Letter to the Editor: Coupling, Decoupling and Disrupting

[Wandering Eyes]

Last year a move to decouple Florida track/casinos from the requirement to conduct racing was passed in the Florida House, but a united horse group stopped it in the Florida Senate.

The wolf was at the door and they got rid of it. This year the wolf is back.

Churchill Downs says Fair Grounds without a casino will close. The wolf is at the door there too, and at every track without coupling.

The coupling of tracks with casino/alternate gaming was a case of leverage. The casinos wanted in and racing used its political leverage to make it happen.

Decoupling is a question of how long racing will have political leverage?

Can we save live racing in states without coupling, like California? Yes. Live racing generates plenty of revenue, it just gets misappropriated.

Last year, over $11 billion was bet on racing. If it all was bet at the tracks, live racing would have received about $2.2 billion. That kind of money can make or break many businesses, including live racing.

Of the $2.2 billion up for grabs last year, only $550 million went to the host tracks, while $1.65 billion went to off-track bet takers.

I believe more than $1.65 billion of off-track revenue is now going to the wrong people. I mean the off-track bet takers in and out of racing. They pay about 5% to live racing, but they keep 15%, just for taking the bets. That can change.

 

What if live racing kept all of it?

 

What if racing disrupted the off-track market and kept all of it? Technology says we can. Why can't our sport display a bit of “race riding” in the gambling market? We can amend the Interstate Horseracing Act (IHA) to deliver the full 20% takeout to the host tracks, and then pay a small commission to those taking off-track bets.

That's how the lotteries work. They gross over $100 billion, pay 5% to gas stations and keep the rest. Racing can do the same.

Technology is changing public behavior quickly. Ticketmaster changed us from paper tickets to phone digital entry overnight.

What if Ticketmaster, or another company, took over off-track bets for the host tracks? If their fee was less than 5%, host tracks would receive over $1 billion in new money.

This disruption in the gambling market could result in less handle for racing, but 20%, means live racing will net more money even if there was a 50% drop in handle.

The IHA, written in 1978, has allowed off-track bet takers to gang up and drive down the price they pay host tracks. That's why host tracks get 5% and bet takers get 15%. We must amend the IHA to refocus the revenue on the live race produced, not where and how the bet is made.

The host tracks are being starved of their own revenue by off-track bet takers. To be clear, the $1.65 billion going to bet takers is more than all of the purse money in North America ($1.1 billion).

This new money to the host tracks will be in addition to coupling revenue. Combining the two means dramatic growth for live racing.

Sports gambling is breaking all the rules. Prediction Market companies, like Kalshi, are barging into every state and cannibalizing the rest of the sports betting market.

The big wagering companies, Fan Duel and Draft Kings, are planning far beyond racing. Their future is with the major sports and prediction markets.

Every day the expenses to breed, train, feed and care for Thoroughbreds go Up.

Every day the expenses to maintain and operate host racetracks go Up.

Every day the expenses to take off-track bets go down.

Look at the graph lines and decide which direction racing's political leverage should be applied.

Right now, one party controls both houses of Congress and the presidency. Before anything changes, those with the means for political leverage can act for the racing's future.

Track owners, the HBPA, THA and TOC need to look at the numbers and see the impact of amending the IHA to deliver all of the off-track takeout to the host tracks. I believe they will see more than $1 billion in new net revenue for them to split.

The folks who stopped decoupling in Florida took direct action to save live racing there. Now they can join others and scale up for a national effort to amend the IHA and assure, by federal law, the protection of live racing's off-track revenue.

John Gaines hired me to sell the concept of the Breeders' Cup to the industry. We started by lining up every major owner and breeder and published the growing list of names every week until those holding out were forced into support of what has become racing's biggest idea. Perhaps some leaders will step up now and start such a list to amend the IHA.

As trainer D. Wayne Lukas said about his strategy to win, “Go to the front and stay there.” Amend the IHA and give live racing a chance to go to the front and stay.

 

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