May 202018
 

The gambling known as business looks with austere disfavor upon the business known as gambling.
Ambrose Bierce

Sal says that many members of the horse racing industry in the United States view the pending legalization of state or Federally regulated sports betting as a saviour for an industry in decline. Sal says that horse racing needs to build the industry up without relying on band-aid subsidization and that the impact of legalized sports betting on horse racing in the US will initially be slightly positive, but over time will slowly but surely cause further deterioration in the betting numbers.

This Mess we’re in

Sal says that the horse racing industry especially the jiggies better realize that there is no entitlement to a share of sports betting revenue and anything received by the horse race industry will be at the behest of the government regulators who can both give and take back. Sal says that the horse racing industry especially the jiggies better realize that the sports leagues, casinos and betting houses have a hell of a lot more clout than the horse racing industry.

The numbers predicted for sports betting handle range from $120 to $150 billion annually. With the state and feds looking for 1% and the leagues looking for 1% the vig may end up so high that Sports Select starts to look like a bargain. However, the takeout from that handle cannot be much more than the current 5% or the gamblers will continue to bet illegally online offshore. How successful has the US been in preventing illegal online offshore wagering in the States. About as successful as the War on Drugs. The only way to shut down the illegal online offshore outlets is to out compete them.

That 5% pie will be divvied into so many slices that horse racing will be lucky to see .0o5% of the total handle contributed to purses or expenses if the states show any largess towards horse racing which is highly unlikely with today’s tight government money policies.

When written in Chinese, the word ‘crisis’ is composed of two characters. One represents danger and the other represents opportunity.
John F. Kennedy

Casinos kept just 2.81 percent of the sports wagers they handled in 1992. But over the next 15 years, casinos set the betting lines in a way to entice lower-information bettors,3 and their win rates soared well above the standard service-fee rate, peaking at a whopping 7.89 percent in 2006. Casinos are still winning in the 4- to 5-percent range over the past decade, with the house taking 5.11 percent of all wagers in 2017.

In 1984, the first year for which Schwartz has data, 51 sports betting locations kept 2.34 percent of the $894.6 million bet, for a total casino win of $20.9 million. In 2017, 192 locations kept 5.11 percent of $4.9 billion wagered, for a total win of $248.8 million.

So, in light of the Supreme Court decision, are Nevada casinos worried about an influx of sportsbooks cutting into their bottom lines? Probably not. In the context of the greater gambling industry, the sportsbook is relative chump change.

According to the Nevada Gaming Control Board, the 24 major Vegas Strip casinos generated $70.3 million in sports betting revenue last year — just 1.26 percent of their $5.56 billion overall gambling revenue. For comparison, slot machines pulled in a whopping $2.8 billion.

Legislators in states where sports betting will soon be legal, may be seeing dollar signs as the dust settles on the Supreme Court’s decision — imagining a $150 billion pot of gold ready to be taxed. But though Americans seem ready and willing to hand their money over to sportsbooks, it remains to be seen just how much money that will be.

FiveThirtyEight – The Supreme Court Made It Easier For More People To Place Bad Sports Bets

Ooh Las Vegas

Legal Sports Report – Gouker – A Look At The Losers From The Supreme Court Sports Betting Case

You better cut the pizza in four pieces because I’m not hungry enough to eat six.
Yogi Berra

On The Nickel

NY Times – Delkic – A Supreme Court Decision That Was a Wild Card

The charismatic Scottish bookmaker John Banks, a ‘king of the ring’ in the 1960s and ’70s, was one of the fastest out of the traps, building up a string of 34 betting shops in and around Glasgow (before selling them in 1972 to Mecca Bookmakers, a corporate firm which itself was subsequently taken over by William Hill). However, he didn’t refer to his premises as betting shops: “I don’t call them betting shops; I call them money factories. To have one is a license to steal money. Week in, week out, it just pours in.”

Of course, though, nothing lasts forever. The glint of the golden age soon began to fade. ‘Diversification’ is often hailed as the way forward, but diversification of punting habits has been bad news for racing: our sport formerly had the punting market cornered, but nowadays racing’s market share is less than 50% as betting on other sports has mushroomed. Throw in the invention of the internet and the consequent explosion of internet betting, and we have seen the betting shop boom turn to something not far short of bust.

What, however, has been continuing to breathe life into the ailing patient has been the advent of the FOBTs. Betting shops were thrown a life-line in 1991 when the government gave permission for each shop to house four FOBTs. These machines became the ‘money factories’. And it wasn’t just the bookmakers who were profiting. As the yield from the Levy stalled, the racing authorities combined with the racecourses to reach a deal with the off-course betting industry to sell the pictures of the races. Without the FOBTs, the country’s betting shop population would have been in rapid decline: as it was, big betting firms found themselves happy to maintain, say, three otherwise unprofitable betting shops on the same high street (each paying for its pictures of the races) as 12 FOBTs on one street were better than four.

In a stroke, however, the noose has slipped around the neck of the golden goose. It is hard to know exactly what the figures will be, but the slashing of the maximum stake on the FOBTs is certain to lead to widespread betting shop closures. Each shop-closure will mean one fewer shop paying for the pictures. Granted that this is probably a worst-case scenario, but one estimate of the potential loss to racing’s finances is £60-million per year.

TDN – John Berry – Op/Ed: What Do FOBT Cuts Mean For Racing?

The most terrifying words in the English language are: I’m from the government and I’m here to help.
Ronald Reagan

TDN: Because the horsemen lease and operate Monmouth Park, sports betting profits will benefit racing. That’s not the case in other states. In fact, elsewhere people are worried that sports betting competition will hurt racing. What advice do you have for horsemen in other states?

DD: I had been telling people they need to be proactive and get involved in the early stages. Now that this is a reality everybody is doing more than they did before. The NTRA is monitoring the situation and is working to make sure racing gets some share. In other states, horsemen have to be proactive and go to their legislators and lobby, testifying about the need for horse racing to get a share. Otherwise they can be left out.

If they are saying that New Jersey got a piece so we will too, they are mistaken. They really have to be out their doing their homework, going to legislators and educating them. They need to go to their governors to advocate their positions. Those who aren’t aggressive will lose out.

TDN – Churchill to Enter N.J. Market; Betfair Considers Options

This outcome counts as a victory for states, consumers and sports stakeholders. The billions bet in underground markets prove that there’s robust demand. A regulated market lets states take a slice of that pie. “We have about 10 million adults within 90 minutes of one of our casinos,” says Danielle Boyd, managing general counsel for the West Virginia Lottery. “This is an opportunity for them to offer sports books as an amenity and drive traffic back into West Virginia.” Licensed operators can also offer in-state mobile sports gambling. West Virginia will collect 10% of the profits and funnel the first $15 million per year into the state lottery fund, which finances school construction, senior-citizen services and tourism promotion.

Time – Gregory – The Risks and Rewards of the Supreme Court’s Sports Gambling Decision

For New York racing, however, there is no such animal. Why? Because everyone wants a piece of the new action, including the Governor, who is on record as saying he needs more information.

Meanwhile, the Thoroughbred and Harness racing industries will have no choice but to fall in line behind casinos, domestic or foreign, OTBs, and professional major sports leagues.

And not to forget that existing Native American casinos, while lacking regulatory guidelines, do not need the state’s permission to offer sports bets. 

Horse Race Insider –  Pricci – Sports Bets at New York Tracks Pose Questions, Not Answers

“There is a huge black market that pays zero tax,” Greg Carlin, CEO of Rush Street Gaming, whose company operates two casinos in Pennsylvania, told USA TODAY Sports. “If legal sports betting is going to be a regulated and successful business, the tax rates can’t be so high that it makes it impossible to compete with the black market.”

Pennsylvania is seeking a $10 million licensing fee, along with a state tax of 34% on gaming revenue. By comparison, Nevada – the only state before Monday that had legalized, state-sanctioned betting – pays 6.75% to the state. All states must pay a federal excise tax, which equates to about another 5%.    

It’s a sticker price that has given multiple companies pause, including two that operate gambling establishments in the state: Rush Street (Rivers Casino in Pittsburgh and Sugar House Casino in Philadelphia) and Penn National Gaming (Hollywood Casino in Grantville).

Along with taxes, another complicating factor is a 1% integrity fee the sports leagues are seeking in many states. That would come out of the “handle,” the total amount taken in by a sports book for a bet — not on the revenues generated. No state has so far passed legislation that would include such a fee, although bills under consideration in Illinois, Kansas, Indiana and New York do include it. 

“I’ve been trying to get the word out because 1% seems like a nice, small number,” Asher said. “Really, that 1% would equate to about 20% of the revenues.”

The end result could be that states seeking higher taxes and agreeing to integrity fees could end up with the same tax revenue on sports gambling as they had before the Supreme Court ruled: None.  

USA Today – Perez – High cost of launching sports betting in certain states could keep companies away

Sal says that Danielle Boyd and the thousands of other politicians and horsemen need to do the arithmetic before they run off at the mouth touting sports betting as the unicorn that eats garbage and shits skittles. Danielle says that West Virginia will take 10% of the profits and funnel the first $15 million per year into the state lottery fund. That first $15 million annually is a pipe dream.

Let’s assume that the sports books stay close to the current vig with a slight bump to 6% to cover the new bookmaker’s (Government) share. Danielle proposes to take 10% of the profits meaning that West Virginia’s take would be a maximum .6% of the total wager on sports books in West Virginia. Total sports book wagering in the state would have to be $2,500,000,000.00 to reach the $15 million mark. With West Virginia’s population being less than .5% of the US population using the $150 billion estimate West Virginia’s share would be about $750,000,000.00 per year or less than 1/3 of the rose coloured glasses figures Danielle Boyd is using.

If the horse racing industry is lucky and receives any largess from the states or Feds using the numbers Sal posited earlier horse racing may not even receive sufficient funds for a couple of G1 Purses.

If you must play, decide upon three things at the start: the rules of the game, the stakes, and the quitting time.
Chinese Proverb

Fool Yourself

In statements released after the Supreme Court’s ruling, both the N.B.A. and the N.F.L. called on Congress to pass a federal sports betting law, and Senator Orrin G. Hatch of Utah, one of the original authors of the law struck down on Monday, said he planned to introduce federal legislation regulating sports betting.

Justice Alito said there were good policy arguments on both sides about whether to legalize sports betting.

“Supporters argue that legalization will produce revenue for the states and critically weaken illegal sports betting operations, which are often run by organized crime,” he wrote. “Opponents contend that legalizing sports gambling will hook the young on gambling, encourage people of modest means to squander their savings and earnings, and corrupt professional and college sports.”

NY Times – Liptak and Draper – Supreme Court Ruling Favors Sports Betting

Hard Sun

Legal Sports Report – Candee – NBA’s Adam Silver On Sports Betting: ‘The Integrity Fee Is Something That We Are Entitled To’

Money’s Too Tight To Mention

Or perhaps the legacy of Wolfe and his cohorts offers a buoying lesson: for aspiring and established writers alike to keep radicalizing the form, to use imitation as a byway into genuine innovation and not an end in itself. Many forms stagnate, or self-immolate, or wither and die on the vine. The ambition of anyone looking to inhabit Wolfe’s witty, caustic, deeply perceptive white-on-white livery is to commit to a project of sustained revolution, to lure the ever-wearying reader into wondering, exactly, “What the hell is going on?”

The Globe and Mail – Semley – Tom Wolfe and the overlong legacy of New Journalism

The reason a writer writes a book is to forget a book and the reason a reader reads one is to remember it.
Thomas Wolfe
Legalization of sports betting should be a call to action for the racing industry. Regardless of whether the industry moves in favor of fixed-odds/exchange betting, in our view the upside potential in reaching new fans and innovating betting platforms greatly exceeds the downside risk of cannibalization.

Bloodhorse – Singer and Vonwiller – Sports Betting Provides Plenty of Upside for Racing

Thoroughbred Racing Commentary – Hayward – View from the Rail: sports betting can transform racing’s finances – and the live track experience

Gambling can turn into a dangerous two-way street when you least expect it. Weird things happen suddenly, and your life can go all to pieces.
Hunter S. Thompson

TDN – Monmouth Sports Betting Hits Statutory Snag

A word of caution: Pennsylvania racetracks that currently have slots licenses will have to pay $10 million for a sports betting license and will be taxed at 36 percent of revenue under the current law. It’s up to the state Gaming Control Board to draft regulations before Pennsylvania sports betting can begin. There is no revenue agreement for purses from sports betting at Pennsylvania racetracks.

Horsemen in states outside of New Jersey asking for “their share” of revenue from this new form of wagering have no reason to be optimistic. They can only hope a floodgate of future gamblers at racetrack sports books or expected to sign up with TVG or TwinSpires or one of the other ADW companies will cross over to bet on horses. That didn’t work with slot machines, but there are far more similarities between sports bettors and horseplayers than there are with casino gamblers or slots players.

Paulick Report – Paulick – View From The Eighth Pole: Who Wins From Sports Betting?

Sal says that Paulick is correct when he says that horsemen waiting for “their share” have no reason to be optimistic. Sal also says that the floodgates of future gamblers at race track sports books will never materialize as the majority of the sports betting will be continue to be online either legal or illegal offshore, be it at home on a computer or laptop or at a sports bar or restaurant on a smartphone or tablet.

No Grey Cup ticket? No problem.

“Knowing the Grey Cup is going to be sold out, we feel there is another opportunity over and above for those that can’t get into the building but want to participate in some of the festivities that are going to take place on Jasper Ave., our gala dinner or at the awards night,” Rhodes said, adding another raffle will be held over Grey Cup Week.

Edmonton Sun – Moddejonge – Could 2018 Grey Cup raffle hit $1-million take-home jackpot?

NHL.com – True North Youth Foundation launches 50/50 program for Jets away games

Me and Julio Down By The Schoolyard

I have long understood that losing always comes with the territory when you wander into the gambling business, just as getting crippled for life is an acceptable risk in the linebacker business. They both are extremely violent sports, and pain is part of the bargain. Buy the ticket, take the ride.
Hunter S. Thompson

State officials from California to Connecticut spent last week maneuvering for control of the tens of billions of dollars in projected revenue from sports betting, and joining them was another group of powerful, and familiar, gambling operators aiming to claim their piece of the action: American Indian tribes.

NY Times – Drapee, Arango and Blinder – Indian Tribes Dig In to Gain Their Share of Sports Betting

Lawyers in Love

Most importantly, there has been little serious conversation about how much of a taste racing will get from sports betting at tracks and OTB’s. Sports betting isn’t close to the money tree slots are. According to figures from Nevada, the rake on sports betting is a bit over 5 percent. Slots produce almost double that and never take sick days or vacation. They need only IT people to keep them operating.

Sports wagering demands savvy individuals to create and manage betting lines. Monmouth is already in bed with British firm William Hill and Churchill Downs has announced an agreement to manage the Golden Nugget Hotel and Casino in Atlantic City. These are more fingers in the pie.

States will demand their cut and are unlikely to be as initially generous toward racing as they were when slots were introduced. Indeed, the trend is in the opposite direction. It is not inconceivable that some states will balk at directing any sports revenue toward horses.

Horse Race Insider – Jicha – Racing might not benefit from sports betting

There is a respectable body of economic thought that holds that casino gambling is actually economically regressive to a state and a community.

Mario Cuomo

Up On Cripple Creek

Q: How will fans be able to place bets?

A: Here’s how you know the NBA really wants gambling. In some of the states that are rushing to pass gambling laws, lawmakers want to make people go to their existing casinos or racetracks and physically bet at a window or kiosk. It’s an effort to save or buttress these institutions. But the NBA has been actively lobbying states to offer betting on mobile phones and even for fans to be able to register a mobile gambling account without having to go to a sportsbook first (which is the case in Nevada). The league says it’s to compete with the illegal sportsbooks that offer such action. But, of course, it would likely mean way more betting this way … perhaps even within arenas during games.

ESPN – Windhorst – FAQ: How will legal gambling change the NBA and the way we watch it?

ESPN – Windhorst – How the NBA, MLB are lobbying states to cash in on sports betting

But the initial rush of euphoria within the Thoroughbred industry must be tempered by the daunting reality that numerous other non-racing entities will also want in on the lucrative action. The American Gaming Association estimated in 2017 that the combined legal and illegal sports betting handle in America is $107 billion annually, noting that that figure “would significantly increase” upon the widespread legality of sports wagering.

Eric Hamelback, the chief executive officer for the National Horsemen’s Benevolent and Protective Association, also said he believed that the ruling appears beneficial to the horse industry on the surface, but that racing interests should be cognizant that sports betting isn’t going to exist in a racing-centric vacuum.

But racing has been down this proverbial “symbiotic” road before in terms of partnering with gaming interests, and now, 25 or so years into the racino era, many of the marriages between casino companies and racetracks are either strained or have been severed. In some non-gaming jurisdictions, horse racing got flat-out left at the gate entirely.

As is usually the case when something that has been illegal for a long time suddenly gets decriminalized and there is a big rush to participate, Waldrop urged caution to those racing-related entities that are eager to enter the marketplace as quickly as possible.

“Tracks, horsemen, and others–they’re well advised to secure the expertise necessary to understand and succeed in the business of sports betting, both legislatively and operationally,” Waldrop said. “It’s complicated, it’s risky, and it’s different from pari-mutuel wagering.”

The roulette table pays nobody except him that keeps it.
Nevertheless a passion for gaming is common, though a passion for keeping roulette tables is unknown.
George Bernard Shaw

But will anyone in power listen or be sympathetic to racing, which figures to be one hand among dozens seeking a piece of the pie? Even if racetracks around the country are allowed to offer their own sports betting, what guarantees do horsemen’s groups have that the tracks will use some of the money to go toward purses?

“We have a monopoly on online wagering and are the only sports people can bet on legally,” Hamelback said. “We need to protect our own investments and our industry because this could go in a bad direction if we’re not paying attention.”

People are paying attention, but how these potential problems are addressed remains anyone’s guess.

In gambling the many must lose in order that the few may win.
George Bernard Shaw

Do It Again

The only man who makes money following the races is the one who does it with a broom and shovel.
Elbert Hubbard
“But how it affects the purses and the horsemen will be interesting because the legislature all across the country that have gaming and racing holding hands, the gaming is so lucrative that most of the legislative people say, ‘We need to take more and give racing less.’ That’s in a lot of states already.”

Gambling is the future on the internet. You can only look at so many dirty pictures.
Simon Noble

“I love when they say record-breaking handles, which means people are involved and still into it,” Baffert said. “Everybody’s betting on their phones now, less people are coming to the races because they’ve made it so convenient.

“You like to win when there’s a crowd. That’s why Breeders’ Cup, Derby, anybody that wins a race even on the undercard, it means a lot because there’s 100,000 people here watching you win a race,” he said. “Everyone wants to win when the whole world is watching.”

And Baffert believes more people will watch if more could bet.

NBC Chicago – Graves – Horse Racing Industry Betting Court Ruling Boosts the Sport

Nine gamblers could not feed a single rooster.
Yugoslav Proverb

That advantage may soon be over because of SCOTUS’ decision, which should upend how horse racing has done business for years. Starting as early as June — as states move ahead with already passed sports betting legislation, and bills that had been prepped in anticipation of the court’s decision — Americans will be able to wager on football, basketball, hockey, and other college and professional sports. The American Gaming Association estimates the sports betting market could run as high as $150 billion in annual handle. Lower end estimates put the market at $67 billion.

In comparison, U.S. Thoroughbred racing handle was almost $11 billion in 2017. And the newly legal wagering has two built-in advantages over racing bets: Sport betting will engage users with a product that will be designed for mobile from the start, and will cost gamblers less than the average racing bet.

The good news for the rest of the racing industry is that there’s time to ramp up for the competition — time to build better streaming services and user-friendly apps, and time to make data more accessible, lower takeout, and create new wagering options, such as expanding the kind of fixed-odds play that’s available on Betfair’s New Jersey betting exchange. It will take most states months, or even years, to legalize sports betting.

But there’s no question about one thing — in the race for America’s gambling dollar, sports betting is the flashy new favorite, and it’s going to take a lot of money.

Miami is a melting pot in which none of the stones melt. They rattle around.

Tom Wolfe

But not everyone is convinced that such a development will be good for horse racing. Louis Cella, president of Oaklawn Park in Arkansas, is not so sure.

“We already have an industry of sports betting, it’s just not done in the public,” Cella said. “Whether or not [legalization] will help the sport of horse racing is a complete unknown. To date, having it be kind of under a cloud, it certainly hasn’t increased business on the horse racing side. Whether making it legal does so, we don’t know.”

ESPN – Darcy – Can legalized sports betting boost horse racing?

The issue is seeing an army of lobbyists and executives descend at the state Capitol to push the effort in various—and sometimes competing—forms, including representatives from Thoroughbred and harness tracks, casinos and racinos, off-track betting corporations, international gambling interests, and the major pro sports leagues. On May 30, former New York Yankees manager Joe Girardi spoke up the plan with senators in a closed-door meeting and with Assembly members who eventually formed a line to get their photograph taken with him.

Up in the air is what might happen with horse racing in a sports gambling bill. Bonacic and Pretlow want to greatly expand sports gambling beyond the 2013 law by permitting it to be offered at other venues and, most sweeping, via online by bettors who are within the borders of New York State. They would more strictly regulate the gambling and tax companies offering the wagering.

The biggest change in the Bonacic bill from the original version introduced in March is permission for bettors to sign up for mobile accounts from anywhere in the state, including on their smart phone from their living room. The original version had required people to travel to a casino or “affiliate” location, such as a racetrack-based racino, to physically sign up for a mobile account. Officials called the idea especially impractical for New York City residents.

Bloodhorse – Precious – New York Legislature Moving on Sports Betting

Empire State Of Mind

Sal says it sounds like horse racing in NY could have the lion’s share of sports betting revenue when sports betting wasn’t legal, but it’s going to have a battle on its hands to receive even a crumb now that sports betting is legal.

TDN – Thornton – The Week in Review: Crashing the Sports Betting Party Before It Even Starts

Sal says that he sides with the pessimists on sports betting not being beneficial for horse racing. Gambling in North America is a mature saturated market with little room for growth. Horsemen need to remember that they are no longer the only gambling game in town. In jurisdictions where sports betting is tied to a casino or pari-mutuel license there may be a small trickle of funds to the horse industry. In jurisdictions where sports betting is not tied to a casino or pari-mutuel license there will be a further cannibalization of the handle as another form of gambling takes a slice out of the pie.

But earlier Tuesday, Drazin told the Press that “We feel we’re entitled to additional damages. We believe the leagues acted in bad faith trying to stop New Jersey from taking advantage of sports betting while at the same time they were pursing fantasy sports through their equity positions with the FanDuels and Draft Kings of the world, playing games in jurisdictions that permit gambling on sports, all while telling the courts it was an integrity issue.’”

TDN – Thornton – Monmouth to Seek Sports Betting Damages from Leagues

Asbury Park Press – NJ sports betting: Monmouth Park says leagues blocked it from $150 million in bet revenue

Blinded By The Light

NY Times – Draper – How Betting Will Change the Sports Media Business

TDN – Bill Finley – Sports Betting and Racing: After Jersey, Then What?

TDN – Bill Finley – Horse Racing, Robinson Cano and Can Lasix Really Mask Other Drugs?

The Pusher Man


Hawthorne Sal

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