Hail the new allies and the new era.
Monmouth Park’s record all-source handle of $20,479,372 from the July 18 Haskell Stakes — despite a limited crowd of about 3,500 — highlights an emerging dynamic between the horse racing and sports betting industries.
The entities are ready to overlap, on several fronts, in a partnership enabled by the post-PASPA world.
On one level, online gamblers have helped to recuse the horse racing industry this year. They have done so all spring and summer by providing multi-million-dollar daily handles to tracks that can’t allow spectators.
But a second level is about to launch in New Jersey, through a vehicle known as fixed odds betting.
Sportsbook operators, fueled by success stories in Australia, want to tap a dormant revenue stream from the lucrative US horse racing market. Their first ally is Monmouth Park, which wants to expand its sphere of business.
The key players in this partnership are Monmouth, Australian technology giant BetMakers, and sportsbook operator PointsBet, which has a NJ sportsbook app. Separately, DraftKings plans to put several horse racing options into its platform within the next couple of months. All it takes is the right deal and state-by-state approvals.
Even so, the intersection of horse betting and sports betting will come to a head soon. And when it does, New Jersey will once again be in the spotlight and fixed odds betting will be the source.
What is fixed odds betting?
The common denominator for these groups is fixed odds betting, the practice by which gamblers can lock in their odds minutes, hours, or perhaps a day before the race. Horse racing currently operates with pari-mutuel pools, which change projected payouts until the final seconds and frustrate bettors who see the price they wagered upon altered.
Small bettors won’t notice the change. Big gamblers can have profit and loss determined by it.
Fixed odds would put a segment of the NJ horse betting operation (only applying to win, place and show wagers) in line with the practices of sportsbook wagering. Odds on most sports events are locked in the moment one bets.
Dennis Drazin, the Monmouth Park CEO, said state approvals are imminent to launch the revolutionary concept.
He sees it as a victory for the horse racing industry, which has been declining amid high takeout percentages and a wagering platform that does not entice sports bettors. Fixed odds, if used by enough players, could turn horse racing back into a growth industry. Any entry into the sports betting mainstream will benefit racing.
But this is also a win for NJ sportsbooks. Once approved by NJ regulatory channels, sportsbooks can offer a historic sport that runs nearly every day of the year. It’s a sport that flourished with big fields and sizable payouts during the COVID-19 pandemic.
How fixed odds is enabled
The partnership between Monmouth, BetMakers, and PointsBet represents a new avenue into New Jersey’s operating shop because it proceeds through this new route of fixed odds.
In a nutshell, New Jersey racing operates in the pari-mutuel realm. The New Jersey Sports and Exposition Authority is the licensee to operate Monmouth Park.
In 2018, after PASPA was repealed, it awarded a five-year contract to racing giant TVG, which powers betting via the 4NJBETS platform New Jersey gamblers use. TVG also offers New Jersey harness racing from the Meadowlands and Freehold in New Jersey.
Fixed odds represent a different department than pari-mutuels. Monmouth Park awarded its fixed odds contract to BetMakers for a 10-year period in February. BetMakers, which, among other things provides the algorithms to enable wagering, signed up PointsBet.
It is presumed that other fixed odds operators would utilize BetMakers to gain access to Monmouth Park data. The regulatory environment, still being worked out, will shed more light on this process later.
Interestingly, both BetMakers and PointsBet have strong gambling roots in Australia. Their first foray into the potentially lucrative American market just happens to be New Jersey’s Monmouth Park.
‘A great opportunity for racing’
BetMakers and PointsBet view the Australian market as a tip-of-the-iceberg barometer of potential American horse racing dollars.
Seth Young, the chief innovation officer for PointsBet, is ecstatic over its potential.
“Fixed odds racing was introduced in Australia in 2007, and in that year, the Australian racing market handled roughly $15 billion in wagers, a 30% increase over the previous year,” he told Play NJ.
“Over the next 10 years, the market spiked to roughly $24 billion in wagers in Australia – a 46% increase – while over the same period the US racing market, with no fixed odds racing, declined to $11 billion from $15 billion, or a 30% decrease. Numbers are facts, not opinions.”
Young explained the philosophy behind fixed odds, which is rooted in consumer buying habits.
“Imagine finding an item you like on Amazon for $5, and after you put it in your cart the price of that item somehow increases to $20 because 100 other people also want to buy it at the same price,” he said. “That’s sort of like what betting pari-mutuel on horse racing is now. You have no idea what price you might end up with since your price can change after you’ve made your bet depending on where the weight of interest is. It’s confusing, it’s a bad client experience, and fixed odds helps solve for that by providing some trust and transparency around what the end-user should expect when they make a bet.”
The Australian market tells Young one thing. Overall consumer history supplies another. Horse racing’s evolution, or perhaps de-evolution, provides a third.
“Look at it holistically,” he added. “In a story old as time there are new generations of interested people in this country that are enjoying gambling entertainment responsibly, but they have more choices today than gamblers did 30, 40, 50 years ago.
“When horse racing began there were no slot machines, no esports, no prolific casino-style gaming like we see today. Consumption habits and interests shift. They have shifted. But have you ever been to a horse race? It’s amazing, it’s unique, and it should be celebrated.”
Eliminating any barrier to entry into horse betting can only be a good thing in Young’s view.
“It’s an incredible industry, but it’s an incredible industry that’s resisted change, and the numbers tell the story. The problem is there are high barriers to entry with pari-mutuel betting for a new consumer. Betting pari-mutuel for the first time is simply not as easy as fixed odds mechanics.
“With the proliferation of legal, regulated fixed odds sports wagering across the country, this is a great opportunity for racing to tap into that demand for its benefit. If not now, when?”
The role of BetMakers and fixed odds
Dallas Baker, head of international operations for BetMakers, gave an overview of his company’s fixed odds role.
BetMakers is essentially a business to business operation, he said. Whether via Monmouth Park or any other track around the world, the company enhances the data and provides it in a streamlined single feed to wagering operators through its Global Racing Network.
Its “enhancing” provides the bookmakers with the algorithmic tools they need to manage a horse racing book, to offer the customer-facing bells and whistles to enliven the user experience and provide everything else that can automate racebook wagering.
The company seeks distribution rights from tracks and charges the bookmakers a fee for those rights to bet on the tracks it has under contract. Thus for BetMakers, the 10-year deal with Monmouth Park creates a time period in which to sign up clients. BetMakers also manages the risk for fixed odds bets and welcomes the heavy bettors.
Like Young, Baker sees a world of potential in the US market. In Australia, with roughly 25 million people, $25 billion is invested in racing, he told Play NJ. The US, with 330 million people, only tabs $11 billion.
The untapped American market is colossal.
Horse racing: the sport of (Draft)Kings
Fixed odds can enable a creative sports betting option according to Johnny Avello, the director of race and sportsbook operations for DraftKings Sportsbook.
“We are going to launch something within the next month or two,” he said.
“Once we have permission from the racetrack or racing organization to offer fixed odds, we can offer something a couple of different ways and they get a cut out of it. We incur the win and the loss from our bets.”
DraftKings can match the odds provided at the racetrack or go in a different direction, offering specific matchups of horse against horse. Avello said he did this as far back as 1989 in the brick-and-mortar world, setting a head-to-head prop of Sunday Silence against Easy Goer in a Triple Crown race for Bally’s in Las Vegas.
Avello notes fixed odds betting was prominent in Australia and Europe prior to pari-mutuel betting. He shares the optimism of horse racing’s burgeoning market, its flaws regarding high take-out percentage, and the recruitment of young bettors.
Horse racing’s takeout percentage of 15%-25% of its bets is disadvantageous compared with sportsbook offers in which the “vig” is 10%, sometimes less. In recent years, horse racing has become smarter, adding Pick 3, 4, 5 and 6 wagers with takeouts of about 15%. At that level, it can almost compete with other sports in attracting bettors.
Above that, it cannot.
“Horse racing has declined over the past five or six years but has done really well during the 3-4 months of this pandemic,” Avello said. “There are not a lot of options for the bettors. Horse racing has elevated its handle and that’s great to see.”
Horse racing has its betting hurdles
But there is always a challenge when it comes to younger bettors who more often than not favor MLB, NFL, and NBA bets to horses.
“When the track has a takeout of 15%-25%, depending on the type of bet, it has a challenge,” he added.
“The younger generation, they don’t like that type of takeout percentage. In an eight-horse field, you have to beat out seven other horses to win, and yet the takeout percentage is high. They have a better chance of hitting something if it is A versus B (one horse vs another horse, just as an NFL game would match two teams).”
Another hurdle facing horse racing is the complexity of picking winners. There are class distinctions, speed factors, layoffs, differences in surfaces, and rain.
“It can be very difficult for someone to learn how to read a racing form,” he said. “What do claiming and allowance races mean? How do I figure all of that out? Where is the value in the race?
“Some of us have years and years of experience in this,” he laughed, “and we’re still not good at it. How will the beginner figure all of this out?”
Avello said DraftKings will launch fixed odds in several of its jurisdictions. Will New Jersey be one of them? That depends upon whether a deal can be made.
Monmouth sees both sides of the coin
Drazin understands the picture as both a horse racing CEO and a NJ sports betting entrepreneur. Monmouth Park features the William Hill sportsbook, along with online partners SugarHouse Sportsbook and theScore.
He was a gambler before there even was legalized gambling.
Drazin partnered with William Hill, building its book back in 2012, six years and several unsuccessful court decisions before the US Supreme Court enabled legalized gambling in 2018. In years past, this hunch had been played elsewhere, unsuccessfully. Caesars Atlantic City designed a posh room for sports betting, but the legislation never followed.
Drazin the racetrack operator considers fixed odds a wealth of untapped betting interest.
“You go to a racetrack and bet a horse at 2-1, he breaks a few steps and now he’s 1-5,” Drazin said. “The bettor wonders how that happened but is not aware of the computer bets coming in that change odds after the break. The people have complained about this and they get suspicious. Well now, if you get a horse 2-1 you get 2-1.”
A fixed odds system would protect big bettors, who are concerned with knocking down their odds with a sizable wager into a small pari-mutuel betting pool. Consider a bet of a couple thousand dollars on a 2-1 shot that changes the odds instantaneously to 6-5 or even money. The bettor lost $1,000 before the race event starts.
The discussion will be interesting regarding when to offer the fixed bet. Minutes? Hours? A day in advance? It’s all to be determined and timing matters.
Maximum Security was a 10-1 shot the night before the 2019 Kentucky Derby. But when rain soaked the track on Derby Day, the frontrunning speed horse was dropped to 9-2. That’s more than half the potential profit lost for someone who made the wager one night earlier. (Maximum Security initially won the race but became the first Derby winner ever disqualified for alleged interference.)
If fixed odds from one night before the Derby were honored, getting 10-1 on a horse that became 9-2 would feel like a coup to a gambler.
Monmouth, fixed odds, and the industry evolution
Launching a major initiative like fixed odds is encouraging for Monmouth Park, which lived through an age when the convergence of sports betting, casinos, and horse racing was a longshot in New Jersey. A pipe dream.
Atlantic City casinos once jostled with Garden State racetrack operators, who wanted slots and other forms of gambling on their own properties.
To avoid competition, the casino industry essentially paid several years of indemnification fees to the state’s tracks, which promptly fought amongst themselves about how to split the money.
Fast forward to the birth of racinos, in which a property features both a track and a casino. The concept matured as places such as Hollywood Park at Charles Town Races in West Virginia, Delaware Park and Penn National, among others, highlighted the racing-casino marriage.
Casino revenue bolstered the racing industry, which in turn entertained casino customers.
And then came the sportsbook era, championed by Drazin, a horse racing official who fought alongside casinos to repeal PASPA.
For his efforts to enable legal sports wagering, Drazin was inducted into the Sports Betting Hall of Fame last year.
Who better to orchestrate the fixed odds innovation? And to consider other measures?
“When you become more creative you can sell wagers across all sports,” Drazin said. “What about having three legs of a racing parlay and make the fourth a Yankees game, a Giants game, or a Jets game? You can do the opposite with three legs from an individual sport and make the fourth on horse racing.
“We have tried these things already and there could be more.”
Horse betting and sports betting combined
Drazin was impressed with racing’s ability to generate handle during the COVID-19 pandemic. It possibly cemented the faith of BetMakers and PointsBet in going forward with fixed odds.
Unlike his partners, however, Drazin can shift modes. One minute, he’s the track CEO, the next a sportsbook promoter.
“Racing made a big move in part recently because there was nothing else for fans to bet on,” he said.
“But now we have a lot of sports coming back. MLB is going to be huge. There is a lot of pent-up demand. People have been sitting around, anxious, and they are going to come back roaring.”
Drazin stands at the intersection of a reality he helped create. Fixed odds are a big step, but only one, in the new racing-betting world.
This innovation exceeds what was envisioned by sports betting pioneers. The app magnified their victory, multifold.