Five crucial issues to keep an eye on in 2019

They’re off at Colonial Downs - or at least they will be in August (for the first time since 2013) for what promises to be an exciting addition to the U.S. racing program. Photo:

The New Year dawns with a host of initiatives underway full of important opportunities for the future of the Thoroughbred racing industry. Here are five that I will be focusing on particularly.

1. Progress of the Thoroughbred Horseracing Integrity Act

The movement of this hugely important legislation through the two houses of Congress represents the most significant opportunity for the future of Thoroughbred racing and breeding in the U.S. in 2019. I encourage everyone to support it.

It would be helpful to review some history at this point. In 2014, the Jockey Club commissioned McKinsey and Company to conduct an analysis of individual state medication, testing, research, and enforcement programs for Thoroughbred racing as compared to other sports and other international racing jurisdictions. Dan Singer, a senior Partner at McKinsey, presented a report - Raising the Standard of Testing and Enforcement - at the Jockey Club Roundtable in August that year. Click here for my summary of the findings of Singer’s report as well as a complete copy of his presentation.

The following year, Congressmen Andy Barr from Kentucky and Paul Tomko of New York introduced a bill referred to as the Thoroughbred Horseracing Integrity Act. In August 2017, much of the agenda of the Jockey Club Roundtable was devoted to the progress of this legislation and the significant opportunity it represented for the future of the industry. Speakers on this important subject included James Gagliano, Jockey Club President and COO, Barbara Banke, owner of Stonestreet Farm, and Shawn Smeallie, the Executive Director of the Coalition for Horse Racing Integrity and an experienced lobbyist in Washington DC. Click here for excerpts from their remarks.

Certainly in the U.S., nothing is more important for the future of racing than creating a robust, technologically advanced regulatory system that will protect the integrity of the sport and eliminate the cheating that occurs much too frequently in Thoroughbred races across the country.

2. Is racing in danger of being ‘left at the gate’ on sports betting?

Legal sports betting in the United States was just shy of $1 billion dollars for November. As expected, Nevada leads all states with an all-time single month wagering record of $581 million.

New Jersey, responsible for the Supreme Court case that has cleared the way for sports betting in all states that choose to legalize it, was well prepared for the ruling. In November, the eight bricks-and-mortar locations (and their related apps) handled $330 million in bets, which I would suggest was very strong for a business that did not exist seven months ago. The remaining four states that were up and operating, Mississippi, Delaware, West Virginia, and Pennsylvania, totaled $83 million.

However, the results in New Jersey reflected that sports betting is not as financially predictable as racing’s pari-mutuel wagering. Sports betting requires experience and expertise in risk management while, in pari-mutuel wagering, the operator/racetrack simply takes a 20 percent slice off  the total wagering pool with no risk whatsoever.

In October, New Jersey sportsbooks handled $260 million in wagers, which was a 41 percent increase over the $148 million on September. However, net revenue declined by 50 percent in October from $23.4 million to $11.7 million. This was explained largely by the payouts on the Red Sox World Series victory and some larger than anticipated NFL losses.

In the major Thoroughbred racing states such as New York, California, Florida and Maryland, there is a strong risk of being ‘left at the gate’ due to political issues.

The Supreme Court ruling in May struck down laws that prohibited states from sports betting, but it is up to the states to legally approve sports betting in their jurisdictions. In most instances, the state legislatures have to approve a bill that will propose legalizing sports betting and then it has to go to a statewide referendum.

As an example, the state legislatures in New York, Maryland, Florida and California did not pass such legislation in 2018 and it would appear that the earliest any of these four states could possibly have sports betting would be 2020 or later. Also, in New York and California there are already battles looming over which businesses could get licensed for sports betting.

In California, the Native American tribes have enormous legislative connections with the card clubs and poker rooms ahead of the racetracks and off-track betting facilities.

In New York it is even more complex. The four newest non-Native American casinos in the state have sports betting language in their legislation but it requires activation by the state regulators. Then there are a number of Native American casinos, racinos at the harness tracks, the five regional off-track betting companies, and the two Thoroughbred organizations, Finger Lakes and the New York Racing Association. Andrew Cuomo, the Democratic governor and the Democrat-controlled assembly publicly made some negative comments on prospect of sports betting in New York.

If any other U.S. Thoroughbred racing companies have developed sports betting strategies they have not been shared with the racing press and the public. Anyone surprised?

3. Colonial Downs will reopen in 2019 - in a big way!

We are accustomed to reading about racetracks closing, but it is very exciting news to learn that Colonial Downs in New Kent, Virginia, will reopen for live racing on August 8, 2019, with 15 live Thoroughbred dates, ending on September 7.

The last live Thoroughbred race there was in 2013, and the track subsequently closed when the owner, Jacobs Entertainment, could not reach a purse agreement with the local HBPA (Horsemen’s Benevolent and Protective Association).

Later, the Virginia Equine Alliance, representing the interests of owners and breeders, conducted charity race meets and operated the off-track betting retail operations. In May 2018, Revolutionary Racing, led by chairman Larry Lucas, purchased Colonial Downs, which included the off-track betting operations, and the right to operate historical horse racing machines (HHR) at Colonial Downs and the OTBs.

Since the acquisition and the formation of the Colonial Downs Group, Lucas and his team have worked closely with the Virginia Equine Alliance, its president, Debbie Easter, and the Virginia HBPA to negotiate a welcome, long-term purse arrangement.

The current plan calls for five OTB outlets to open in 2019, according to Mark Hubbard, a spokesman for the Colonial Group. All the OTBs and the HHR business at Colonial Downs will operate under the brand name ‘Rosie’s’. The current plan calls for Rosie’s at Colonial Downs to open with 600 HHR units in mid-April. On track, the first 15-day meet will feature prominent use of the turf course, which was highly acclaimed by horsemen when the track opened for the first time on September 1, 1997.

“This is an exciting step for everyone impassioned by the rebirth of live racing and for our team delivering on our promise to revitalize horse racing in the Commonwealth,” said Colonial Downs Group senior-vice-president and general manager John Marshall.

The new Colonial Downs will be a brilliant addition to racing in the Mid-Atlantic region.

4. The Britbet conundrum

On December 5, 2017, I wrote this article on the new initiative by a consortium of then 54 of the 58 British racecourses to introduce a new pool betting service both on-track and online to compete with the BetFred-owned Tote, whose exclusive license for tote (pool wagering) was due to expire on July 12,  2018

You will see I feel strongly that this was/is a big opportunity for the racecourses, the trainers and owners to take on the bookmakers with new technology, online account wagering, exotic wagers that the bookmakers could not compete with and a much-more-attractive takeout (deduction rate) for the punters.

The racecourse initiative, Britbet, had put together an excellent management team, with Nigel Roddis as managing director, and an impressive board that included the highly regarded Simon Bazalgette, the Jockey Club group chief executive.

From the outset of Fred Done’s purchase of the Tote, there was speculation that Done had much more interest in the Tote’s bookmaker shops than he did in the Tote pool business. That may explain why, when Done took over the Tote in 2012, the takeout on win bets was 13.5 percent, which he shortly raised to 16.5 percent and, in 2017, further increased to 19.25 percent. This helps explain why the Tote market share of UK betting dropped from four percent to three percent under his ownership.

However, Done was not going to sit still and let his exclusive license simply expire.

In late May 2018, Betfred announced they had sold a 25 percent interest in the Tote with an option to purchase the remaining 75 percent over a 3-5 year period. The acquiring entity of the Tote minority share was the Alizeti Capital Group, headed by Alex Frost, a former Merrill Lynch trader and a horse owner and breeder. Frost’s group also includes Eamon Wilmott, chairman of Total Performance Data.

Presumably, since Betfred’s exclusive license was to end in less than two months, negotiations began between Betfred, their minority partner, and Britbet, the consortium now comprised of 55 UK racecourses. A deal was finally agreed among the three parties in late October 2018. According to press materials, Britbet will manage all operations across their 55 partner racecourses, while the Tote consortium will continue to develop the Tote online and in betting shops, as well as being responsible for the digital offering and marketing of the Tote.

There appears to me to be a few unsettling issues that are outstanding and perhaps precarious.

First, however you look at it, Betfred would appear to maintain the controlling interest in this combined entity despite a statement that a “steering group with representatives of the three parties will oversee operations”.

Second, while Alizeti has stated that its backers are prominent participants in the Thoroughbred industry, Frost and Wilmott have firmly stated that they will not be disclosing who their other investors are at this time. It would seem to me that the racecourses deserve to know who their partners might be in the long term as the Tote represents the racecourses future’ financial stability.

Stay tuned. This may get more complicated before it becomes more transparent. In the meantime, it would appear that the technology and marketing initiatives that were part of the early Britbet plan are on hold.

5. Our responsibility for aftercare

The Thoroughbred Aftercare Alliance (TAA) is one of the most strategically important initiatives of the last decade in the industry in America. Ten years ago, Thoroughbred aftercare was often referred to as horse ‘retirement’ and run on a regional basis by well-intentioned organizations that were often under-capitalized and had little funding and engagement from major racetracks, owners and breeders. That has all changed.

In 2011, at Belmont Park, Jack Wolf, co-founder of Starlight Stable (and the first President of the TAA) along with then NYTHA President Rick Violette, owner Mike Repole and other industry leaders, convened a series of meetings to gather significant financial and membership support for this new aftercare initiative.

The TAA was then formed. This group identified Stacie Clark as the top individual to run the organization as Operations Consultant, although a more appropriate title in my view would be the ‘manager and soul’ of the organization.

In the six short years since the TAA launched, a tremendous amount has been accomplished.

First, have a look at the website and review the board members. They represent some of the very best people and organizations in the industry. Most importantly, in late November, the TAA announced that $3,043,000 was being awarded as grants to 70 Thoroughbred organizations that currently hold TAA accreditation.

I am including this item in this article on things to watch in 2019 because in the words of Jack Wolf:

“It is our responsibility as owners, tracks, breeders, trainers, jockeys, bloodstock agents and anyone who has a stake in the game to take responsibility for the aftercare of these great animals who are the keystone of our sport.”

While the TAA is off to a brilliant start, the fundraising and industry involvement needs to grow.

These initiatives represent different opportunities for the Thoroughbred industry. I will be updating and commenting on each of them as 2019 progresses.

View Comments
blog comments powered by Disqus

More View From The Rail Articles

By the same author