Exchange Wagering Could Be Troublesome to the Horse Racing Industry – Let’s Think Before We Act

A new form of gambling on horse races called “exchange wagering” could soon be coming to America. While its proven popular in Europe, exchange wagering has a slew of inherent problems that could prove troublesome to U.S. horsemen and racetrack officials.

In exchange wagering, which is conducted via the Internet, handicappers bet on an individual horse to win or lose. A market is produced for each race in which some bettors will offer odds on a particular horse to either win or lose. Other bettors can browse the market and elect to “play” the odds being offered.

Exchange wagering is not without its controversy as there are several integrity issues. Here are some of the major concerns expressed by horsemen and racing officials.

One is what are the possible consequences if people are allowed to bet on a horse to lose? This has never been allowed in the U.S. for obvious reasons. What's to stop a jockey from “stiffing” a horse in order to guarantee a loss? Also, as one veterinarian was recently quoted as saying, it's a lot easier to give a horse something to make him run slower than faster.

In reality, it wouldn't even take something like a foreign substance to compromise a horse's performance. Something as simple as pulling back a horse's feed or water prior to a race, or “under-training” a horse would greatly enhance the chances of a loss.

The potential for chicanery certainly seems valid.
The company that is promoting exchange wagering doesn't really have an interest like the racetrack operators. The track operators have tens of millions, even hundreds of millions, invested in their racing facilities.

A major change in the betting programs could be a disaster for these operators. The company promoting exchange wagering has absolutely no interest in any physical horse racing venue. One has to wonder if they would be so eager to push exchange wagering through if they had hundreds of millions of dollars tied up in horse racing venues.

Another concern is how the revenue from exchange wagering will be divided. Under the pari-mutuel model, a percentage of each bet, called the takeout, is withheld and divided between the state, the racetrack and horsemen in the form of purses. With exchange wagering, the operator charges a commission on each wager. That figures to be much lower than the 15-to-25 percent takeout charged on pari-mutuel wagers.

Up until now, exchange wagering has been only offered in Europe. However, California and New Jersey have approved exchange wagering and it could be unveiled in those states as early as the next summer.

A more reasonable approach to the implementation of exchange wagering would be to limit it to a portion of the California fair circuit for a three to five-year “pilot” program. This would allow the industry and all of its key players, including the horsemen, the racetrack operators, breeders, trainers, owners, etc., to monitor the impact of exchange wagering on the sport in a limited risk program.

As most know, the last major initiative in California—the mandate that all tracks install a synthetic racing surface—proved disastrous. Most believe California regulators moved too quickly to go with synthetic tracks, which it was claimed were safer for horses and easier to maintain. Neither of those claims proved to be true.

Santa Anita Park would go on to spend millions of dollars repairing and ultimately replacing its synthetic surface.

With that in mind, California regulators should tread lightly given the potential for major abuses inherent in exchange wagering. In this case the devil certainly appears to be in the details