12/04/2012 3:45PM

Exchange wagering draws closer at California track


Live wagering on a betting exchange in California may be coming far sooner than the Thoroughbred industry expected in that state.

On Tuesday, Ed Comins, chief operating officer of Watchandwager.com – which recently reached a deal to lease the small Northern California track Cal Expo – said that the company already has an agreement with the state’s harness horsemen to offer exchange wagering if rules recently adopted by the racing commission pass muster with the state’s Office of Administrative Review. Cal Expo also would need an agreement with an exchange-wagering operator, but the track already has a relationship with Betfair-TVG, which operates the most popular exchange-wagering platform in Europe and which has high hopes for the U.S. market.

Comins outlined the relationships following a presentation at the University of Arizona Global Symposium on Racing and Gaming, where he appeared as a speaker on a panel exploring account-wagering issues. Watchandwager is a small, recently launched account-wagering company with a British pedigree, licensed in North Dakota, headquartered in San Francisco, and operated by European Wagering Services. The company reached a deal to lease Cal Expo from the state earlier this year and had its license approved by state regulators in August. Cal Expo runs a short summer Thoroughbred meet and a November-December Standardbred meet.

Exchange wagering remains a highly controversial subject in the United States despite recent gains by supporters in California, where a law authorizing the practice was passed two years ago. Because exchange wagering allows players to bet on horses to lose, critics remain troubled by the potential for the practice to create questions among the public over efforts put forth by riders and horses. In addition, Thoroughbred horsemen and racetracks have questioned whether the industry would receive an adequate return for its product under Betfair’s existing business model, which is estimated to return the equivalent of 1.5 percent of handle to the racing industry.

For those reasons, Thoroughbred horsemen in California recently agreed to table any approvals with an exchange-wagering operator for at least a year. But it’s possible that Cal Expo could be offering exchange wagering well before 2013 is over.

“We’re shooting for sometime next year, yes,” Comins said after his presentation. Comins said that exchange wagering in California could actually be first launched at Los Alamitos in Southern California, which runs Quarter Horse and Thoroughbred racing year-round.

The law in California requires betting-exchange operators to reach an agreement with the track and the horsemen representing the track’s runners in order to go forward. Comins said that Cal Expo already has a “non-exclusive” agreement with Betfair to become its exchange-wagering partner if the rules are approved by the state’s Office of Administrative Review, which could happen as early as January.

Comins also said that Cal Expo’s harness races “would be a great product to test” exchange wagering because the races generally take approximately two minutes to run. One of the most popular products offered by exchange wagering platforms is so-called “in-play” betting, in which bettors offer new prices on entrants as the race is run.

The California law would limit wagering on exchanges to California residents. Betfair, which purchased TVG in 2009 in order to begin lobbying in U.S. states, has focused its efforts on California because the size of the state’s population gives it the best chance to succeed in a one-state effort. The company hopes to expand its operations from there, including into New Jersey, where lawmakers passed a law legalizing the practice in 2010. Since then, regulators in the state have not aggressively pushed forward with passing rules to implement the practice.

If Betfair and Cal Expo begin to offer exchange wagering next year, the Thoroughbred industry will likely be watching closely for both positive and negative impacts, Lou Raffetto, president of the Thoroughbred Owners of California, said after the panel.

Overseas markets discussed

Earlier on Tuesday morning at the symposium, panelists from five different continents – South America, Europe, Australia, Africa, and North America – discussed the growth and evolution of international simulcasting over the past 10 years. All of the panelists agreed that the most important factors in selling a signal in overseas markets is to customize the product to fit the buyer’s needs, from scheduling races at times when the buyer needs product to presenting the race data in formats that are familiar to the bettors in the country.

“Customers don’t come to you begging, saying, ‘Please can you allow me to show your racing,’ ” said Phil Adams, a manager with Phumelela, a South African company that imports and exports races. “If you want to do it, you have to really want to do it, because it’s a lot of work.”

The panelists also agreed that the size of purse or quality of racing were minor factors when determining when a race would draw handle. Instead, the panelists cited two factors that are entirely familiar to U.S. race managers: field size and isolation from other live races.