Fixed Odds Role in U.S. Racing a Hot Topic

One of the key elements of horse racing's ability to maintain relevance in the modern era will be its success in marketing itself as a viable competitor for wagering dollars against other sports. The rise of sports betting across the United States shows the general public's willingness to gamble on competition, and racing is looking for ways to adjust. One of the key ideas for bringing more wagering dollars to the sport is the introduction of fixed-odds wagering, the format used by the sports wagering industry, which generated around $149 billion in wagers in the U.S. last year, alongside racing's pari-mutuel pools. The introduction of fixed-odds wagering on a larger scale across the country would open the door for horse racing to be placed alongside other sports on the same wagering apps and websites. Fixed odds were the centerpiece of discussion Aug. 12 during the "Can Horse Racing Ride the Sports Betting Wave?" panel moderated by Greenberg Traurig shareholder Rajat Shah on Day 2 of The Racing and Gaming Conference at Saratoga. “We have to, as an industry, look at this as an opportunity to get a new audience, to expose ourselves to those people who are betting $149 billion last year and put it into the same format,” said Sports Information Services vice president Michele Fischer. “I think for some people, (the pari-mutuel wagering system) is very confusing, and having it in the same format as all the other sports is something we need to look at.” One of the kickstarters to this conversation is the recent legalization of fixed odds in West Virginia and the approval of Louisiana's House Bill 547 by both of the state's legislative houses, which is currently waiting for Governor Jeff Landry's signature. Shah mentioned to the four-person panel that some major players in the Louisiana racing industry opposed fixed-odds wagering on the belief that the supplemental funds generated for racing would not be enough to cover the losses in presumed reduced pari-mutuel wagering, where the track takes a piece of the pool as its takeout. Louisiana State Racing Commission executive director Stephen Landry, who spoke on behalf of himself and not the Commission, disagreed. “We don’t think, based on the model that we have, that we’re going to erode the pari-mutuel handle by taking bets away from there and putting them on sports wagering (sites),” Landry said. “We’re going to change this and give it our best shot, but we’re going to recognize that we might not have it right the very first time we launch it. We’re going to pay very close attention to the data as we receive it to make sure it is a net positive for horse racing.” Joe Longo, chief revenue officer for 1/ST, said that any steps taken to introduce fixed-odds wagering have to be a measured and strategic approach. “You can find a case everywhere in a lot of different countries where something like this happened, and they may not have had control, and it totally decimated the pari-mutuel model,” Longo said. “That’s the importance here within the States. Do we have control? Can we slowly roll things out? What are the types of wagers?” Fischer used Australia as an example for fixed-odds interest done right, stating that the increased interest in fixed-odds wagering after changes in laws and regulations about a decade ago has correlated with the increase in purse money offered from AU$480 million around 2012 to around AU$855 million now. "They're a country that traditionally was a pari-mutuel powerhouse," Fischer said. "Fixed odds is now 85% of all betting in Australia. The good news about that is now the purses are $855 million. They practically doubled over those 10 years. There’s more turnover on horse racing, and the whole pie has grown." However, more work needs to be done in the U.S. to have the chance to see any results like Australia. Dan Shapiro, senior vice president and chief development officer of Caesars Digital, said that more states and more prestigious tracks would need to be available to make it economically viable for sportsbooks to offer racing on their apps. Comparing it to offering the United Football League, but not the National Football League, Shapiro said Caesars still prefers to offer pari-mutuel wagering on their racebook app, which they run in partnership with NYRA Bets. “We’re not doing fixed-odds right now because the content is not there,” Shapiro said. “If there’s a more critical mass of states that come on board, we could look at more investments in the area. But right now, without having those major races, we’re really focused on online pari-mutuel.” However, Shapiro acknowledged there is evidence of interest in the sports betting community in horse racing on their platforms. They can drive traffic to the racebook app through advertising major races on the sportsbook app, a strategy that worked well for the Aug. 2 Whitney Stakes (G1) card at Saratoga Race Course. If fixed-odds wagering does get introduced on a wider scale, the panelists agreed there is room for it to co-exist with pari-mutuel wagering and even benefit from the other. Shapiro told a personal story from the July 19 Haskell Stakes (G1) at Monmouth Park in which he saw that one of the entrants, Gosger, had higher odds in the fixed-odds market than the pari-mutuel market. Noticing this led him to the fixed-odds window to place a win bet on Gosger and, since he was already there, moving over to the pari-mutuel window to bet an exacta box with Gosger and the race favorite, Journalism. Supporting the thought process demonstrated by Shapiro’s experience, Landry said that fixed-odds wagering on win, place, and show bets can be a pathway to get new racing bettors interested in playing pari-mutuel exotic and multi-race wagers. “The idea is, if we get people that aren’t looking at horse racing to come on and make a fixed-odds wager, it will bring them into a pari-mutuel pool,” Landry said. “They want that big payout, that half-million dollar pool. That, for us, is going to be a new bettor.” Shapiro also noted that sportsbooks can get more creative and introduce new wagers with fixed-odds wagering. Sticking with the Haskell as an example, he theorized building a parlay that Journalism would finish in the top two, Gosger in the top four, and then adding a wager that one jockey would win three races on the card. “We can look at more data, but to me, that’s probably not something that’s going to be cannibalistic to general pools,” Shapiro said. “It creates more interest, in my opinion.” One of the biggest drivers of new interest in wagering are the marquee race days. Although races like the Kentucky Derby (G1) see growth in handle every year, handle on average race days is in steady decline. “If you look around the country, 1% of the race days account for 20% of the total handle," Longo said. "It gives you an idea of how the big days have gotten bigger. You run that risk of—if you’re stacking stakes on certain days—yes, it becomes bigger and better, but it also waters down the rest of the racing calendar." However, if the big days could be offered on the sportsbook app—for example, this year's Breeders' Cup Saturday falls on a day, Nov. 1, filled with top-level match-ups in college football that will be driving sports fans to their wagering apps—it would help to place horse racing in the eyesight of the casual gambler. "The marquee events have done a great job and are going to bring new fans," Landry said. "The key is to get some of the people who are attracted to the marquee event to be involved in horse racing the rest of the year."