01/15/2014 3:27PM

New Jersey horsemen, Betfair have tentative deal for exchange wagering

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Monmouth Park in New Jersey has reached a tentative agreement with the British-based company Betfair to offer exchange wagering on its races at the beginning of the track’s meet in May, officials said this week.

If the plan goes through, Monmouth would become the first Thoroughbred track in the United States to allow exchange wagering, a controversial type of betting pioneered by Betfair a decade ago that allows customers to set their own odds on horses and take wagers from other bettors through an online platform. While supporters of the business contend it could draw new money to racing, critics have voiced concerns that exchange wagering could lead to allegations of race fixing in a sport that already has pressing public-perception problems.

Monmouth, which is operated by a company controlled by the state’s horsemen, reached the deal at a time when New Jersey’s racing industry is in a state of transition. As of Jan. 1, only one casino in Atlantic City continues to run a racebook, and both Monmouth and the Meadowlands, a Standardbred track, are seeking legislative approval to operate Instant Racing machines – a type of slot machine that uses the results of horse races that have already been run to generate payoffs for players – to shore up their struggling racing operations.

Exchange wagering was legalized by New Jersey’s legislature in 2011 after aggressive lobbying by Betfair, which owns Television Games Network, a partner with the state’s horsemen on New Jersey’s only licensed account-wagering operation. Regulations devised by the state’s racing commission to govern the practice are currently being reviewed by New Jersey’s attorney general’s office. If approved, the rules will be posted for a 60-day public comment period before facing a final vote by the racing commission.

Dennis Drazin, chairman of the horsemen-owned company that operates Monmouth, said the track plans to offer exchange wagering as soon as the rules have received final approval. Monmouth is scheduled to open in mid-May.

“We think this is going to be a brand-new business for us,” Drazin said.

Exchange wagering made its debut more than a decade ago in Britain, where most wagering is done through bookmakers. Following rapid growth, Betfair expanded to a number of other jurisdictions, and its 2009 purchase of TVG, one of the largest account-wagering operations in the country, was a way to plant stakes in the United States.

Because exchange wagering allows players to bet on a horse to lose, critics have said that it provides incentives for trainers or jockeys to hold horses in races. Betfair says that it closely monitors its service and alerts regulatory authorities to suspicious bets.

In addition to public-perception concerns, U.S. racing constituents have been reluctant to sign agreements with Betfair because the operation’s business model returns far less of a bet to tracks and horsemen than the existing parimutuel system. By many estimates, Betfair returns the equivalent of less than 1 percent of each wager to the racing industry in jurisdictions where it operates, compared to approximately 20 percent through the U.S. parimutuel pools.

Drazin would not provide details of Monmouth’s agreement with Betfair, but he said that the pact calls for the track and its horsemen to receive a percentage higher than that in Britain.

Betfair-TVG did not respond to a telephone call seeking comment.

One of the Betfair’s novel features is providing players with the ability to post prices on horses while a race is being run. The service does not allow players to post odds on exotic bets like exactas and trifectas, and so far it is largely limited to win bets.

Drazin said that he does not have concerns that exchange wagering will significantly cannibalize existing parimutuel handle on the track’s races, in large part because betting is limited to straight wagers. Only New Jersey residents will be allowed to use the service.

Wagering through TVG’s New Jersey account-wagering portal skyrocketed last year, up 58 percent, according to estimates, Drazin said. TVG took over the operation near the beginning of 2013.

Exchange wagering could potentially provide new revenues for New Jersey’s racing industry to make up for the loss of revenue from Atlantic City’s racebooks. On Jan. 1, Harrah’s Entertainment, the owner of three casinos on the boardwalk, closed its racing operations, leaving only a racebook at Borgata for casino players to bet horses.

Harrah’s officials have not responded to requests for comment about the closures.

Drazin said that betting at racebooks in Atlantic City provided approximately $1 million in revenue for the New Jersey racing industry in 2013, an amount that was divvied up between the state’s four tracks and its Thoroughbred and Standardbred horsemen. Drazin said the horsemen plan to approach a wealthy horse owner and real estate developer, Morris Bailey – who backed out of an agreement to lease Monmouth from the state late in 2011 – about a plan to possibly open a standalone OTB facility on the boardwalk.

Horsemen also are planning to push the legislature to approve Instant Racing machines in 2014. A bill allowing the operation of the devices moved out of a committee late in 2013, but was not taken up by the legislature before the session ended. The legislature is scheduled to start its 2014 session next week.