Is US Sports Betting A Threat To Horse Racing, An Opportunity To Copy Success, Or Both?

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Horse racing and sports betting

At least one horsemen’s group believes the one singular threat to the survival of the thoroughbred racing industry is the spread of legalized sports betting and the fixed-odds model.

“It’s an urgent situation,” said Pat Cummings, executive director of the Thoroughbred IDEA Foundation (TIF).

“There is a two- to three-year window. At the end of three years, there could be 31 states with sports betting in their jurisdictions. It is a threat, but it could be an opportunity,” Cumming told Legal Sports Report in an interview.

The advocacy group, located in Lexington, Ky., released a study titled “Horse Racing and ‘Legal’ Sports Betting.” The report highlights several critical areas the horse racing industry needs to address in order to keep up with the rapid spread of sports betting.

“While sports betting has long existed in an unorganized fashion, its legalization will swiftly lead to a massive development of supporting infrastructure – including marketing, data services, and customer management – that will transform the competitive landscape of the gaming industry,” the report says.

Updating the racing industry

The TIF research outlines several market conditions the racing industry must adapt in order to stay competitive, including:

One of the major takeaways from the report is the wagering structure surrounding horse racing and its inability to drive revenue from major partnerships. The research paints a compelling argument. In the eight months since the strike-down of the Professional and Amateur Sports Protection Act (PASPA), lucrative partnerships between sports leagues and casinos have become the new norm.

MGM Resorts International was the first casino operator to usher in a new era of sports betting post-PASPA when it struck a three-year deal with the NBA for $25 million.

“The difference between the sports leagues and racing is, racing derives all its revenue from betting,” Cummings said. “Sports leagues will see their value increase with deals they secure to distribute their product.”

Here’s more from the TIF report:

“In horse racing, the price is only set when the market is closed, and additional money cannot change the odds. The pari-mutuel system, in which the weight of all bettors’ money on any possible combination of outcomes determines the price is foreign to other types of event-based wagering.”

“Sports betting in America is conducted at fixed-odds. Prices are set and changed by the operator of the sportsbook. You bet at a price and know what return you will get if you win.”

Racing integrity fees?

Another complicated question floating around the racing industry is, should horsemen continue to get a cut of revenue simply for putting on races?

Much like professional sports leagues lobbying for an integrity fee,” horsemen’s groups have long be compensated for their product. Indiana was the first state to coin the concept of an “integrity fee,” which essentially gives professional sports leagues a dedicated cut of all money wagered on their products. But so far, no state with legal sports betting has included language pertaining to an integrity fee.

“The Interstate Horse Racing Act outlines by law that horsemen are guaranteed some sort of cut by putting on the product,” Cummings said. “Racing is an expensive sport to put on, but it has a huge trickledown effect.”

In a state like Kentucky, which is essentially the horse racing capital of the US, the industry is tied to several agricultural resources.

“At the speed in which racing is declining, a state like Kentucky would be most affected,” Cummings said.

Progressive thinking on horse racing

In the eight months since New Jersey entered the sports betting market, Delaware, Mississippi, New Mexico, Pennsylvania, Rhode Island and West Virginia have all introduced sports betting in some capacity.

There are bills looking to legalize sports betting in upwards of 20 states in the next few years.

Cummings said the racing industry sees opportunity in New Jersey.

Last year, Monmouth Park offered three fixed-odds bets with 48-hours notice and recorded $21,000 in handle.

“The book offered fixed-odds prop bets on the 2018 Haskell Invitational — (on bet) required bettors to select the winner of three races and the winner of the Cubs/Cardianls baseball game.”

“That to use was a sign that this model has legs,” Cummings said.

The report also includes a few ways horse racing could adopt new ways to bet:

“The states, the individual state horsemen’s groups who control the rights for their product need to be proactive in allowing the development of fixed odds on their races,” he said.

TIF plans on introducing research that dives into a high debated topic amongst the sports betting industry – data rights.

“Horse racing data is incredibly expensive,” Cummings said.

“Our organization is trying to raise awareness that (the industry) needs to be a part of sports betting, not simply exist alongside it,” he said.