Days after the New Jersey State Assembly approved a fixed-odds horse racing bill by a near unanimous margin, Colorado regulators took initial steps this week to explore the addition of the wagering option in the Centennial State.
More than two dozen sports betting, regulatory, and thoroughbred racing executives took part in Tuesday’s stakeholder workshop, hosted by the Colorado Division of Gaming. The webinar featured heavy hitters from prominent sportsbook operators such as FanDuel, BetMGM, and DraftKings, as well as top horse racing companies, led by Churchill Downs and TVG.
The stakeholders convened for the working group meeting to discuss pertinent issues related to fixed-odds wagering, a concept popular in Australia and the U.K. Fixed-odds betting differs from parimutuel wagering, the prevailing form of horse racing betting in the U.S. At this month’s Kentucky Derby, morning line favorite Essential Quality opened at 2/1, but his odds declined as wagers poured in on the undefeated Breeders Cup Juvenile champion.
Under a fixed-odds system, a bettor will lock in his odds the moment the wager is placed. For instance, Kentucky Derby runner-up Mandaloun opened with morning line odds of 15/1, shortly after the draw. While Mandaloun subsequently rose to 27/1 at post time, a fixed-odds bettor will receive the 15/1 odds based on the Derby prices at the time of his wager.
After passing by a 74-0-1 margin in the New Jersey Assembly, the fixed-odds bill moves to the Senate. If ratified in the Senate, there is a strong possibility that fixed odds will be in place at Monmouth Park in mid July for the Grade I TVG.com Haskell Stakes.
Developments in New Jersey may inform Colorado market
Weeks before COVID-19 hit the majority of the U.S., BetMakers Technology Group Limited, the New Jersey Thoroughbred Horsemen Association (NJTHA) and Darby Development LLC signed an agreement that granted the Australian-headquartered company exclusive rights to distribute and manage fixed-odds betting on horse racing at Monmouth. As part of the New Jersey fixed-odds model, a bookmaker can offer fixed-odds wagering on horse racing through a partnership under which the racing body or rights holder allows the betting to occur.
In turn, the bookmaker (possibly a major sportsbook operator) will pay a portion of the fixed-odds handle back to the race track and potentially a state horsemen’s association as “rights fees.” Monmouth Park, which is owned by the New Jersey Sports and Exposition Authority, is operated under a five-year lease with the NJTHA under a management rights deal with Darby Development.
At the time, BetMakers indicated that it intended on forming partnerships with other U.S. based and international race tracks that hope to access the New Jersey fixed-odds racing market by offering their content to bookmakers licensed in the state, the company said in a February 2020 press release.
breaking: NJ Assembly just passed the fixed-odds horse racing bill by a 75-0-1 vote. bill already had unanimous support in a Senate committee, but obstacles could remain before it becomes law. pols want horsemen to reach accord on revenue splits
— John Brennan (@BergenBrennan) May 20, 2021
The size and scope of the racing industry in Colorado pales in comparison to New Jersey. A 32-day meet at Arapahoe Park in Aurora is expected to have a $71,000 per day purse average, the Daily Racing Form reported. The stake schedule alone at Monmouth’s 53-day meet, which will begin on Friday, features $6.15 million in purses. Still, the Colorado offering could become another product embraced by sportsbooks to acquire and retain customers.
William Pascrell III, a New Jersey lobbyist, spoke on behalf of BetMakers at Tuesday’s meeting. Pascrell contends that fixed-odds wagering will not cannibalize parimutuel betting, or wagering through a “tote” system. While demographics show that about 80-90% of the revenue from U.S. parimutuel wagering is generated by adults ages 40 and over, the figure is around 35% for sports betting revenues from the same demographic, according to participants at Tuesday’s meeting.
“It really won’t take away from the tote because that younger player isn’t playing in the tote,” Pascrell said.
Pascrell engaged in a heated exchange with Dave Basler, who serves as executive director of the Ohio Horsemen’s Benevolent & Protective Association. Basler took issue with Pascrell’s claims that exotic pools under the parimutuel system will be unaffected by the addition of a fixed-odds platform. During the price discovery process if Basler spots a trifecta with a more favorable price on a fixed-odds platform, he will opt to place his wager there rather than in a traditional parimutuel pool. Consequently, the size of the trifecta pool on the parimutuel side will then decrease, he argued.
A “can’t miss opportunity”
FanDuel Director of Trading John Sheeran also participated in Tuesday’s stakeholder meeting. At present, horseplayers can bet on the sport through the FanDuel Racing app in 22 states, including Colorado, California, New York, and Florida. Of those states, FanDuel also offers mobile sports betting in Colorado, Illinois, Pennsylvania, and West Virginia. In describing fixed-odds wagering as a “can’t miss opportunity” for the sports betting industry, Sheeran made reference to listed pitching odds in Major League Baseball to illustrate his point.
For MLB lines, the odds on action pitchers (or scheduled starters) are fixed, Sheeran noted. If a bettor places a $180 wager on the New York Mets to win with Jacob DeGrom (-180) on the mound, the customer will receive a payout of $100. Regardless of any last-minute scratches, the bettor already knows his payout before the opening pitch.
“That’s what they expect when they’ve been exposed to horse racing and that hasn’t been the case through the tote,” Sheeran said.
"…Fairmount Park partnered with New York-based online sports wagering firm FanDuel Group and renamed itself FanDuel Sportsbook and Horse Racing."
— Alfonso Straffon 🇨🇷🇺🇸🇲🇽 (@astraffon) April 28, 2021
Matt Holt, founder and president of U.S. Integrity, indicated that the trends in baseball show that fixed-odds wagering caters to a younger demographic of bettors.
“We all know through data and facts that younger bettors gravitate toward knowing what their payout is going to be at the time they make their bet,” Holt said.
Fixed-odds wagering also protects bettors from a practice known as “past posting,” which occurs when a horse’s odds change after the race has already started. The practice is common when a frontrunner with 6/1 odds at post time suddenly drops to 4/1 after taking an uncontested lead a furlong into a race.
While top racetracks contend the fluctuations result from a rush of late money on a certain entry, a bettor can remove all suspense through a fixed-odds bet. The same horse in a fixed-odds futures pool might be available at 5/1 days before a race.
Building a fixed odds culture
Another stakeholder, Michele Fischer of Sports Information Services, expressed concern that while fixed-odds betting is imbued in the wagering culture overseas, it has largely flown under the radar in the U.S. The first hurdle to overcome here, she said, is in cultivating a culture of fixed odds.
“I think some of the hesitation in America is the unknown,” Fischer said during the meeting.
In response, Sheeran asserted that top sportsbooks are already building a fixed odds culture inherently through sports betting.
BetMGM, a top competitor of FanDuel, unveiled a horse racing app at last month’s Investor Day presentation, but did not set a firm date for rollout. The app, though, accentuates the importance of a common wallet where customers can engage in sports betting, horse racing, and even online casino gaming in states where it is legal.
BetMGM Director of Trading Operations Matt Cosgriff described the unique fixed-odds opportunities that may arise through cross-sport parlays. If approved, a bettor could theoretically place a 3-team parlay on the Denver Broncos, Colorado Buffaloes and the winner of the Breeders Cup Classic before the start of the weekend. Prior to the 2018 Haskell, the Monmouth Park Sportsbook by William Hill accepted bets on a “Grand Slam” wager that featured three races on the Haskell card, along with a win bet on a matchup between the Chicago Cubs and St. Louis Cardinals.
Probably done with horse racing. I lost 20k at a -50% ROI this weekend. And why did I lose? My average winner paid 49% of the odds at which I bet it. One "winner" paid 25%. Had I bet at fixed odds I would have broken even!
— Quantum (@Quantum_Sport) May 2, 2021
BetMGM has already made a move, announcing on Friday that it had saddled up with NYRA Bets, the official online wagering platform of the New York Racing Association.
“We’ve found a great partner in NYRA Bets and look forward to working with them to create a thrilling, interactive experience for horse racing fans on BetMGM,” said BetMGM CEO Adam Greenblatt.
With fixed-odds betting on the menu, participants at the Colorado meeeting are confident that it could lead to enhanced synergies between the horse racing and sports betting industries. Colorado Division of Gaming Director Dan Hartman indicated that the division will likely schedule further meetings to discuss the parameters of a revenue-sharing model between the disparate parties.
A number of participants reached a consensus that a fixed-odds market in Colorado could serve as a template for other states nationwide. Some argued that fixed-odds betting will grow the revenue pie for horse racing interests, not cannibalize it. As a result, purses at Arapahoe Park may increase exponentially.
“We don’t want to rip up the industry, we want to grow the industry,” Cosgriff said. “If we rip up the industry, then all of a sudden we have nothing to bet on.”