12/08/2005 1:00AM

New company will monitor bet-processing network

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TUCSON, Ariz. - The Association of Racing Commissioners International will form a not-for-profit company to monitor the country's electronic bet-processing network for fraud, officials of the association said on Wednesday.

The company, to be called RCI Integrity Services, was unanimously approved by the RCI board Wednesday in Tucson, the site of the University of Arizona Symposium on Racing and Gaming. The company is scheduled to begin operation in the second quarter of 2006.

The issue of monitoring the betting network arose more than three years ago after a former employee of Autotote - the bet-processing company now known as Scientific Games - rigged a pick six ticket on the Breeders' Cup. Despite urgent calls for a nationwide monitoring system in the wake of that scandal and efforts by the National Thoroughbred Racing Association to create a national security office, there has been little progress in the intervening three years.

"Someone has to jump-start this process," said Ed Martin, the president of RCI, said during a panel discussion at the symposium on Thursday, referring to betting network security issues. "The technology is there. The expertise is there."

Martin said that RCI has partnered with ESI Integrity Inc., a company that already provides monitoring systems for gambling companies in the U.S. and Canada. In the parimutuel world, ESI monitors systems in the Canadian bet-processing network, sites operated by Scientific Games, network hubs in Florida, and bets processed by the New York Racing Association. When RCI's company is officially launched, ESI's current North American parimutuel clients will be shifted to RCI Integrity Services, according to Martin and the president of ESI, Alan Ahacs.

Youbet.com, the online horse racing wagering and broadcast company, has agreed to use the RCI system to monitor transactions through its wagering platform, according to Chuck Champion, Youbet's chief executive. Last week, Youbet reached an agreement to purchase United Tote, the bet-processing company that has about a 35 percent market share in the U.S.

Scientific Games is the largest bet-processing company with about 50 percent of the domestic market.

The RCI's monitoring system will create a record of every wager made through companies affiliated with the program. Software on the system will use complex algorithms designed to detect suspicious wagering activity. The creation of such a system was a recommendation of the 2003 Guiliani Report, which was commissioned by the NTRA after the pick-six scandal to make recommendations on how to improve security.

The NTRA is currently examining business plans to start a security office, and NTRA officials have said that a final plan will be presented to the NTRA board in January. Separately, the Thoroughbred Racing Associations, the racetrack trade group, is also exploring a project to provide better monitoring of the bet-processing network.

It is uncertain how those efforts will affect the RCI plan. Martin said he had approached both the NTRA and the TRA over the last several months to explore partnerships but encountered only lukewarm responses.

RCI is an umbrella group for racing commissioners in the U.S. and Canada. Earlier this week, the RCI reached an agreement to merge with a separate umbrella group, the North American Pari-Mutuel Regulators Association.

International simulcasting talks

In a separate panel on Thursday morning, the last day of the Symposium, racing officials from several countries outlined the promise of international simulcasting but said that the full potential of international markets would be difficult to realize without significant changes in racing law and current practices.

Racing officials in the U.S. and Canada have been attempting to reach international markets for several years, but, as the panelists noted, differences in bet types, exchange rates, and laws governing the placing of wagers have created significant barriers.

John Stuart, the director of simulcasting for Phumelala Ltd., a South African-based company, gave examples of how fluctuating exchange rates can complicate simulcasting between two countries, especially when one country's currency is weak in comparison to the other. In some situations, rounding to an exchange rate can force the racing association of one country to lose money on bets.

In the United Kingdom, U.S. horse racing has made some strides in recent years by partnering with such companies as Attheraces, which has purchased the rights to some American racing and broadcasts races during prime time. Currently, about $2 million a week is bet in the United Kingdom on American races through Attheraces, according to Phill Adams, the head of international development for the company.

In Canada, wagers on U.S. races by tracks that have allowed Canada to commingle bets into U.S. pools has increased sharply since regulations were relaxed earlier this year, according to Sean Pinsonneault, the vice president of wagering operations for Woodbine Entertainment Group. According to Pinsonneault, monthly simulcast handle on U.S. races that have allowed commingling has grown 42 percent since the practice was allowed, but wagering on tracks that have retained separate pools has fallen significantly.