Fixed Odds, Sports Wagering Embraced at Symposium

A pair of morning sessions Dec. 8 during the University of Arizona Race Track Industry Program's Global Symposium on Racing emphasized the importance and potential profitability of integrating fixed-odds wagering and sports wagering with pari-mutuel horse racing.

The first of two such sessions, called "Seizing the Fixed Odds Wagering Opportunity" and moderated by retired Thoroughbred Racing Associations of North America executive Chris Scherf, featured five speakers who embraced oncoming fixed-odds betting, though some with reservations. Among those concerns were Interstate Horseracing Act compliance, funding toward purses, and cannibalization of the pari-mutuel wagering market.

Fixed-odds wagering—with New Jersey and Colorado soon in line to offer it—would allow bettors to place a wager on a horse at a set price, without concerns that the odds would fluctuate before post time. But unlike a pari-mutuel wager, the bettor places this wager against the track or authorized bookmaker. In pari-mutuel wagering, bettors compete against one another, with a percentage of the handle called the takeout going to the track, horsemen, and the state.  

Speakers Simon Fraser, senior vice president of international for 1/ST Technology, and Dallas Baker, head of international operations for BetMakers, sparred on the topic of cannibalization during the fixed-odds session. Fraser said racing leaders are "fooling ourselves" to think cannibalization won't happen.

"It's much easier to get someone who already bets on racing on the tote to bet on fixed odds than it is to get somebody who bets on table tennis to try and convert them to a racing punter, which is hard," Fraser said. "Whereas somebody who already bets on racing on the tote, they already know what they're doing. They've already made a choice about who they're going to bet on. So to get them to move their bet from the tote to fixed odds—if you offer them a nice bonus and a decent price—is a lot easier. So there is going to be cannibalization, and I think everybody needs to think through what that means and how that's going to affect the pools and the marketplace."

He added that in Australia, where fixed-odds wagering has proven popular, the handle was $8.1 billion into pari-mutuel pools in 2000, but with fixed odds available in the marketplace "in 2019 to 2020, it was $4.5 billion."

Baker countered that if growth in betting takes place, it shouldn't matter to the industry. He said racing in Australia is flourishing.

"What matters to the industry is that we increase revenues," he said. "So if those revenues get skewed down—there's more revenue coming from fixed odds than there is tote as an industry—it doesn't really matter all that much. It just depends on what companies become successful in doing so."

Regarding how fixed odds would generate income for the racing industry, Baker said the winning cut for bookmakers is approximately 12%. Of this, he noted that in New Jersey the takeout on fixed odds is to be about 4%, with 1% going back toward purses and the remaining 3% to the track and other entities.

Fixed-odds wagering was signed into law this August, though such betting has not yet happened there. Its regulations place it in compliance with the Interstate Horseracing Act, leave it treated as a racing, not a sports wager, and authorize racetracks or a third party to conduct such wagering on behalf of the racetrack.

Bill Knauf, vice president of business operations for Monmouth Park, said the track previously experimented with a similar type of wagering from 2016-20 known as exchange wagering. In those instances, bettors were matched up against other bettors instead of playing against the track or bookmaker. However, he said that exchange wagering ultimately was scrapped after not obtaining enough liquidity in the pools.

Knauf said he believes bettors will appreciate playing horses with fixed-odds wagering without fear of late odds fluctuations commonly seen in pari-mutuel pools. He called fixed-odds wagering a "true hybrid of racing and sports in New Jersey."

Fixed-odds wagering is not without challenges to gamblers. High-rolling, successful bettors risk getting shut out by bookmakers if they repeatedly beat the house.

Dan Hartman, director of gaming for the Colorado Division of Gaming, sees promise for fixed-odds betting in Colorado. He noted that racing could appeal to bettors in the way that ping-pong gambling does with sports bettors, with a relatively low-profile sport generating slightly more betting last year in Colorado than pari-mutuel horse racing did there.

"I think it shows the potential of what content can do," he said, mentioning ping-pong's regular games and accessibility to bettors.

For horse racing interests in states still in the process of considering fixed-odds wagering, Eric Hamelback, CEO of the National Horsemen's Benevolent and Protective Association, noted the importance of favorable laws and regulations that assist the industry. He said horse racing had not experienced the full benefit from advance deposit wagering that it should.

"There are plenty of people here that can guide you down a good path because I do think that the future of fixed odds is positive," he said. "But we have to get this right."

Riding the Sports Betting Wave

Immediately following the fixed-odds discussion, panelists discussed "Riding the Sports Betting Wave," with three speakers saying that horse racing has the potential to grow by integrating wagering alongside sports.

Dan Shapiro, senior vice president and chief development officer for Caesars Digital, said the explosion of sports betting, with markets still to come as other states legalize it, leaves horse racing "at the cusp of an unprecedented opportunity."

He said the steady content of horse racing, coupled with "shared wallet" concepts that can allow a sports and horse racing bettor to access different plays within the same account, will lead to engagement and growth. Additionally, racing stands to capitalize by sponsorship with sports betting platforms and by monetizing its assets by sending its customer list to such companies.

Andrew Moore, vice president of racing for FanDuel, echoed those statements, noting that sports betting customers are "extremely willing" to bet on horse racing. He mentioned how sports bettors turned to horse racing during the onset of the pandemic when it faced little competition from sports. They also play on significant racing days, he added.

"What we also see is they don't really hang around because they have separate sports betting accounts with separate logins," he said. "They're not inclined to deposit and play on two different places on the one day, but we know a lot of people go to place an NFL bet on a Sunday. But having horse racing side by side of that on the same wallet or pay with their winnings, even, off the NFL on a Monday, there's lots of places where horse racing can complement that main offering that brings people in and then be a very important part of the ecosystem for the customer."

The typical sports bettor is also younger than one that plays horse racing.

"Seventy percent of sportsbook customers are 40 or under. Sixty-five percent of ADW customers are older than 40," Moore said. "There is a huge difference in the age profile of these customers."

So having sports bettors grow to appreciate horse racing is vital.

"We don't want our customers to die. We want them to continue to come," added Ylva Svensson, head of international sales for ATG, the session's final speaker, who exhibited her company's betting growth in Sweden.