If all goes as planned, Monmouth Park will launch its fixed odds wagering program for the entire card on Haskell day (July 17) and will continue for the rest of the summer meeting.
It is no coincidence that Dennis Drazin, Chairman and CEO of Monmouth Park, was one of the leaders of the legal challenge that convinced the U.S. Supreme Court to rule against the Professional and Amateur Sports Protection Act of 1992 (PASPA), which had allowed only Nevada and a few other jurisdictions to take bets on sports. The rest of the country was excluded.
The Supreme Court ruled in May 2018 against the Federal Government in declaring PASPA unconstitutional. It currently appears that, by the end of 2021, there will be some form of legal sports wagering in at least 30 states.
What makes this important and relevant for racing is that a sports bet at a casino, an OTB or a racetrack is effectively a fixed odds bet. The odds that the bettor gets when he/she wins a bet is exactly what the odds were when the bet was placed. Any subsequent movement of a betting line, whether it is a final score, a bet on who scores first or a bet on whether a player fouled out at a point in time, does not affect the payout on the original bet.
There is an important distinction between a traditional pari-mutuel race bet (where the odds fluctuate after a bet is made until the race goes off) and a fixed odds bet (where the bettor is paid off on the odds at the time the bet is made).
Fixed odds betting is the term for placing wagers with a bookmaker, racetrack or account wagering company at agreed, odds. Basically, you make your selection on which horse will win, place or show in a specific race, and the bookmaker you are betting with will give you odds at the time the wager is placed. Those odds will not change, hence ‘fixed odds’.
As any regular horseplayer knows, when you bet into a pari-mutuel pool, you do not get the odds that existed at the time of your bet, but rather the price that is reflected in the pool at the time betting is closed just prior to the start of the race.
Most tracks do not put bets into the pool as they are received, but rather delay in ten-, 20- or 30-second cycles, which can delay the posting of any change in the pari-mutuel odds. To make matters worse, large computer assisted wagering (CAW) customers have direct access to most racetracks’ pari-mutuel pools that allows CAWs to make thousands of individual bets in the last minute before the pools close and the race goes off.
Puzzling uncertainty
I can assure you that any regular bettor reading this article has watched a race where his/her bet on a horse goes off at, say, 4/1, then, when the horse crosses the finish line, the odds on the Tote board could then show 5/2 or 3/1, or perhaps even money.
Any sports bettor knows that whenever they bet on a non-racing sports event, whether it is at a casino or the corner bookmaker, the odds on that bet are what they receive when they make the bet.
Yet, when a college-age sports bettor goes to place a bet on a horserace, they do not understand the uncertainty of the potential payoff they will receive if their horse does win/place or show.
There are at least two additional benefits that fixed odds in horseracing have over pari-mutuel wagering. Fixed odds, at least in the early stages, will be generally only taken on win, place and show bets. Exotic bets such as trifectas, superfectas, Pick 3, 4, 5 and 6 will be difficult to risk-manage. However, currently win, place and show wagering comprise approximately 30 percent of all bets on a race card.
The takeout rate on fixed odds wagering will be approximately 12 percent, which is a substantial improvement on current straight-bet rates, which ranges between 15 and 18 percent.
The reduction in the takeout of the fixed odds bet means there will be less money available to rebate to the higher-volume bettors, which may discourage the high-volume player from playing in the straight pools. This should result in better payoffs for the casual bettor.
‘Real opportunity’
A critical long-term contract has been executed between Monmouth Park and Betmakers Technology Group Ltd. Betmakers is a software development company that designs and develops odds comparisons and intelligent betting platforms as well as analytic and trading solutions.
It is based in New South Wales, Australia. A decade ago, Australia made the bold move to add fixed odds wagering to its pari-mutuel menu for horseracing wagering products. This has been successful, as you will see in some of the reporting below. It is important that the U.S. racing business works to emulate that success.
Here is a quote from BetMakers CEO Todd Buckingham:
“We have been working with racing bodies and bookmakers from all parts of the world to develop the best solution that fits into the horseracing ecosystem. We believe that U.S. horseracing has the potential to be the largest betting sport in the U.S, including basketball, American Football and baseball. There is a real opportunity for the U.S. horseracing market to grow like it has in Australia, which has seen prize money levels double over the past 7-10 years based on a funding model that is equitable to all participants.”
Bold strategy
I think fixed odds wagering is a bold and forward-looking strategy for the team at Monmouth. This is all new and exciting, and there has been some interesting material in the media on both fixed odds wagering and sports betting.
First, I will draw your attention to this excellent discussion between Ray Paulick, Publisher of the Paulick Report, Joe Nevills, Paulick Report Bloodstock Editor, and Pat Cummings, Executive Director of the Thoroughbred Idea Foundation (TIF), had on the Paulick Friday Report on June 25.
Next, I would like to continue with Pat Cummings’ work with a look at this TIF article, published in February 2019 but still relevant today.
He says, “Over roughly the next two to three years, racing must adapt to these new market conditions – accepting fixed odds and exchange wagering on its product; developing a new funding model to support the sport in light of this disruptive, well-financed and aggressive competition; significantly boosting and improving our marketing efforts; and innovating to create new types of bets for customers who will soon be taken by agile, forward-thinking sports betting outlets.
“The future of horseracing on the continent will depend on it.”
Below is a brief article from Wagering America, published in July 2020, which demonstrates that, when Australia offered fixed odds wagering to its traditional pari-mutuel customers, the aggregate result was strong performance of fixed odds wagering, outpacing pari-mutuel.
Fixed odds can return race wagering to growth
“A selection of global regions provide case studies where introduction of fixed odds wagering bet types have complimented pari-mutuel offerings and stimulated sustainable net growth.
“In markets of Australia and New Zealand especially, also parts of Europe, fixed odds and pari-mutuel wagering options have coexisted to fulfill demand growth for two decades.
“According to the International Federation of Horse Racing Authorities (IFHA) facts and figures, Thoroughbred racing handle in Australia and New Zealand has grown by 9.5 percent and 5.5 percent CAGR (Compound Annual Growth Rate) respectively in the ten-year period between 2008 and 2018. “Australian racing handle combined across three codes of Thoroughbred, Harness and Greyhounds for 2017-18 was AU$25.8 billion, up from $11 billion in 1992.
“In contrast, fragmented pari-mutuel-only markets scattered across 40 authorized jurisdictions in the United States have collectively been flat, 0.04 percent CAGR from 2008-2018.
“In a wagering and betting discussion paper released by the Office of Liquor, Gaming and Racing, figures from Racing Australia’s Fact Book from 2009-10 to 2016-17 show changes in demand from bettors in Victoria, one of Australia’s two largest race wagering regions. Here consumer preferences continue to shift away from pari-mutuel pools toward fixed odds. Overall total wagering turnover has grown with rapid acceleration of fixed odds outpacing incremental decline of pari-mutuel trends.”
Clearly the addition of fixed odds to the traditional pari-mutuel wager has continued to move Australian wagering activity in a positive direction. However, without the addition of fixed odds to the pari-mutuel, Australia could be facing the same declines that the U.S. is experiencing with its outdated pari-mutuel system.
Below is a brief article from Ibisworld Australia, which confirms the Wagering America report.
Horse and Sports Betting in Australia industry trends (2015-2020)
“The horse and sports betting industry has grown consistently up until the current year as the popularity of online and mobile betting platforms has risen. Several factors have influenced the industry's performance, including gambling expenditure, demand for other gambling activities, the number of internet subscribers and spectator sport participation.
“The popularity of more traditional betting formats such as on- and off-course totalisators has declined over the past five years. However, strong growth in digital wagering, fixed odds betting and sports betting, which have largely been led by foreign-owned bookmakers and smaller niche operators, have more than offset the decline in traditional betting.”
One final piece I would like to refer you to is this Blood-Horse article: Regulators Urged to Make Room for Betting Innovation, from April 2018 by Frank Angst, who writes brilliantly on regulatory, financial and wagering topics on Thoroughbred racing.
The quotes here are taken from panel discussion at an ARCI (Association of Racing Commissioners International) conference entitled Behind the Curtain: Technology and Change in a Growing Industry.
“J Curtis Linnell, executive vice president of the Thoroughbred Racing Protective Bureau, which oversees wagering pools for the tracks, noted reasons for that urgency. He said that while pari-mutuel wagering in North America has declined about 25 percent in 2007 - despite a recent uptick - sports betting in Nevada has improved 88 percent. He said wagering on horseracing in Australia is up 38 percent during the same years.
“Linnell said a big part of the growth in Nevada has been the addition of in-game betting that allows players to wager not just on the final outcome but from half-to-half, quarter-to-quarter and even play-to-play. He noted the growth in race wagering in Australia has occurred at a time in which its handle has shifted from 70 percent pari-mutuel and 30 percent fixed odds to 62 percent fixed-odds wagering and 38 percent pari-mutuel”.
“Linnell said the fixed-odds market in Australia sends a lower return to racing than pari-mutuel wagering, but its growth has been substantial enough to help double prize money purses in the past ten years.”
The lesson on takeout
I think that there is a lesson in the observation that Linnell articulated. I believe that there is a reason that fixed odds sends a lower return to racing than pari-mutuel, yet purses have doubled in ten years. The lesson is that the takeout on fixed odds is substantially less than the takeout on pari-mutuel. If you return more money to the betting customer, they will churn that money back into the pools.
I will let ARCI President Ed Martin have the final word - from the Blood-Horse article:
“It’s not only the racing commission’s responsibility, it’s the horsemen, the tracks, the breed registry, and everybody involved in the sport. This sport is in a highly competitive environment. We can be sitting here talking about pari-mutuel wagering ten years from now, but you just saw these statistics about fixed odds wagering and where the market is taking wagering.
“Bets are going offshore because we cannot offer these opportunities domestically … We have not collectively as an industry done what we need to do to adapt to the technology coming forward. This is about the survival and competitive position of an industry.
“We can debate Lasix for five more years, but if we don’t focus on this side, we’ll be debating Lasix in front of an empty grandstand.”
After the above words were spoken at the ARCI meeting on April 6, 2018, Dennis Drazin and his racing, political and legal colleagues delivered sports betting business in May 2018 for the racing industry to participate in, and on July 17 - Haskell day - Monmouth Park will host the first fixed odds bets at a U.S. racetrack.
It is not often that Ed Martin and I agree, but as he clearly stated, “This is about the survival and competitive position of an industry.”