Concerns over integrity, viability not unique to horse racing

Struggling Horse Racing Industry Offers Lessons For US Sports Betting

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The history of horse racing in the US predates the Revolutionary War, in fact stretching back to 1665. Traditions aside, however, the sport of kings is struggling across most of the country in the modern era.

Not only has fan support for horse racing dwindled, but the industry also faces unprecedented scrutiny following high-profile incidents involving the deaths of horses — most notably at the Santa Anita racetrack in California.

In August 2019, the New York Times reported that horse racing’s troubles extend even further to a shortage of horses.

Meeting of the minds in South Africa

The Thoroughbred Idea Foundation (TIF) recently released a blog post which hangs another question mark over the troubled industry.

The post emerged from the Asian Racing Conference, which concluded last week in Cape Town, South Africa. The panel that sparked much discussion was titled “Protecting Racing’s Integrity,” a topic that incorporated a variety of integrity matters relevant to racing.

Among the critiques that emerged was about the ability to detect doping under current testing structures. In a passing remark, however, it was also suggested that there might be a move to a more algorithmic approach that relies on outliers from a horse’s historical patterns to detect cheating.

This, of course, provides the basis for integrity-monitoring services that companies have hawked to American sports leagues in recent years.

Here’s the issue with integrity

An important caveat emerged in the discussion, however, one that has been overlooked in the American sports betting context. When it comes to monitoring, it is imperative to create a separation between regulators and operators.

Here in the US, pro sports leagues barnstormed the country, asserting that they should have access to betting data to monitor integrity. Such provisions have even made their way into draft regulations in some states (like Tennessee).

Indeed, the blog post contained the following about one attendee’s reaction to North America’s racing integrity mechanisms:

“It was surprising to the panelists approached after the session that racing operators in North America effectively owned the betting integrity functions of the sport.”

The post followed a January white paper from the TIF highlighting three critical issues facing horse racing.

Political appointments galore

The first issue the paper outlines as a threat to the viability of racing is the political appointments made to state racing commissions. A number of these appointees seem to lack a necessary understanding of the greater needs of the sport.

The crux of the organization’s argument is there is too much variation in rules between states and that state racing commissions often act as rubber stamps.

The report noted that between January 2017 and November 2019, for instance, every motion before the Ohio Racing Commission passed without a single dissenting vote.

Business structures

Another factor to consider is the shared relationship between horse racing and other gaming entities.

In many states, horse racing relies heavily on other gaming activities to subsidize prize money. In Pennsylvania, for instance, 88% of funds for racing prizes came from slots. West Virginia awards more than $40 in subsidies for every $1 in horse racing revenue it collects.

The relationship between many gaming operators and racetracks is threatening the industry, as a growing number of states move toward decoupling. This trend has been going on for some time across racing, and the nature of these deals is significant.

Harrah’s, for instance, struck a deal with the state of Iowa nearly 10 years ago to decouple casino gaming from dog racing in exchange for an annual payment of $7 million.

Racing can’t get on track

The TIF paper notes that while there are pockets of horse racing success (like Kentucky), there has been a lack of success in forming a national voice and responding to criticism.

It cites a failure to stop the bleeding of a decline of more than 50% in wagering since 2003.

Lessons learned from horse racing

The TIF paper recommends that the industry reorganize itself into three groups, respectively overseeing:

  • Integrity, safety, and welfare
  • Marketing and public relations
  • Wagering and scheduling

The group also suggests concentrating ownership in the hands of those who want to see the sport succeed as opposed to casino giants that may have taken an interest in order to gain market access. Finally the group recommends pursuing market expansion.

One of the key takeaways from the TIF paper is that there are lessons to be learned from other regulated industries.

In the sports betting universe, it is intriguing to watch states try to reinvent the regulatory wheel despite having models of success to follow — both domestically and abroad. And the learning curve will only steepen as the industry matures.

It would be foolish to ignore these lessons from the state of horse racing, especially as policymakers move to consolidate gaming operations and oversight in search of economic efficiencies.

Sports betting stakeholders would do well to be proactive so that they’re not the subject of a similar white paper 10 or 20 years down the road.

- John Holden J.D. / Ph.D. is an academic. His research focuses on policy issues surrounding sports corruption.
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