Court Protects Licensed Wagering, More Battles Expected

In the ever-changing world of illegal or "gray area" wagering (those descriptions often depend on who you ask), track owner 1/ST Racing recently secured an important court decision in the battle to protect racing's licensed-wagering revenue stream. While the decision does not figure to provide an immediate return in terms of money, it should prove useful as the sport continues to try to protect its licensed wagering outlets against offshore sites and emerging bet-taking sites of concern—specifically prediction markets, which we'll address in a bit. As for the recent industry favorable court decision, on Nov. 13 Judge Fred W. Slaughter of the United States District Court for the Central District of California ruled that offshore entity BUSR (sometimes referred to as Bet U.S. Racing) pay compensatory damages of $1.79 million to Pacific Racing Association, owner of the former Golden Gate Fields; and $1.85 million to Los Angeles Turf Club, owner of Santa Anita Park. Each of those owners is, or was, controlled by 1/ST Racing (The Stronach Group). While $3.64 million could do a lot of good for California racing right now, no one is really expecting that check anytime soon. The ruling was a default judgement because representatives of BUSR never bothered to show up for the court proceedings that included an Oct. 23 hearing. As described in court documents, BUSR is an unknown entity of unknown form that owns, controls, and operates the website busr.ag. At that site, the company describes itself as an "international gaming company with offices in the United Kingdom and the Americas." The racing industry refers to such outlets as offshore sites. These sites do not return any money to the industry, which is a problem because this revenue is needed to fund purses and tracks. Outlets licensed to offer wagering on races in the U.S., typically pari-mutuel wagering, agree to pay back a percentage of that handle—takeout—that is used to fund tracks and purses. Because this is an important economic driver for racing, outlets that do not pay such fees are highly detrimental to the industry. In terms of attracting customers, sites that do not return money to the industry have a competitive advantage. The money they're not returning to the industry can go toward higher payouts to players or rebates on their handle. At this year's International Federation of Horseracing Authorities Conference, experts on illegal betting said they continue to see more growth on the unlicensed side than in legal (licensed) wagering. Martin Purbrick, who chairs the IFHA council on illegal betting, outlined several reasons why players move to these sites. He said reasons include the aforementioned better pricing, the ability to use cryptocurrencies in making wagers, and the opportunity to skirt exclusions. The latter would include players who have been banned from tracks or players who have self-excluded from licensed outlets in an effort to halt poor wagering habits, but now move to these sites that have no such oversight and allow them to play. Tom Chignell, consultant of integrity projects for the Hong Kong Jockey Club, said a growing concern for the sport is prediction market sites. These sites operate under the U.S. Commodity Futures Trading Commission and, like betting exchange sites, allow players to take odds or give them—the latter playing the role of the "house." In looking at just one of these sites over a 36-hour period in June, Chignell said it took 235 wagers per minute and saw $126 million wagered. The top five items of interest were U.S. and world events—think, Will the Federal Reserve raise or lower rates? or, How many times will Elon Musk post on social media in a week?—but three of the top 10 pools were sports wagers such as who would finish as NBA champion. Chignell said one prediction market site saw $1.2 million wagered on this year's Triple Crown races. "It could be quite concerning for horse racing going forward," Chignell said. Currently, some of the major prediction market players include Kalshi and Polymarket, but the owners of well-recognized major sports betting platforms such as FanDuel and DraftKings also plan to enter the market. On Nov. 19, CNBC and other news outlets reported that FanDuel and DraftKings both plan to quit the American Gaming Association, which represents casinos, gaming manufacturers, and sportsbooks, because of that organization's opposition to prediction markets that offer sports betting. A release earlier this month from FanDuel owner Flutter said it plans to enter prediction markets in the U.S. through its "FanDuel Predicts" app and will offer sports wagering on its platforms in states that do not otherwise allow sports wagering. It said if a state adds legal sports wagering, it will drop that state from the sports prediction markets app. Both FanDuel and DraftKings offer pari-mutuel wagering platforms in the U.S. In its release, FanDuel did not cite horse racing as an example of one of the sports it would offer in its prediction markets. Beyond the potential to reduce revenue for horse racing, Chignell believes prediction market wagering creates significant new integrity risks. While the FanDuel release said it will require the same type of sign-up standards that it mandates for its sports betting sites, Chignell said other prediction market platforms come up short in this regard. "Some of these prediction markets currently have insufficient (integrity) processes. You can actually sign up with one of them without providing your name; just an email address," Chignell said. "It's as easy as an email address, a deposit in a cryptocurrency, and you start betting." Because these sites allow players to lay odds—in sports this essentially would be betting on a loss—he said the lack of oversight is especially concerning. "There's a very high risk here," Chignell said. "Do these operators really understand our sport or other sports? Do they know who the licensed persons are? Do they know the betting rules? This all needs to be properly monitored and have correct reporting structures in place for sport and for horse racing." All of this brings us back to that recent court decision. It could prove useful as racing attempts to use protections provided by the Interstate Horseracing Act to ensure the sport's revenue stream is protected and that the integrity of its competition is upheld in an ever-changing scene in terms of mobile and Internet wagering.