How Does the Regulatory Environment for Pool Betting Impact on the Financial Health of Horseracing Around the World?

Simon Bazalgette, the founding Chair of specialist management consultancy GVS EQ, and Martin Purbrick, a founding GVS EQ associate, take a canter around the world to see how betting regulation, and particularly pool betting, has a vital impact on the relative level of prize money, and therefore the financial health of the sport.

For the last century and beyond, Horseracing has had a symbiotic relationship with betting, and this remains the case in most countries – to a greater or lesser extent. As a result, the financial strength of each national horseracing industry depends on the way that betting is regulated and owned in that country. An understanding of a national regulatory structure for betting is vital for any understanding the wide variation of prize money in different countries.

Pool betting, also known as ‘Tote betting’ or ‘pari-mutuel betting’, has long been associated with horse racing. Tote betting was established in the 19th century and involves all the amounts bet combined in a pool, from which the operator takes a cut, then the odds are calculated based on the proportions wagered on each outcome. Totalisator odds are different to fixed odds in that they are not set until the race begins, no more bets are accepted and the total amount in the pool is finalised.

Tote operators were created to harness wagering to support the sustainability of racing, the welfare of horses, as well as employment for the large numbers of people involved in the sport around the world. Horse racing is a high cost and capital intensive sport to organise and operate, and requires considerable sustainable funding to survive. 

In markets with strong totes such as Japan, Hong Kong and France, racing generally does relatively well. In countries where other forms of betting have been licensed, racing can still do well if there is a fair balance of funding provided back to the sport from all types of betting. Australia would be a good example of this. In the US the position is rapidly changing from a pure racing tote market with the introduction of sports betting.

In the UK, the introduction of off course fixed odds betting in the early 1960s, with a relatively loose link to horseracing, has meant that British horseracing has lost pace with its fellow racing jurisdictions around the world when it comes to prize money and investment in the sport from the betting industry.

In South Africa and Australia there remains a mixed economy of fixed odds and pool betting. Australian racing has strong statutory support to ensure a meaningful percentage of betting revenues goes to horseracing ensures that prize money levels remain internationally competitive.

For many years there has been a steady but less than speedy process of the official totes connecting with each other to combine pools on racing – commonly known as commingling. There are several reasons for the slow progress, primarily the different bet types and conditions attached to similar bet types, but also the commingling technology (ITSP) which has been in place for more than 20 years but is still embedded in many heritage platforms. The most important development in commingling has been the World Pool, which is hosted by the Hong Kong Jockey Club. 

In addition to the main national or state totes, there are a number of private pool operators who offer access to the pools particularly for large international players who offer significant liquidity to the market.

Some countries, particularly the Gulf States, do not have licensed betting of any sort, and the sport relies mainly on the financial support of the state, the royal families and rich owners.

To a large degree, the level of funding available for horseracing is dependent on the level of support that national or state regulations provide, particularly with regard to funding from betting, and therefore any attempt to assume that success in one country can be used as a template for another should be treated with great caution.

Let’s take a high level look at what this means for the major racing jurisdictions.

France

The French pool betting market is around €9 billion annually, the profits from which are reinvested back into the sport. It is notable for its wide retail distribution through the vast network of over 20,000 tabacs (tobacco and convenience stores) in the country.

Pool betting in France is primarily controlled and run by the PMU despite attempts to open up the market over the last decade or so. The PMU returns all its benefits to the 66 French horse racing companies organising gallop and trotting races (France Galop and Le Trot), sustaining more than 60,000 direct and indirect jobs throughout France. 

In 2023, the PMU paid a total contribution of 835 million euros to France Galop and Le Trot. This financial contribution supported the operation of 233 racetracks and 26,000 horses in training.

Other types of betting operator have been licensed in France since 2010 but they remain heavily restricted and take only a very small share of the French horserace betting market.

Japan

The Japan Racing Association (JRA) is the custodian of horse racing and also tote betting at the national level. Pool betting on racing in Japan generated a betting turnover of over 2.5 trillion Yen (Euro 15 billion). The JRA is required to provide 10% of its gross betting turnover to the national treasury, as well as 50% of any surplus profits remaining at the end of the fiscal year. Three-quarters of the contribution must be used for improvement of livestock breeding and the JRA also contributes additional funds to horse breeding as well as the promotion of equestrian culture.

It is no coincidence that Japanese racing offers the largest pool of prize money in the world, given the JRA’s control of horserace betting in Japan under its vertically integrated sole licensed operator. Betting on other sports is also limited to only a small number of local sports such as bicycle, boat and motor racing.

The Japanese pool is restricted from commingling with other international pool operators, with only limited pilot trials having taken place to date. Typically this is driven by the presence of Japanese runners in overseas races, to allow Japanese punters to bet on these horses. When this does take place, it generally has a major impact because the level of Japanese betting will be significantly larger than the home pool.

Hong Kong

Hong Kong has vertically integrated racing and pool betting, operated by the Hong Kong Jockey Club (HKJC). It generates around HK$130 billion (€15 billion) in annual betting turnover, with the HKJC being the largest corporate taxpayer in Hong Kong, and operating one of the world’s largest and most active charitable trusts. All surplus funds after operating expenses are either reinvested in racing or passed to the HKJC Charities Trust.

Most recently, the HKJC has become the host of the most successful international pool betting initiative, the World Pool and involves a collaboration of over 25 racing jurisdictions allowing customers to bet into a single pool involving enormous liquidity. This enlarged liquidity ensures that there are less odds (price) variations in smaller betting markets and better value for all betting customers. In the 2023/24 racing season, there are 45 World Pool fixtures at racecourses around the world, and the number is likely to continue to grow.

By allowing international horseracing fans the ability to bet into one pool on the major group races around the world, it has created a significant additional betting revenue stream in other territories whereby, for example, racedays such as the Epsom Derby, Caulfield Cup and the Dubai World Cup benefit from the significant level of betting that can be generated. 

United States

In the US, betting is regulated at the state level and historically was limited to pari mutuel betting on horseracing.

Alongside this there were some examples of licensed casinos or slots which would usually be allowed only on racecourses or designated casino sites. Where a racecourse had such additional betting, it would significantly increase the level of prize money that racecourse could offer compared to other US racecourses.

The first Off Track Betting (OTB) service for horseracing was licensed in New York State in the 1970s, and rolled out in a number of states thereafter. These have been superseded by account deposit wagering services (ADWs). Horseracing remained the prime beneficiary of the OTBs and ADWs until in 2018 a Supreme Court ruling opened up the potential for states to licence fixed odds sports betting and almost 40 states have now done so to some extent.

US horserace pool betting is dominated by the two major racetrack groups - Churchill Downs (through its Twin Spires service) and the Stronach group (through their 1/ST and Xpressbet services). The two groups also own two of the major tote tech companies, United Tote (CD) and Amtote (1/ST). Churchill recently announced that NYRA (the racing operator in NY State) had completed its purchase of a 49% stake in United Tote.

Licensed betting on horseracing remains around $10 billion pa but betting on other sports has grown to over $90 billion pa.

United Kingdom

The UK has arguably the most competitive licensing environment for betting in the world. The UK Tote was created by Winston Churchill (a Jockey Club member) in 1926 as an independent body run for the good of racing; but unlike other countries, its betting monopoly was ended in the early 1960s with the creation of licensed fixed odds betting shops. Also unlike elsewhere, British horseracing was given no control over the off-course market, but instead a statutory levy was created to ensure that a small proportion of the profits from betting on horseracing was passed through to contribute to the financing of the sport.

Since that time, pool betting has had a declining share of the betting market and currently represents around 10%. The UK is dominated by fixed odds operators, and while British punters have the widest choice of competitive bets in the world, they also benefit from the highest return on bets in the world. This means that pool betting, with its higher take-out rates, struggles to match the pricing for fixed odds for simple bets, but is more competitive in so-called exotic bets, particularly the Place Pot.

The Levy is currently set at 10% of gross margin on betting on domestic horseracing, which, due to the highly competitive market and the low margins, is the equivalent of around 0.7% of betting turnover, amongst the lowest return from betting to horseracing in the world.

There have been various attempts to bring the Tote closer to racing, either through transferring its ownership to the sport, or through a preferential sale to racing, but these attempts have all failed. In 2011, the Tote was nationalised and then sold to the bookmaker group, Betfred, who sold it on to its current owners (which includes several large owners and breeders) in 2018. The UK Tote has had a commercial arrangement with the British racecourses (via their shared on-course betting company, Britbet) which is due for renewal in 2025.

Horserace betting remains at a significant level in the UK, c£5bn pa, second in Europe to France, but due to the difference to the regulatory structures, the amount transferred to the sport is significantly lower than in France.

Australia

Australia is arguably the best example of a mixed economy of pool and fixed odds betting, all of which provides significant funding back into horseracing. 

Each state and territory has its own regulatory authority for betting and racing. Betting is owned and run separately from the sport, and generates around €15 billion pa, which is pretty evenly split between pool betting and fixed odds.

Tabcorp Holdings, a public company, is the largest operator of pari-mutuel betting, running TAB-branded services across multiple states, and each state tends to have its own pool operator as well.

As in the UK betting operators are required to pay a proportion of their revenues to the sport, under what is known as Racing Fields regulations. The level required in Australia is significantly higher than the UK levy – typically between 1.5% and 3% of betting turnover - and allows Australian racing to offer prize money at the top end of international levels. 

Ireland

The betting market in Ireland has many similarities to the UK. Betting on horseracing is around €1.1bn to €1.3bn each year, with Tote Ireland representing a small proportion (6%-7%). Betting operators pay a government levy which is paid over to the horseracing industry via Horse Racing Ireland (HRI), usually between €80m - €100m pa. This funding supports the development and promotion of the industry, racecourse maintenance and annual prize money of around €65m pa.

South Africa

South Africa is a market with a mixed economy between the original pool operator (the SA Tote, owned by Phumelela, the largest racecourse group) and fixed odds operators. Phumelela has arrangements in place with the National Horseracing Authority of South Africa to support prize money and the promotion of SA racing in the country.

Pool betting on horseracing is around €400m pa and represents around two thirds of the market, with fixed odds operators growing fast.

Conclusion

The financial contributions to racing from totes are a critical part of the sustainability of racing, supporting a huge number of jobs in the sport. However, the regulatory and tax structure for pool betting varies considerably around the world.

Most countries will have started from a similar position of the tote being the only form of licensed betting as explained by Sir Winston Churchill: “I have always believed that it was a good thing for the State to organise the totalisator and take control of this form of betting in order to eliminate illegal practices and to ensure that a proper proportion of the proceeds went to public purposes.” 

The position in each country has diverged significantly over the last 100 years, and this means the impact on the funding for the sport is very different in each country. While there are areas of similarity, building greater collaboration between tote operators is a long road but one that can only benefit racing in the long term.

Tokyo Calling – Documenting Iresine’s journey from rural France to the Japan Cup

Article by Katherine Ford

This is the fairytale of a Japanese adventure for a team of family and friends who could never have anticipated being treated like emperors in Tokyo as privileged guests of the JRA. 

Iresine, a six-year-old gelding who cost just €6000 as a yearling before climbing the ranks to a pair of Group 1 successes in France, brought the dream to life for hands-on trainer Jean-Pierre Gauvin, France’s leading lady jockey Marie Velon and a group of low-key owners and supporters eager for the experience of a lifetime.

Rags to riches stories are nothing new to Jean-Pierre Gauvin, famed in France as the handler of Saonois, the “Cheval du Boulanger”, who was bought for a song and won the 2012 Prix du Jockey-Club for local baker Pascal Treyve, and renowned for his success with the unfashionably-bred mare Siljan’s Saga, multiple Group 1 placed and 4th at 100/1 in the 2016 Arc. 
Winner of the Prix Royal-Oak in 2022 and Prix Ganay in 2023, his latest star, Iresine, has been high on the wish list of the Japan Racing Association for the Japan Cup for many months and this autumn, Gauvin decided the time was right. 

“Ever since last year, the JRA French representative Soichiro Matsumae, has been encouraging us to run in the Japan Cup! He has done a good job! As a six-year-old gelding he has the right profile to travel to Asia and the date of the Japan Cup is ideal before he goes on his winter break.”

Family Connections

“Above all the aim is to enjoy the adventure. My son and daughter are co-owners of the horse and they are both coming, as well as my grandson who is just 18 months old, my wife, my brother who is a co-owner too, plus another brother who lives in the USA. If it hadn’t been for Iresine, we would never have undertaken such a trip as a family.”

60 year-old Gauvin is a horseman through and through. Born and raised in the Centre-East region of France by parents who “like many farmers in the region, had a couple of trotting broodmares. At age 15 I went to the apprentice school to learn the trotting trade but at only 33kg, I was advised to try the flat!” Except for a brief stint in Marseille, he has spent his entire career, from apprentice to trainer, at the stable he still occupies in the rural hamlet of Saint-Cyr les Vignes.

With limited facilities but plenty of turnout paddocks and a hands-on approach, Jean-Pierre Gauvin is not afraid to test alternative routes, and was not deterred by conditions in Tokyo. 

“The ground will be fast and the competition will be very tough, but if we only raced when everything was in our favour and we were sure to win we’d never go anywhere. The JRA agreed to all our requests, including the possibility of taking a companion horse, so there was no reason not to go!”

JRA Generosity

“For Iresine’s participation, the JRA offer the same bonus as for the winner of the Prix de l’Arc de Triomphe and other bonus races, of which the Ganay is not one. He will receive $200,000 just for participating, plus there is prize money down to tenth place. So from a financial perspective, it represents a considerable sum even if we finish tenth. It’s an adventure but the organisation has been perfect. Now the final concern is the travel, which after a change of plan from Air France, will be from Frankfurt to Tokyo. I’m looking forward to Eric calling me to tell me that all has gone well.”

Eric Vandra, Gauvin’s travelling head lad, is about to undertake his second far-flung journey with a horse as he was present when Saonois ran (10th) in Hong Kong 11 years earlier. A former jockey who left racing twice only to return each time, he is determined to ensure that all goes smoothly with Iresine. 

“We’re going on an adventure. But there are already details which reassure me. On the plane Iresine will be accompanied by Edouard Lyon who is a trainer but does some work for the STH transport company. I used to be an apprentice for his father and looked after Edouard when he was a kid. All these years later, we meet again on a plane to Japan, and it’s him who will be looking after me! 

Iresine will come off the horsebox and be stabled for a few hours in Frankfurt airport, then the flight to Tokyo takes about 14 hours. He’s a horse who can be nervous when he travels, and it seems he inherits his stressed nature from his dam. I didn’t know her in training but we have got to know Iresine’s breeders and they have told us about her character.”

Vandra has prepared 250kg of equipment to travel with Iresine and stablemate Marcan, “I’ve tried to think of every eventuality. Having been to Hong Kong, I know more or less what we’ll need, and of course the most important thing is the passport!”

All the foodstuff has already been taken care of, as Jean-Pierre Gauvin explains, “The JRA requested a full inventory of all our feed, plus any complementary products, because nothing can come off the plane with Iresine. The JRA supply everything, and this will be either the equivalent product from Japan, or imported items if necessary.”

Vandra continues, “The JRA have explained what it will be like over there. We have to leave our riding clothes in the quarantine area, there are showers on site and we have to wash and change before leaving the stable complex. The protocol is very strict. I’ve seen some photos, it all looks very new.” 

Indeed, the equine import procedure for the Japan Cup has been simplified with the opening in 2022 of a new quarantine stable in the infield of Tokyo racecourse, eliminating the need for horses to respect a quarantine period at a separate site upon arrival in Japan before moving on to Tokyo days later. 

Nerves fraying early in the week

Iresine travelled “perfectly” to Japan but after clearing quarantine gave trainer Jean-Pierre Gauvin a major scare. At a press conference for “international visiting horses” three days before the race, the eyes of around 100 media and other onlookers were all focused upon connections of sole visitor, Iresine. 

“On Monday, Iresine suffered from tying up syndrome after his work.”, the trainer explained with refreshing transparency. “He got nervous when going through the tunnel to access the track, but then he cantered fine. Back at the stable, all seemed to be OK initially but then he started to tie up as we took him to wash down. I was very worried but the vet took a blood test and we treated him, essentially to rehydrate him. On Tuesday he had to undergo his stalls test so we had no choice but to take him through the tunnel again, but we led him through in hand and mounted him on the other side, and he reassured us with his exercise. All went smoothly again on Wednesday and today (Thursday) he was completely back to himself, asking to go faster. His coat is shiny again and he looks happy to be here.”

The same can be said for his trainer, who was out on the track each day aboard lead horse Marcan. “I would have come here just for the opportunity to ride out at this amazing racecourse!” he joked to an interested reporter. 

In addition to the assembled media, Team Iresine had taken time out from sightseeing to attend the training session and press conference. “I’ve never seen so many media in all my life. Wow!” exclaimed wide-eyed co-owner Bertrand Millière. “For small owners like us, we weren’t programmed to have a horse like this. At the sales, he didn’t have the profile to end up where he is today. But as is often the case with the Gauvin method, he has climbed the ladder step by step. Each time we just said “wow”, but he has never stopped progressing and now here we are in Japan, the centre of attention of a crowd of journalists. We are living in a dream and are making the most of it.” 

Another co-owner is Jean-Pierre’s brother, trotting trainer Jean-Paul Gauvin, “I’m on a different planet, even further than the moon! I wanted to have horses in training with Jean-Pierre to share experiences, but I was thinking of small provincial race tracks at home, we never imagined ending up here. The two disciplines, trotting and flat, are so different, but we do take ideas from each other and I think that Jean-Pierre has gained a lot of inspiration from the trotting world. We exchange a lot, notably about shoeing… It’s an opportunity for us to talk, because we both have all-consuming jobs. Training is more than a passion, it’s a way of life, and having horses with Jean-Pierre gives us an opportunity to see each other and share emotions. We’re making the most of it at 200%, visiting Tokyo, enjoying good food and discovering a whole new world.”

“Iresine is a champion. He has a huge heart and a great attitude. It wasn’t written on him at the sales.. or else we wouldn’t have been able to buy him so cheaply. But Jean-Pierre has a real horseman’s intuition. Don’t forget he also picked out Saonois and Siljan’s Saga. Saonois cost €8000, “Siljan” just €2500 and she finished fourth in the Arc. That’s proof that you can always dream with horses, and here we are!”

Bargain buy from novice breeders

Jean-Pierre Gauvin goes on to explain the purchase of Iresine, for €6000 at Arqana’s October yearling sale. “He caught my eye in the collecting area before entering the ring. He had four white stockings which is often considered to be a negative but Bertrand Millière’s children fell in love with his markings and we were able to buy him cheaply.” 

Breeders Marie-Louise Van Dedem and her husband Pierre Joyaux are also part of the support team in Tokyo and Dutch-born Marie-Louise remembers, “Iresine was the first generation to be born at our Haras de Grandouet in Normandy and he always had a lot of personality. The Haras de Montaigu presented him at the sale and Jean-Pierre Gauvin was the only one to show any interest in the horse. I didn’t know him at the time, but Aliette Forien (of Haras de Montaigu) said to me after the sale, “you did the right thing to let him go at that price, as he is a very good trainer.”” 

Like the rest of the team, Marie-Louise Van Dedem was far from imagining that one day she would be invited by the JRA as a connection of a Japan Cup runner. “I became a breeder by chance, and we bought the property on (resale website) Le Bon Coin and built it from scratch. My husband Pierre bought Iresine’s dam and he chooses the matings. I remember early on he explained to me about the Group race system and I didn’t understand a thing! But I’ve learnt quickly and do everything now. It’s all about observation and attention to detail.”

More drama as dream almost turns to nightmare

Attention to detail is a maître-mot for the JRA who cannot receive enough praise from Jean-Pierre Gauvin and his team, especially after a second unwelcome setback. “On Friday evening, as Iresine was being led out, he wasn’t sound. We couldn’t believe it, another problem after him tying up on Monday,” recounts Vandra. 

Jean-Pierre Gauvin received the bad news just moments before attending the Japan Cup gala event, “it was a difficult moment at the formal dinner as I would have preferred to be at the stable close to the horse, but I had a lot of confidence in the JRA veterinary team. The vet proposed solutions but also listened to our suggestions. We always agreed about the best treatment to adopt.” 

After fears of an infection were discounted, confidence grew that Iresine would make the starting line after all. “He had leather pads on all four feet. These can have a tendency to harden and one of them had become distorted, making a lump which was putting pressure on the sole. In agreement with the veterinarian, we applied a linseed poultice, and on Saturday morning, even without his shoe he trotted out sound. The blacksmith was superb, he is the son of the best farrier in Japan, and I even heard that he shoes Equinox. He reshod Iresine, taking care to avoid pressure on the sensitive part, and things soon worked out. But it was a worry as we were less than two days from the race.”

“For me, the victory is that we were able to run,” says Vandra, “it didn’t look good during the week. The JRA teams did everything they could to help us.”

A memorable occasion for a united team

Come raceday, in a state of relief, excitement and wonder, the team of co-owners, breeders and trainer were welcomed into a private box overlooking Tokyo’s gigantic track and stands filled with 85,000 fans. Jockey Marie Velon’s parents, who live close to the Gauvin stable, were also part of the supporting group throughout the week. “Marie turned up one morning at the stable after finishing her apprenticeship with Alain de Royer Dupré, and until recently worked for me whenever racing allowed. She has grown with Iresine and this is her adventure too,” says Gauvin before adding with emotion, “I am her racing dad. I was touched the day she came out with that…”

As is the way in Japan, horses enter the parade ring 35 minutes before the race, giving fans time to digest all the information available on the giant screens and admire their champions before placing a bet and taking position in the stands. Focus is on favourite Equinox, the Longines World’s Best Racehorse, but there is respect and admiration for the foreign visitor. 

“In the parade ring, the only noise I could hear was of cameras clicking all the way around for 15 minutes,” recalls Vandra. “The public are real fans; they must have taken hundreds of photos, and I’ve received some of them. They love their racing and are pleased to have an international horse in the race.”

In what will be remembered as an iconic edition of the Japan Cup, won in superlative style by the world champion Equinox, Iresine ran credibly to finish ninth. 

“He ran honourably. It’s difficult to say whether the complications affected his performance, but Marie was happy with how he ran and he recorded his best time over the distance of 2400m.”

For his efforts, connections take home to France the $200,000 participation bonus plus €107,000 for ninth place. But far more important than the prize money, Iresine’s Japan Cup was an unforgettable team adventure.

“We would have liked to stay longer… We all had an incredible experience, both professionally and personally… We were the only international horse so maybe they made an extra effort for us, but the support from the JRA was second to none. Day by day, within our group, we reassured each other about the likelihood of being able to race, which wasn’t guaranteed at times, and despite the worries we were able to relax and enjoy the week together.”

After Iresine landed back in France safe and sound several days after the Japan Cup and began his annual winter break in the Puy de Dome, the final word goes to his trainer, “Merci Iresine!”, or should that be Arigatou Iresine?