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Of Interest ( Horse News )
Rich Rewards
By JOE DRAPE
Published: April 26, 2004
n horseplaying parlance, Maury Wolff is a whale, one of the thousand or so professional bettors who collectively wager as much as $1.5 billion a year on thoroughbred races in the United States. He will not attend the Kentucky Derby at Churchill Downs on Saturday. In fact, he and the other whales rarely set foot in a racetrack.
He will watch the Derby from his home in Alexandria, Va., where a pile of Daily Racing Forms, a stack of videotapes of past races and a computer will give him all the insight he needs into the horses competing. When he decides which horse he believes will win the race, Mr. Wolff will call in his selection.
Even before the starting gates open at Churchill Downs, Mr. Wolff will have an advantage over many other horseplayers. He bets through what are called rebate shops, which are off-shore, on Indian reservations or in states with fewer regulations. Rebate shops offer from 4 percent to 10 percent back on every dollar wagered — win or lose.
When someone bets more than $100 million a year, as one man did through a North Dakota rebate shop in 2002, the savings add up quickly and often mean the difference between winning and losing money.
The practice is legal. Mr. Wolff likens his rebates to the cash or airline miles that credit-card users often receive.
"Racing is like a lot of businesses in which the best customers get the best deals," said Mr. Wolff, a former racetrack executive and an economist. "Rebates are targeted tax cuts to the consumer who is most responsive to your product. When you turn people into winners from losers, you're going to get astronomical growth."
National figures compiled by the Jockey Club, considered the official statistician of the industry, show that rebate operations may have had an impact. In 1997, before they became prevalent, $12.5 billion was bet on horse racing held in the United States; in 2003, more than $15 billion was wagered, a 20 percent increase.
But the proliferation of rebate shops has stirred intense debate and raised thorny questions within the horse racing industry.
¶Do rebate shops siphon revenue from the racetracks and from the trainers, jockeys and horse owners who put on the show?
¶Do well-financed gamblers have an unfair advantage over the $2 bettor or even $500-a-day players?
¶Is gambling on a horse race a game, or is it a financial market that a skilled player can manipulate for profit?
Unlike casinos, where bookmakers set odds or determine point spreads, horse racing is based on the parimutuel system, which means bettors are wagering against one another and not against the house. All the betting money, including wagers made at the racetrack and at rebate shops, is commingled, or linked into one pool.
In the Kentucky Derby on Saturday, for example, Churchill Downs will return to bettors at the track about 82 cents of every dollar wagered in the form of winnings. The remaining 18 cents, known as the takeout, will be used to pay for expenses like racing purses, state taxes and track maintenance.
This business model worked fine 25 years ago. But the advent of telephone and computer wagering has drastically changed the flow of money in the industry.
Despite the increase in the amount of money wagered on races held in the United States, the purse money given away at racetracks declined in 2003, for the first time in nine years, by nearly 2 percent, to $1 billion, according to the National Thoroughbred Racing Association. The decline is referred to as "handle up, purses down," and the N.T.R.A. formed a task force last month to examine the problem.
"We have witnessed over the past few years a significant change in betting patterns where the tracks in the U.S. are receiving less net revenue from interstate simulcasting," said Greg Avioli, deputy commissioner for the N.T.R.A. and the task force's chairman. Simulcasting allows racetracks to sell off-site access to their betting pools. "Money is leaking out of the system and not going back to live racing."
By JOE DRAPE
Published: April 26, 2004
n horseplaying parlance, Maury Wolff is a whale, one of the thousand or so professional bettors who collectively wager as much as $1.5 billion a year on thoroughbred races in the United States. He will not attend the Kentucky Derby at Churchill Downs on Saturday. In fact, he and the other whales rarely set foot in a racetrack.
He will watch the Derby from his home in Alexandria, Va., where a pile of Daily Racing Forms, a stack of videotapes of past races and a computer will give him all the insight he needs into the horses competing. When he decides which horse he believes will win the race, Mr. Wolff will call in his selection.
Even before the starting gates open at Churchill Downs, Mr. Wolff will have an advantage over many other horseplayers. He bets through what are called rebate shops, which are off-shore, on Indian reservations or in states with fewer regulations. Rebate shops offer from 4 percent to 10 percent back on every dollar wagered — win or lose.
When someone bets more than $100 million a year, as one man did through a North Dakota rebate shop in 2002, the savings add up quickly and often mean the difference between winning and losing money.
The practice is legal. Mr. Wolff likens his rebates to the cash or airline miles that credit-card users often receive.
"Racing is like a lot of businesses in which the best customers get the best deals," said Mr. Wolff, a former racetrack executive and an economist. "Rebates are targeted tax cuts to the consumer who is most responsive to your product. When you turn people into winners from losers, you're going to get astronomical growth."
National figures compiled by the Jockey Club, considered the official statistician of the industry, show that rebate operations may have had an impact. In 1997, before they became prevalent, $12.5 billion was bet on horse racing held in the United States; in 2003, more than $15 billion was wagered, a 20 percent increase.
But the proliferation of rebate shops has stirred intense debate and raised thorny questions within the horse racing industry.
¶Do rebate shops siphon revenue from the racetracks and from the trainers, jockeys and horse owners who put on the show?
¶Do well-financed gamblers have an unfair advantage over the $2 bettor or even $500-a-day players?
¶Is gambling on a horse race a game, or is it a financial market that a skilled player can manipulate for profit?
Unlike casinos, where bookmakers set odds or determine point spreads, horse racing is based on the parimutuel system, which means bettors are wagering against one another and not against the house. All the betting money, including wagers made at the racetrack and at rebate shops, is commingled, or linked into one pool.
In the Kentucky Derby on Saturday, for example, Churchill Downs will return to bettors at the track about 82 cents of every dollar wagered in the form of winnings. The remaining 18 cents, known as the takeout, will be used to pay for expenses like racing purses, state taxes and track maintenance.
This business model worked fine 25 years ago. But the advent of telephone and computer wagering has drastically changed the flow of money in the industry.
Despite the increase in the amount of money wagered on races held in the United States, the purse money given away at racetracks declined in 2003, for the first time in nine years, by nearly 2 percent, to $1 billion, according to the National Thoroughbred Racing Association. The decline is referred to as "handle up, purses down," and the N.T.R.A. formed a task force last month to examine the problem.
"We have witnessed over the past few years a significant change in betting patterns where the tracks in the U.S. are receiving less net revenue from interstate simulcasting," said Greg Avioli, deputy commissioner for the N.T.R.A. and the task force's chairman. Simulcasting allows racetracks to sell off-site access to their betting pools. "Money is leaking out of the system and not going back to live racing."