Betting on racing's future - innovations to grow handle

Article by Bill Heller

Fueled by new technology, there’s an ever-changing, brave new world of wagering domestically and internationally. North American horsemen and racetracks are doing their best to be part of it, finding innovative ways to increase handle—the lifeblood of horsemen.

Sports gambling, fixed odds and international commingled pools are already operating in North American racing. Figuring out their roles in racing’s future is a difficult exercise because of the ever-changing landscape, one which includes illegal off-shore wagering operations stealing races from tracks and returning nothing to their horsemen.

Just when it seemed like sports gambling was sweeping the nation, California voters last November rejected two propositions for sports gambling by a wide margin.

Five and a half months later, sports gambling was passed in Kentucky.

On March 22, the FanDuel Group, which includes FanDuel Sportsbook, FanDuel Racing, FanDuel TV and TVG.com and the Breeders’ Cup Limited announced a multi-year agreement to extend FanDuel’s status as the Official Wagering Partner of the Breeders’ Cup World Championships. FanDuel will continue as a title partner for both the Breeders’ Cup Juvenile and the Breeders’ Cup Mile.

The Breeders’ Cup Betting Challenge on Breeders’ Cup World Championships Saturday at Churchill Downs.

“FanDuel has been a great partner for the Breeders’ Cup because horse racing is in their DNA,” Breeders’ Cup CEO and President Drew Fleming said. “FanDuel has an aggregate app which combines sports betting and horse wagering. The Breeders’ Cup believes sports wagering is racing’s biggest marketing opportunity. Our product will be on the bookshelf with leagues like the NBA, the NFL and Major League Baseball. Our product is great, and we’re looking forward to having that product before millions of new eyes. It’s a concentrated group. They like sports. And they like betting. It’s a great opportunity for us.”

Just nine days later after the Breeders’ Cup announcement, on the final day of the 2023 legislative session, Kentucky approved sports betting, becoming the 38th state to do so, according to the Louisville Courier-Journal. Sports betting in the Commonwealth will begin in late June.

“Kentucky had been an island, sports-wagering-wise,” FanDuel Group Racing General Manager Andrew Moore said. “I think they have seen a lot of people driving out of their state to wager on sports.” FanDuel Group is a subsidiary of Flutter Entertainment, which also runs Betfair in England.

Pat Cummings, the executive director of the Thoroughbred Idea Foundation and founder and president of Global Racing Solutions, said, “I live in Lexington, and I will have an account for sports wagering. It’s real. It’s here. It’s growing.”

Not in California. Millions of dollars were spent in California to support two sports gambling propositions, and California voters rejected them. “Both were defeated,” Thoroughbred Owners of California President and CEO Bill Nader said. “We would relish the opportunity to have access to a secondary stream of income to help purse structure. If sports gambling does come to California, we need to be part of it.”

Nader, whose previous race career included six years at the New York Racing Association as senior vice-president and chief operating officer and 15 years in various senior positions for the Hong Kong Jockey Club, is well aware of the problem of unlicensed off-shore wagering companies. “Anything that’s legal is fine,” Nader said. “It’s the unlicensed off-shore operations that are a real threat for the industry. It’s a serious threat. Effectively, it’s siphoning money from the industry with no return to the industry.”

Asked how wide-spread illegal off-shore wagering is, Nader said, “It’s more than you think.”

Nader said Martin Pubrick, Chairman of the Council of Anti-illegal Betting and Related Financial Crime of the Asian Racing Foundation, is one of the world’s most knowledgeable racing officials on illegal offshore operations. He said, “Illegal betting operators have an increase in customers visiting their websites that is almost twice as high a growth race as legal licensed operators. Illegal betting is a major threat to racing and sports integrity, and if not combatted, can completely undermine public confidence in racing and sports. As betting on horse racing and other sports continue to globalize, it is increasingly difficult to differentiate between online legal and illegal betting operators.”

Meanwhile, sports gambling continues to grow. According to Moore, racing handle in the United States last year was more than $11 billion, and sports betting in January 2023, was $10 billion—a number which will only grow when Kentucky adds it.

“This is an important opportunity for racing,” Moore said. “It’s very important for racing not to miss that opportunity. My fear is that if this chance is missed, sports bettors will find different things to bet than horse racing. This is where the new audience is. This is where the next generation of bettors is. I’m really excited about getting horse racing in front of them.”

How will they respond? FanDuel started its new horse wagering/sports wagering app in December. “We’re seeing a strong takeoff,” Moore said. “We have had tens of thousands of people betting on horse racing for the first time. We’re very excited for the Kentucky Derby to come.”

Asked if there’s a risk horse racing bettors will switch to sports betting, Moore said, “They already are. That doesn’t mean they’re going to abandon horse racing. Racing as a stand-alone product can’t compete with sports betting. It needs to be available in that world.”

Asked the same question about losing racing bettors to sports betting, Fleming said, “Sports betting far outweighs the risk.”  

Will that new audience demand a different form of wagering more in tune with their experience betting on sports? “I think that fixed odds is a huge opportunity in the United States,” Moore said. “I think it would be a game-changer. I love pari-mutuel, but pari-mutuel is dated. There are a lot of important considerations with fixed odds. Horsemen and tracks are very wary. But pari-mutuel is already fading out. Opportunities to innovate would be worth the risks.”

Monmouth Park has already taken that risk. The New Jersey track began offering fixed odds last August. “Five years from now, fixed odds will be 50 percent of the handle on horse racing in New Jersey,” Monmouth Park’s Chairman and CEO Dennis Drazin told John Brennan on August 4 in his online story (njonlinegambling.com), “younger people love it because they are used to a sports betting mentality. A lot of older bettors—they are more reluctant to try something new. We need something to attract a lot of new customers, and the idea of fixed odds has always appealed to me.”

It’s appealing to lots of people around the globe. At the National Horsemen’s Benevolent & Protective Association and Association of Racing Commissioners Conference March 6–10 in New Orleans, Michele Fischer, vice-president of SIS Content Services, said that $44.3 billion globally was wagered worldwide through fixed odds on horse racing last year—led by Australia ($19.1 billion) and the UK ($12.9 billion). “We’ve really had a mantra to educate our members on what’s coming,” National HBPA CEO Eric Hamelback told Jennie Rees in her story about the conference. “I believe sports wagering and fixed odds are in our future. But it’s up to us to continue to educate everyone properly on the pros, the cons and the nuances of what’s going on.”

Moore is certainly doing his part. “We have a lot of skin in the game,” Moore said. “We have a lot of long-standing partnerships. Whatever we do, we’ll be in consultation. Over the next few years, we’re going to push it hard. You can bring a lot of new customers into the sport. We all know the frustration of going to the window, placing a bet and thinking you’re getting 5-1, and getting much lower odds. Try to explain that to a new customer. When you bring someone new into racing, it’s hard to hold on to new bettors in the age of instant gratification.”

Cummings says he’s a “huge fan” of fixed odds, with a twist: “We need it. We don’t need it to replace pari-mutuel wagering. We need it to complement pari-mutuel wagering.”

Pari-mutuel wagering suffers when huge bets are sent electronically in the final seconds before post time. They skew odds and screw winning bettors with dramatically less return.

In his March 23, 2023, story in The Financial Times, Oliver Roeder wrote that computer-assisted wagers (CAWs) made by four very large bettors generate as much as one-third of the national handle for the year.

He also said that research from Cummings showed CAW handle has increased 150 percent in the past 20 years, while betting from the general public decreased 63 percent.

“The current trend is that the one or two biggest players are having a deleterious effect on mainstream players for sure,” Cummings said. “It causes higher takeout, less churn and really makes it difficult for your average player. Mandatory payout days are feeding days for the CAWs. They kill it on mandatory payout days.” 

Fixed odds eliminate that problem.

Racing’s inherent nature could be a powerful inducement to sports bettors who want instant gratification. Sports bettors must suffer through two or three hours of changing scores, momentum shifts and possibly meaningless scores at the end of a game that can cost them their wager. Horse races are over in two minutes or less. And simulcasting allows bettors either on-track or off-track to switch racetracks in seconds.

Racetracks from different countries working together can keep all bettors busy. With commingled pools, odds can be more attractive. “For the Breeders’ Cup, we started with international combined pools in 1996,” Fleming said. “We are very proud we had 26 countries mingle into our common, global pool last year. Then we had seven other countries with separate pari-mutuel pools. To the Breeders’ Cup, we put our international participation as one of our pillars. We seek the best horses and also work with our global partners to promote the sport internationally and have strong international wagering.”

Of course, the Breeders’ Cup isn’t the only entity already working internationally. On September 22, last fall, the New York Racing Association Current Management Solutions (CMS), a subsidiary of NYRA, and 1/ST Content announced a 10-year partnership to expand distribution of North American racing internationally. Part of the agreement calls for NYRA CMS to acquire a significant equity position in TSG Global Wagering Solution, a 1/ST subsidiary company. 

“This agreement assures that North American horse racing’s stakeholders are the primary beneficiaries of revenues generated through international wagering, further strengthening the domestic industry for the next generation of fan and bettor,” according to 1/ST Content’s CEO Gregg Colvin. NYRA’s Chief Revenue Officer Tony Allevaro said, “Sports fans and bettors around the world can look forward to more coverage of top-quality racing than ever before.”

1/ST Content’s distribution network stretches to the United Kingdom, Ireland, Europe, Australia, New Zealand and Africa, as well as serving 1/ST Racing’s Gulfstream Park, Santa Anita, Golden Gate Fields, Laurel and Pimlico, NYRA’s Belmont Park, Saratoga and Aqueduct, Del Mar, Keeneland, Tampa Bay Downs and Woodbine.

On April 4, it was announced that from May 1, BetMakers’ Global Racing Network’s (GRN) race meetings will be available for inclusion in 1/ST Content’s broadcast schedule. This will result in signals from tracks such as Kentucky Downs, Charles Town, Mahoning Valley, Penn National, Sam Houston, Zia Park and Monmouth Park benefiting from increased global exposure.

BetMakers’ Chief Executive Officer Jake Henson said, “The partnership with 1/ST Content is designed to be an important addition to BetMakers’ Global Racing Network, further broadening our global racing distribution base with a strong and credible partner in expansive markets, which can deliver enhanced returns to our racetrack partners.”

Founded in 2000, Betfair has been offering international wagering for more than 20 years. With its headquarters in Hammersmith in London (England) and overseas hubs in Malta and Ceuta, Spain, Betfair offers horse racing, sports betting and online casino, poker and bingo.

In November 2009, Betfair announced a deal with the New York Racing Association to start wagering immediately on Aqueduct. TVG Network, which is now FanDuel TV, was acquired in 2009 for $50 million. In February 2016, Betfair merged with Paddy Power to create Flutter Entertainment. Two years later, Betfair offered live-betting customers fixed odds. 

Another European company, XBGlobal.com, based in Germany, offers customers wagers, which are “directly commingled into host track pools, giving you access to the world’s most lucrative wagers,” and offers marquis Thoroughbred tracks in the United States, simulcasting from Chile and greyhound racing. XBGlobal.com is an affiliate of Xpressbet, LLC, on file with the Oregon Racing Commission—a site chosen because of tax advantages.

There is a worldwide racing stage, and North American tracks have yet to be involved. The World Pool offers international, commingling pools with top racing events operated through the Hong Kong Jockey Club. The first World Pool event was at Royal Ascot in 2019. Since then, it has been expanded to cover the Dubai World Cup in Meydan, the 2000 Guineas at Newmarket, The Oaks and The Derby (both run at Epsom Downs in the United Kingdom), Gold Cup Day in South Africa and Irish Champions Day at Leopardstown in Ireland. 

This year, the World Pool has been expanded to include the Lightning Stakes Day in Australia, the Saudi Cup and the Irish Derby. That gives the World Pool 25 dates, up four from last year, including Melbourne Cup Day in Australia.

Asked about the World Pool, Breeders’ Cup’s Fleming said, “We have continued dialogue with Hong Kong and other jurisdictions. Hong Kong did the Breeders’ Cup last year. Anything is possible. We already operate our own global pool since 1996. We want to grow the pie.”

FanDuel’s Moore said, “It will be interesting to see how it works out.”

The same can be said for new wagering innovations in a continually changing global landscape. Racing’s future depends on it.

“We need to modernize and give our customers confidence that we can compete for the wagering dollar,” Cummings said. “We’re really not trying today. We’re existing. There are a lot of reasons to be pessimistic about horse racing, but there’s one key positive. We have not tried to grow the betting. We need to modernize and give our customers confidence that we can compete for the wagering dollar.”

The competition has never been greater. Technology waits for no one.