You have been hearing this for months, but it’s truer now than ever: Fixed-odds wagering is coming soon. Like probably in the next few weeks.
New Jersey Gov. Phil Murphy signed a bill into law in August to allow fixed-odds wagering. The bill instructed the state’s Division of Gaming Enforcement to create regulations, and it gave the attorney general’s office 90 days to approve them. The 90-day period ends Nov. 3.
After that happens, things should unfold pretty quickly.
Monmouth Park chairman and CEO Dennis Drazin – who had hoped to offer fixed-odds wagering at his track before the meet ended in September – told Horse Racing Nation this week that fixed-odds betting could begin within a week of the regulations being approved.
“I would anticipate that when the regs come out, there would be an application that would be a form to fill out and then you fill out your application and you get your approval,” he said. “And I can't imagine that that would take a very long time. Because with sports betting it was like 24 hours. But having said that, getting the consents from the other jurisdictions – and BetMakers I know has been working on that, probably for a year at this point.”
BetMakers is the Australian company that has a 10-year agreement to manage fixed-odds wagering in New Jersey.
Dallas Baker, head of BetMaker’s international operations, said 11 tracks already have agreed to offer fixed-odds wagering: Canterbury Park, Colonial Downs, Delaware Park, Emerald Downs, Fairmount Park, Grants Pass, Lone Star Park, Monmouth, Monmouth @ Meadowlands, Tampa Bay Downs and Hawthorne. He expects more tracks to come on board as the launch date approaches.
And, he said, the New York Racing Association “has shown interest in it and naturally we're involved in discussions with NYRA about hopefully bringing the content into New Jersey.”
He agrees with Drazin’s estimated timeline for rolling out fixed odds.
“There's two major moving parts for that. There's one, the on-course aspect at Monmouth Park – which obviously they're not racing anymore, but still having a simulcast situation," Baker said. "And then there's the online bookmakers. As long as the regulations come down and there's nothing major that we need to do outside of what we've already anticipated, we can be up and running at Monmouth conservatively within a week, and if it had to be, can be within a few days. Being live and accepting bets at Monmouth Park, obviously through simulcasting, that would be within a week as long as there's no major surprises in anything that we have to do that comes down after the regulations are dropped. If that is the case, I'm sure it won't be too long.
“Then with the other bookmakers coming online, that'll be a little bit longer,” Baker said. “The technology that we've got is pretty much flicking a switch, but as you can imagine when you're doing something that includes managing thousands of races a week from all around the globe, there's a little bit more than just literally flicking a switch. So it's a figurative flicking of a switch, and they're probably like in two to six weeks. What you'll basically see is a gradual rollout with the bookmakers, just depending on how quickly in conjunction with all of them we get we get them ready to start accepting bets.”
So, if fixed-odds wagering could be rolled out in a few days, and the approval could come any day now, is there any chance it will be available for the Nov. 5-6 Breeders’ Cup races at Del Mar?
“If it was to come down this weekend, we would definitely be able to be in a position to be taking bets on that weekend,” Baker said Wednesday. “Subject to agreement with Breeders Cup, the answer would be yes."
For its part, the Breeders' Cup provided this statement: “Breeders’ Cup is always looking at innovative ways to grow our sport and has been studying the fixed odds market for quite a while. If structured properly and with support from the horsemen, we believe fixed odds in conjunction with parimutuel wagering has the potential to expand the customer base while also maintaining wagering’s significant contribution to purse levels. We are continuing to evaluate this emerging market as new laws are passed and opportunities present themselves.”
How it will help bettors
Fixed-odds wagering is the norm overseas, and Drazin and Baker see only benefits for bettors when it come to the U.S.
“When I go to the track, and I talk to two sets of people – one being the whales, the second being the casual customers,” Drazin said. “The whales understand that when you're betting parimutuelly, the bets that are being commingled means the common pools can affect the odds after the horses break, but they still don't like it when a horse that they wanted to bet at 8-5 ends up 2-5 to 3-5.
“The novices, the people that are coming out to enjoy themselves – I engage in a lot of conversations with our customers and they think something's wrong with the picture. They say, I bet this horse at 2-1 and by the time they went out of the gate and traveled half a furlong all of a sudden it was 1-2. Are you letting people bet after the horses break? What's going on here? So I think there's a lot of dissatisfaction over that type of picture. … I think (fixed-odds wagering) will eliminate that. I think it will present opportunities for people to wager significant sums, to the extent that it's within the scope of whoever's making the offer.”
Drazin also expects fixed-odds wagering to appeal to bettors who otherwise might not be interested in horse racing.
“It's not a huge segment of our population that follows horse racing,” he said. “But it's a good crowd that wagers right now about $10 billion in the United States. But when you now move to a system where you're getting more eyes on your product, I think when you shift horse racing, not only to the current models, but to every sports book, casino, iGaming operator in the country, now you have 20 times the amount of eyes that are looking at your product then getting an opportunity to bet on your signals.”
How it will help tracks
Of course, Drazin and Baker both believe fixed-odds wagering is a no-lose proposition for tracks as well, even though the takeout rate will be lower.
Fixed odds will be offered only on win, place and show bets; exactas and other exotic bets will remain parimutuel.
Drazin explained that currently in New Jersey, the takeout on win, place and show bets is 17 percent, and the rate is higher for exotics, depending on the bet.
“We say typically that the blend is 20 percent of the takeout,” Drazin said. “So in the current system, if you have a takeout of 20 cents on every dollar, that takeout gets divided amongst the cost of getting the signal, a percentage goes to purses, a percentage goes to the operator. So here in New Jersey, at least, the horsemen get 6.6 percent of that takeout and the operator gets the balance, after paying the cost of the signal, and uses it for operations.”
Under a fixed-odds system in New Jersey, “if you take a mythical $1,000 bet, $875 is being returned to the bettors, $25 is being paid to the host group, the horsemen. And then from the balance, which is $100, BetMakers is managing that risk. So Monmouth Park would receive 75 percent and BetMakers would receive 25 percent. So the takeout would be a lower takeout. So the takeout is probably 12 and a half percent versus the 17 or 20.”
Yes, that is a lower takeout. “But at the end of the day, if you get a lot more people to bet on your product, you're presumably going to end up with a higher revenue base,” Drazin said. “And with our agreement with BetMakers, if that does not prove to be the case, they've offered some minimum guarantees to make sure that we don't get hurt on cannibalization.”
Baker said the amount bookmakers retain “is not actually a takeout because there's no guarantees with fixed odds. Basically, (12.5 percent) is the number that you'll roughly expect the bookmaker to win. It can't be defined because the bookmakers can still lose, obviously, so there's no predetermined takeout.”
He offered an example: “I have my market set perfectly at 12 and a half percent, and right up until the second before the race that market is perfectly rounded out at 12 and a half percent. Then one second before the race someone comes up and has $100,000 on something at even money, then suddenly I'm not really at 12 and a half percent, if that makes sense. So that's the guesstimate or the assumed win rate of a bookmaker. Essentially what it means is that you're going to have a better price than what the tote offers across the board.”
And about the cannibalization concerns, Baker said, “in essence the tote has been cannibalizing itself for the last decade – just the fact that there hasn't been a lot of innovation in it. It's just been the same old thing. There's now a lot more competition to racing than when racing was in its heyday, and the technology hasn't moved with the times. So in essence, I think the system itself is cannibalizing itself. And invigoration, with different options for the customer – which is essentially what it's all about – and a more modern approach to the customer as well, it makes sense that it should have a positive effect or at least be worth embracing as an opportunity to try something anyway.”
And that Drazin mention of “minimum guarantees to make sure that we don’t get hurt’? Baker said BetMakers will work to address any concerns that a track operator might have.
“Every deal with every track is different,” he said. “And every track has their own concerns and idiosyncrasies. We're open to discussion with any track on any way that we can satisfy their own individual needs. And a lot of those track have a hold-harmless provision, and we're willing to sit down with anybody and discuss what what their fears are and hopefully alleviate those fears because we're ultimately confident that this is going to be a fantastic boost to the racing industry, and we're wanting to back ourselves to prove that as well.”
Along those lines, Baker noted, BetMakers recently bought the racing and tote business of Sportech. “We put our money where our mouth is acquiring Sportech, which is roughly close enough to a $50 million US investment. I'm saying we don't think the tote's going to be cannibalized because we bought a tote company."
Drazin also discussed the concerns about fixed-odds wagering. "There are a lot of jurisdictions and racetracks and horsemen's groups that are concerned about cannibalization. They're concerned about the math – what's the right takeout? What's the right compensation? Are we going to be taking less money for wagering by doing this? And they're uncertain what the future would hold with fixed-odds wagering. So there is a element of the country who has been evaluating this issue, and everybody's in different places about their willingness to go forward.
"There are a lot of jurisdictions – even here in our own state, New Jersey, the standardbred industry is concerned about cannibalization, and the Meadowlands racetrack, which is standardbred racing, is concerned about cannibalization," Drazin. "So it seems like they all come together on one issue: Let's let the Thoroughbreds at Monmouth Park do this first and make them a test case that we can see how it works and whether or not they cut the right deal.
"And maybe I cut the right deal, and maybe I didn't," Drazin said. "But at the end of the day, if everybody gets stuck with their heads in the sand, and nobody's willing to take a risk, then there can never be any progress and can't be any innovation and you can't grow the industry."
Baker fully expects that fixed-odds wagering will gain a lot of traction once people can see it in operation.
“We're essentially still talking about a concept because it's not up and running yet," he said. "But I think with the fullness of time, where everybody starts seeing that this will hopefully start bringing the returns that we forecast for the tracks that are involved – and also that the sky isn't going to fall down on the take. We're very confident the take will, at worst, stabilize, if not grow, with more people being involved and more people who've been exposed to racing. …
“Once everything gets up and running and everybody starts seeing it in practical terms rather than theoretical terms, then I think people's opinions will change," Baker added. "If people's opinions are against fixed odds at the moment, I'm pretty sure after a little bit of time – six to 12 months down the track – when the model is starting to starting to kick into gear, I'm pretty sure that there'll be a lot more people willing to embrace it in the next six months than there are now.”