaming industry that had not implemented any serious oversight to its technology.”

TIF contacted Mullally in March 2021 and his views were unchanged and now augmented by the new forms of gaming technology which have entered the market, each aligned to a set of technical standards that are independently tested under the authority of their regulators. Racing's controls fall farther behind.

“If you were to put me on a panel today, 13 years later, I'd say the exact same thing.

“The only difference is that the tote systems stand out even more given how technology in the rest of the gaming industry has evolved. Testing is not only ubiquitous in every other sector of gaming but is also without controversy.

“The only aspect about testing of gaming equipment that is controversial is if someone suggests that it is not needed…

“Automated bingo card devices in church basements have more independent monitoring than the tote systems.”

Ironically, Mullally added, the primary source of new money to the racing business – subsidies via slot machines, video lottery terminals and historical horse racing (HHR) machines (slot machine-like devices driven internally by race results) – are all substantially more controlled than the billions going through the tote system.

“Historical horse racing machines have similar levels of controls and oversight as any casino or lottery-style machines. Tote systems that have been used in America lack the clear lines of accountability and defined processes to independently validate the technology. Moreover, they lack proper safeguards to independently investigate a malfunction, or investigate attempts to compromise the system. The message has always been, 'we can do better.'”

Tote operators, not so much.

Mullally's position from outside racing was affirmed by one active racing executive whose role includes managing wagering, but asked not to be named because of ongoing relationships with tote companies. That executive told TIF in early 2021 that AmTote, which was reported to process about 80% of North America's pari-mutuel bets, has consistently disappointed his track:

“They have not met our expectations on tote processing innovations and it has long seemed like they are not receiving the cash needed to evolve or innovate in racing. If anything, they have given the impression most of their team was working on their historical horse racing technology.”

That technology powers the slot-like devices used to subsidize racing in states including Arkansas, Kentucky and Virginia.

MONITORING

Back in the 2008 panel, Bowlinger, Sobkowski and Mullally were all bearish on the state of wagering integrity and did not hold back.

In the session's Q&A period, Chris Scherf, long-time Executive Director of the Thoroughbred Racing Associations of North America, the owner of the TRPB, publicly contested Sobkowski's monitoring business, challenging the underlying technology and claiming it insufficient to meet industry needs.

“I think it vastly overpromises.”

By this point, Scherf had almost two decades of experience working with the tote companies and noted that the technological infrastructure that was required to institute independent monitoring was not possible given the rather sorry state of technology on the part of the tote companies.

Reached in March 2021, Scherf made it clearer.

“You haven't had an adventure in life until you've tried to get tote companies to do something in concert. I found quickly that when you get them all into a room, everyone was in favor of uniformity and the definition of uniformity was everyone doing it 'my' way.”

The Scherf challenge in 2008 was an engagement familiar to Sobkowski, who had heard the hemming and hawing before.

“We are a vendor. We compete in a free market and we've got a good system. I understand TRA [Scherf's employer, funded by the consortium of track owners] has a system as well, we'd love to go ahead and compete against you, love to go ahead and partner with you.

“We're looking for an industry solution here, we're not looking for any kind of unfair monopoly or any kind of unfair advantage.”

Earlier in his main remarks, Sobkowski struck hard at the racing industry's overwhelming reluctance.

“I just want to say that the industry has had some pretty significant push-back to the things that we're doing as a company.

“I've been told, for example, that our system is too simplistic. I've been told that our system is too sophisticated. I've been told that our system works too well and we don't need it. I've been told that our system doesn't work at all and why bother?

“But what I've really been told over and over is that someone has to pay for this and the industry doesn't want to pay for it.”

A DEAD RAT

In 2009, the Indiana Horse Racing Commission (IHRC) decided to move forward with Sobkowski's firm, AMS, declaring itself the first state in America to institute real-time, independently monitored pari-mutuel wagering.

Joe Gorajec was Executive Director of the IHRC for 25 years, and pulled no punches in 2021 when assessing the state of wagering integrity in America, suggesting little, if anything, has been done in the almost two decades that have gone by since the Fix Six scandal. He told TIF:

“Most racetrack operators would rather have a dead rat in their mouth than expose or take action on any wagering malfeasance that occurred on their races.

“If there is a system in place, today, that is for racetracks to use to monitor live betting, then the tracks should be reporting the results to the public. The reports should indicate exactly the problem that occurred, here's what was done about it and what steps are being taken to ensure it does not happen again.

“You almost never hear that, ever, from anyone.

“Tracks will not take action on their own because tracks are not in the business of integrity. Tracks are in the business of making money conducting horse racing. Some are more integrity and safety minded than others.

“I think most tracks, confronted with a wagering integrity issue, would either bury the information or bury their heads in the sand and it would never see the light of day. That's not every track across America, but the majority would not want to make public any information that would question the integrity of wagering on their product.”

New York adopted a rule requiring independent wagering oversight, and hired Sobkowski's AMS in October 2009 to monitor all betting on tracks in the state. The rule still exists, but one long-time tote executive told TIF the technology is so limited, monitoring to meet the rule can only take place on live, in-person betting at the host track. Thus, actual monitoring only occurs on just a sliver of total betting.

Widespread independent monitoring across the tote landscape never actually materialized in any state, from AMS or another firm. Though formal explanations are impossible to find, TIF learned from multiple individuals that the protocols which govern the tote system are so antiquated that betting details from the tote companies could never get to the monitoring groups in formats that would enable transaction-level oversight. Investment to upgrade systems to enable such transmissions have not been made. These protocols remain in place today.

At present, two of the three main tote companies serving North America are owned by major racing corporations, each of which also own racetracks, ADWs, high volume betting shops, content distribution arms and a host of other service providers. AmTote was bought by Magna Entertainment (later, The Stronach Group and now 1/ST) in 2006 and as was previously cited, controls most of the tote relationships between tracks and betting sites. Churchill Downs Incorporated acquired United Tote in a November 2009 deal as part of its purchase of Youbet. The third, Sportech, sold its global tote business in December 2020 to Australian firm The BetMakers.

TIF asked former TRA boss Chris Scherf in 2021 if consolidating ownership of tote companies with racetracks, as was the case with AmTote and United Tote, made any noticeable difference.

“No. I don't think anyone perceived anything was going to change or be improved, and that's the way it played out.

“It made it easier getting the tote companies to the table a bit more regularly, but that's about it.”

During the period from the Fix Six scandal of 2002 through 2009, horseplayers increasingly questioned the ability of tote firms to secure betting as they witnessed the failings, making it all the more inexplicable that independent monitoring was rebuffed. Tote representatives said there were no such issues.

One professional horseplayer proved, and reported, that he could bet up to 50 seconds into the start of a race.

Coming Thursday, April 29: Part 6 – Proof

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

Part 1 – Expectations

Part 2 – Intertwined

Part 3 – Volponi

Part 4 – Confidence

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