The steady growth of legal sports betting across America isn’t going to end the country’s pari-mutuel horse racing industry, but it does offer leading gambling operators yet another revenue-generating option that accompanies far more profitable casino options – and one less reason to get into the often cash-worthy races to lose.
Horse racing background
With the decline in interest and participation in horse racing in the second half of the 20th century – along with the proliferation of Native American-run casinos in the 1990s – state policymakers increasingly embraced commercial gambling, often on existing horse racing tracks.
These new options have been welcome news for many racecourse operators. As slots and table games expanded and made more profits, the railways’ corporate interests increasingly gave the more lucrative options precedence over horse racing.
For more and more states, it also meant legalizing sports betting more after the 2018 Supreme Court ruling that lifted the federal ban.
To protect horse races, which had strong financial and emotional ties to American culture for generations, many states passed laws requiring operators to hold a certain number of races each year in order to maintain their casino gaming skills. Other states further strengthened the industry by subsidizing horse racing advocates through taxes on casino games.
The removal of these racing requirements and / or the subsidiaries is known as “decoupling”. Florida-based gaming attorney Marc Dunbar said Monday at an industry conference in Saratoga Springs, New York that a nationwide decoupling trend will continue.
That’s not good news for horse racing stakeholders, said John Faraldo, president of the Standardbred Owners Association of New York, at the Racing and Gaming Conference in Saratoga on Monday.
“This decoupling concept is an existential threat to all racing, agriculture and the non-agricultural industry,” said Faraldo.
Decoupling has gained political momentum as interest in horse racing continues to wane on many tracks as other game options gain in importance. But despite these declines, horse racing retains a prominent role in American culture.
Major events such as the nationwide televised Triple Crown races continue to attract hundreds of thousands annually. Certain historic racetracks such as the Saratoga Race Course also still attract large numbers of people; Joe Appelbaum, president of New York’s Thoroughbred Horseman Association, told conference attendees Monday that the track was well on its way to “setting records” this year.
Still, dozens of tracks have been closed in the past few decades. Arlington International Racecourse, a historic course in the Chicago suburbs, is expected to hold its final race in 2021 after nearly 100 years of operation.
In Pennsylvania, state horse tracks are less attractive than lower division baseball teams, said Sharon Ward, former director of the state budget bureau. Those tracks are kept afloat by $ 3.3 billion in annual subsidies, the state’s biggest economic stimulus, Ward said at the conference on Monday.
This creates a natural financial and emotional conflict. Proponents of horse racing argue that the industry offers thousands of jobs and significantly more economic impact. Proponents argue that the intangible, emotional benefits of horse racing are well worth the high financial investment.
Others argue that taxpayers’ investment in financial subsidies is no longer worth the cost. Legislators have increasingly cited this argument, particularly in Florida earlier this year.
Sunshine State legislators passed a decoupling bill that would allow the Jai-Alai Frontons, Standardbred Horse Tracks, and former state greyhound facilities to offer more lucrative poker and card rooms without having to host live competitions or races.
Notably, the state’s two thoroughbred racetracks (which host non-seat belt races in the style of Triple Crown races) are still required to host a certain number of live events.
This could lead to their respective owners selling their properties for redevelopment, Dunbar said, and it means the last two major railroad tracks in the nation’s third largest state could soon be closed.
Tracks become sports betting
Sports betting, a comparatively low-margin gambling offer, is not enough on its own to put an end to horse racing, but for a growing number of gambling providers it is another source of revenue – or at least a little easier to manage than horse racing.
Delaware and New Jersey, the second and third states after Nevada to accept legal single game sports betting, opened racetrack sports betting in 2018.
That same year, Arkansas voters approved casino games and sports betting at Oaklawn Racing Casino Resort, the state’s lonely horse racing track.
Pennsylvania, Indiana, and West Virginia were among the states that allowed certain horse racing tracks to offer casino games (and become “racinos”) and also allow sports betting. Ohio, which, like its neighbors, has legalized racinos, will legalize casino sports betting again this year.
Leading operators are also shifting towards sports betting as more states legalize betting.
Penn National, better known as a horse tram operator for decades, has invested billions in sports betting through high profile acquisitions of Barstool Sports and theScore, two media companies that have become sports betting brands.
The Stronach Group, owner of several iconic horse racing facilities, could open their first track sports betting either in Laurel Park or in Pimlico (home of the Triple Crown’s Preakness Stakes) later this year.
As sports betting grows, tracks are also considering “fixed odds” betting on horses. Instead of the traditional pari-mutuel bets, where all bets are placed in a specific race and a proverbial pot, the odds shift based on the bets placed and the winnings are paid out from the full wallet, fixed-odds bets allow bets, like they would do in a team sport.
This style has gained popularity in more than 50 country markets around the world and is one of the most popular betting options in established markets like Australia.
Fixed-odds betting, especially via mobile devices, also allows bettors to bet on horse deals, comparisons with other horses and literally hundreds of additional options not available on a pari-mutuel model.
New Jersey is the first state to approve fixed-odds betting on horses. It remains to be seen how well this new gaming format will catch on in America, but it underscores the impact that the proliferation of single game sports betting is having on the entire gaming industry.
Meanwhile, sports betting continues to grow rapidly while pari-mutuel betting is stagnant. Horse racing has grossed around $ 11 billion each year for the past decade. In just over three years, legal bets have grossed around $ 65 billion while increasing every year – and all of this without most states still unable to legally take bets.
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While the nation’s most famous horse tracks and races can continue to survive and even thrive, industry watchers from all perspectives agree that much more needs to be done, especially on less viable routes.
Unsurprisingly, many horse racing stakeholders continue to defend subsidies and regulations on racing requirements, arguing that a lack of investment is hurting the industry and requiring more resources to revitalize it.
Others – including some horse racing property owners – say it is time to move away from money-losing equestrian events and casino gaming.
Sports betting won’t be a savior, but it could be a boost. Even Churchill Downs, home of the Kentucky Derby and arguably the most famous horse racing track in the country, has endorsed legislation that would allow for sports betting on the ground.
So the casino options could also increase. With more lucrative slot machines, table games, and now sports betting to back them up, horse tracks that have become racinos have withstood the dwindling horse racing markets.
The question remains whether the industry should continue to invest in unprofitable locations or whether the focus should be entirely on revenue-generating options.
What is certain is that the political pressure to decouple through tax investments and regulatory requirements will continue to gain momentum in the foreseeable future.