08/02/2004 11:00PM

Officials: Layoff bets driving rebate growth


SARATOGA SPRINGS, N.Y. - Racing officials are becoming increasingly concerned that rebate shops are accepting layoff bets from unlicensed offshore bookmakers, an official with the Thoroughbred Racing Associations said Tuesday at a racing law conference in Saratoga Springs.

Chris Scherf, the executive vice president of the TRA, a racetrack trade group, said at the conference that a logical explanation for the exponential recent growth at rebate shops could be explained by the possibility of layoff bets from bookmakers. Rebate shops, which award their high-rolling customers with cash based on a percentage of their handle, took in an estimated $1.2 billion in bets last year, or 8 percent of the national handle, up from nearly nothing in the mid-1990's.

Offshore bookmakers typically offer betting on Thoroughbred races only if the books can limit the risk of losing a large wager. The most common ways to limit the risk is to place maximums on the size of accepted bets and to cap payoffs, practices that are suddenly drying up, Scherf said.

"You have to worry when you go on to the Internet and see a bookmaker offering no-limit bets and no maximums on payoffs, especially if they weren't offering the same thing last year," Scherf said. "And when we ask the rebate shops who their customers are, they tell us it's none of our business."

The possibility that handle from rebate shops is being driven by layoff bets - which could be construed as illegal, Scherf said - is adding another wrinkle to the controversial issue of rebates. Under a scheme described by Scherf, the bookmakers can lock in profits by laying off their booked bets at rebate shops, ultimately allowing the books to make anywhere from 3 to 6 percent on their money without risking a dollar, Scherf said.

"It's pretty well-known that it's happening," said Scherf, in separate comments after his presentation at the conference, sponsored by the Government Law Center of the Albany Law School.

The impact of rebate shops is currently being studied by a task force set up by the National Thoroughbred Racing Association. High-rolling gamblers say that rebates have had a positive impact on the racing industry by introducing new bettors to the game and providing incentives for big bettors to increase their handle. Still, rebate shops have been criticized by others in the racing industry for siphoning large customers away from racetracks and upsetting the balance in parimutuel pools, where the players who receive rebates play against a lower takeout, or price, than other bettors.

One member of the task force, Maury Woolf, a professional gambler and economist who receives rebates, defended the practice at the law conference, saying that the rebates have created a new class of horseplayers who are betting hundreds of millions of dollars a year. While acknowledging that the practice created takeout inequities, Woolf still said that the racing industry would be unwise to turn its back on the incentives and risk alienating the high-rollers.

"Do winners raise the takeout on losers?" Woolf asked. "Yes. By definition, in a closed system, that is always the case. But the question should be, 'Who do you get the most bang for your buck from?' I think it's the winners."

Also at the conference, New York legislative officials said it was extremely unlikely that legislators would craft a bill this year to address a recent state Supreme Court ruling that held that horsemen could not benefit from slot machine revenues at racetracks.

Both Joe McCloskey, a Senate staff member, and Steve Bochnak, who works for the Assembly, said that legislators would wait until appeals are exhausted in the case before addressing the subsidy through legislation.

Racetracks are not expected to be affected by the ruling until the appeals are settled, which is not likely until late next year, attorneys for both sides of the case said during a separate panel at the conference.