Up until June it appeared that exchange wagering on horse racing in California was a sure thing. Two years ago The California Horse Racing Board gave its okay for TVG (owned by Betfair) to offer the product and the only hurdle that TVG had to pass was the approval by other horsemen and a reasonable figure for commission.

As the name suggests, a horse racing exchange operates like the stock exchange whereby one bettor offers a price on a stock (in this case a horse) and another bettor takes that price. The price they agree on is final and if the market changes subsequently it has no effect on the odds that are already agreed to. In North America currently the only option for horse betting is pari-mutuel where the odds on the tote board at the time of the bet are irrelevant and the odds the bettor receives are only known when all the pools, both at the track and those simulcast from other racetracks, are amalgamated and the track takes out its percentage (ranging from 17% to 30% depending on the type of wager). Many younger bettors have said that the fact they don’t know what odds they will be getting is one of the biggest turnoffs to them in betting on horse racing. The other major turnoff is the high takeout. Exchange wagering also offers two other advantages, the ability to bet while the race is being run and the ability to lay a horse (i.e. bet against it). Effectively laying a horse is similar to selling short a stock and is one of the biggest concerns that horsemen have indicated. They believe that the ability to wager against a horse will cause problems with integrity and may convince some jockeys (and possibly trainers or owners on advice to the jockey) to purposely lose on a horse in order to get a big payday on the exchange. After all, if a horse is 1/5 favorite they can probably get 3/1 betting against it and there are certainly subtle ways that jockeys can throw races if they want to. What these horsemen fail to realize is that every wager is logged and TVG would know exactly who placed a wager and for how much so they can actually indicate to the California Horse Racing Board that someone who wasn’t eligible to wager has placed a bet against a horse plus they can highlight suspicious betting patterns which can’t be done currently with pari-mutuel wagering.

I spoke to someone in California who is close to the situation and they were confident that exchange wagering will never get the go ahead as long as Frank Stronach has a say. While TVG and many other more visionary types see the exchange as a savior to the industry, my source says that Stronach is still old school and wants nothing to do with it. He hates the fact that all wagering on the exchange will be done only by computers and he particularly hates the idea of being able to wager against horses. And because Stronach is the head of the Los Angeles Turf Club and Pacific Racing Association, which owns Santa Anita and Golden Gate fields, his approval is necessary for the exchange to ever get the go ahead. That’s why my source is confident that the exchange is effectively dead as Stronach will never give his approval. Moreover, the source said that horsemen at all tracks also want a bigger commission than TVG proposed. The Betfair owned company proposed a 10% commission on all winning wagers to be split between the track, the horsemen and TVG. But the horsemen want it to be closer to the 20% that is taken out from pari-mutuel wagering now and they want the bulk to go to horsemen. The problem with that, as TVG pointed out, is that at a 20% commission there will be no incentive for younger bettors to wager on the exchange since the current exorbitant takeout is a reason they stopped betting on horse racing in North America as it is. Right now Betfair charges UK customers 3% – 5% commission based on their level of play, so the 10% commission is already higher than they would like, but the company realizes that the higher commission is necessary to get the horsemen to at least consider the idea.

Not surprisingly TVG is angry at the California Horse Racing Board’s decision and feel betrayed since they were effectively given the go ahead by the state amid much hoopla just over a year ago to offer the product and then had the rug pulled out from under them without a real discussion with the company. And no doubt TVG sees the writing on the wall that this delay could become indefinite. TVG’s options now are to go to another jurisdiction to offer the product, most likely New Jersey which has indicated interest; they can try and rally the troops to convince Stronach to change his mind; or they can just give up. The latter, however, is not likely. One of the main reasons Betfair bought TVG in the first place was the realization that they had a product that could revolutionize horse racing in North America and bring back younger bettors to the sport. What they didn’t realize is that they possibly had to wait for the old guard to die before they would get the go ahead. And at this rate, the industry will probably die before the likes of Stronach.

Exchange wagering is an exciting product and is a proven winner in Europe and Australia. It offers a way of betting horses that will bring younger bettors back to the sport but it seems that many horsemen still long for the days when horse racing was the only gambling game in town and the elite went to the track dressed in suits and dresses and paid a premium to sit in the clubhouse. At some point these horsemen will realize that those days are long over. Hopefully, it won’t be too late for the sport.

Contact Hartley via email at Hartley[at]osga[dot]com.

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