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Betfair launching first U.S. exchange-wagering site May 10
NEW YORK – The launch date for the first exchange-wagering site in the U.S. has been set for May 10, according to the site’s operator, Betfair, but wagering on the site will be restricted in the U.S. to New Jersey residents who are physically in the state when they make their bets, limiting the site’s reach.
Betfair officials announced the launch date during a series of meetings with media outlets in the New York and New Jersey area on Wednesday and Thursday as part of a carefully calibrated marketing campaign focused on the site’s purported benefits to the racing industry and gamblers. While anticipation for the launch of the site has been intense among many hard-core horseplayers, the debut of exchange wagering has also unsettled some industry constituents who have expressed concerns about the potential of the site to amplify perceptions of race fixing and threaten racing’s existing revenue streams.
The launch of the site is the culmination of seven years of business, political, and legal work by Betfair, which pioneered exchange wagering in Britain 15 years ago. In 2009, Betfair, seeking to expand to the U.S., purchased TVG, the horse-race broadcasting and account-wagering company, and it immediately began lobbying state legislatures to endorse exchange wagering. Only two states, California and New Jersey, have done so, and only horsemen in New Jersey have agreed to the company’s terms.
“I think this is a whole new growth area,” said Dennis Drazin, the president of the horsemen-led group that operates Monmouth Park under a lease from the state. “And in this industry, we have to figure out new ways to conduct our business.”
The success of the site faces several major hurdles, including concerns over whether enough bettors will participate on the site to provide adequate liquidity. Further limiting the site’s initial depth and scope, most major racetracks and horsemen’s groups outside of New Jersey have yet to embrace the concept.
Although Monmouth Park is a definite participant, Betfair officials would not provide a comprehensive list of racetracks that are expected to make their signals available for betting on the site at the launch, citing ongoing contractual discussions. However, The Stronach Group has already renegotiated its TVG contracts with Betfair, prohibiting the site from offering exchange wagering on its tracks, which include Santa Anita, Gulfstream, Golden Gate Fields, and Pimlico, the site of the May 21 Preakness Stakes, the second leg of the Triple Crown. A number of other major racetrack operators, including the New York Racing Association and Churchill Downs Inc., have not yet committed to offering their races on the site either.
Kip Levin, the chief executive of Betfair U.S., said many racetracks and horsemen are reluctant to commit to the site until the New Jersey operation generates data indicative of its impact. He predicted that more racing constituencies would sign on after the site has been up and running for several months.
“I think everyone is watching with a wary eye right now,” Levin said. “If the data show that we are adding incremental revenue, I think we’ll bring more tracks on board.”
The New Jersey legislature authorized exchange wagering early in 2011, but it has taken more than five years for all of the pieces allowing for a launch to come together. Under the enabling statute and regulations drawn up by the state racing commission, players will be able to open accounts only if they are New Jersey residents, and bets will be blocked if they are placed on devices outside of New Jersey’s borders, using geolocation technology. However, customers of Betfair’s U.K.-based exchange also will be allowed to participate.
Like its counterparts in other racing jurisdictions worldwide, the U.S. Betfair site will allow customers to place and accept bets on horses with other customers of the site at prices established by the customers. Betting on the site will be limited to win, place, and show wagers, but bets can also be posted and accepted after a race has started, a practice called “in-race betting.” In addition, unlike traditional parimutuel markets, customers will be able to use a variety of tools on the site allowing them to unwind or trade the positions they have established on races.
Supporters of exchange wagering believe the practice will usher in a new era for racing by establishing advanced wagering markets for bettors who are technologically savvy and understand sophisticated concepts of risk. Betfair has launched a website simulator of how the program works for U.S. residents, using real data culled from overseas races, in hopes of familiarizing potential players with the site’s various intricacies.
“The unique thing about [exchange wagering] is that you can be really good at betting markets without having a very strong opinion about a horse,” said Chip Tuttle, a racetrack and public-relations executive who is heading up Betfair’s U.S. rollout.
Betfair will make money off the exchange by charging customers a 12 percent fee on any net gains from wagers made on one race for a single bet type. In other words, if a player makes a variety of win bets on a race totaling $1,000 and cashes one of the bets for $1,100, the commission will be 12 percent of the $100 net gain. If the player breaks even or loses money, no commission is charged.
The Betfair commission structure differs significantly from the revenue structure of the parimutuel model, where approximately 20 percent of each pool is extracted prior to payouts being calculated and distributed, a system designed to provide payments to various racing constituencies. Because Betfair is expected to generate far less per dollar wagered in commissions than the existing parimutuel system, many horsemen’s groups have resisted calls to adopt the practice in the U.S., citing fears of significant revenue losses. Betfair supporters contend that exchange wagering will broaden racing’s fan base and betting handle, creating a net gain for a struggling industry.
Other industry groups have been reluctant to endorse the site because of fears that racing fans and handicappers will increasingly accuse horsemen and jockeys of deliberately keeping horses from winning because one side in every exchange wager is betting on a horse to lose. Betfair has countered that its system is adept at identifying suspicious wagers and that the company has and will continue to cooperate with all investigations of betting patterns on the site.
Earlier this year, the Jockeys’ Guild held a panel at its annual assembly urging jockeys to use caution when riding at tracks that allow exchange wagering on their races, in anticipation of the launch of the site. The recommendations included declining to allow owners or trainers to pick up checks at restaurants or otherwise accepting gifts from horsemen, along with exercising restraint when discussing their horses’ chances. The guild said it still does not have a clear idea of the regulations that would apply to riders in any investigation focusing on bets on the site.
Ive waited 15 years to see the exchange in America! Finally justice for the Horseplayer! Horsemen need to take a step back and watch this fly! Good for everyone and the worries about fixing are the exception to the rule. The Amazing races offered everyday from England and Australia are better racing to bet and surprise the have both Tote, Fixed, and Exchange Wagering.
I applaud the horsemen in New Jersey, led by Dennis Drazin to recognize that innovation is the only way to grow racing, and innovation requires experimentation with new products. Exchange betting creates new products for the racing consumer: 1) the ability to bet against horses, and 2) the ability to bet in-race. As a horseplayer, I find myself finding more horses I would prefer to bet against than ones that I want to bet on. Betting against false favorites is an immense opportunity for the handicapper. Seeing a horse you have backed midrace and being able to double down on that horse, or back off that horse, is another great betting product.
I only hope that the rest of the horseman's group will recognize the benefit of these innovations to the customers of racing, the bettors, and make them available in other states. The potential for negative impact is minimal, given that WPS betting is a minority of overall handle relative to the exotics, and that like any other business, sometimes you need to sunset old product lines to make better, more improved ones. As a CA resident, I am eagerly awaiting exchange wagering to be made available here.
Living (and betting) in jersey, I hope ew does well.
This is going to be special in a few years given the proper content agreements, high enough liquidity levels, and the useful wagering programs/applications that can be built on top of Betfair's API. I'm elated to see this group of racing stakeholders step into the 21st century in terms of technology driven betting options and user experiences that focus on consumer demand. Bravo to the entire team from the early days of 2004 through today's proponents and leaders. I hope that horseplayers nationwide will support this initiative as the US racing industry has very few cards left to play in terms of innovation outside of tournaments.