Time for show bettors to get paid what they deserve

Barry Meadow, a prominent handicapping author and horseplayer, is a contrarian whose favorite bet is the pick six but who also makes the occasional show bet expecting only a $2.10 for $2 payoff. As a pioneering proponent of value betting, he believes there are situations when a horse’s (or a coupled entry’s) true chances of running third or better are so high that a mere 5 percent profit is actually a bargain. He recently made two such winning online wagers on coupled entries, betting $2,600 for a $130 profit at Golden Gate and $2,400 for a $120 profit at Santa Anita.

“These are legal bets,” Meadow said. “A similar bet ontrack would have gotten me a thank you.“

Instead, Meadow got a letter from a customer-service manager at Xpressbet, the ADW through which he placed the two show wagers:

“Dear Mr. Meadow, Recently your account has fallen under internal review for unusual wagering activity . . . . Because certain regulations require minimum payouts on winning bets, this requires the wagering host (in this case, XpressBet) to contribute additional funds to compensate for the ‘negative breakage’ created. Due to these actions, this letter is serving as a warning that if such irregular and improper wagering activity continues, your account will be subject to closure as allowed per the Terms and Conditions you agreed to when you opened your account . . . ”

The letter encouraged him to contact customer service. Instead, he brought the matter to the attention of the California Horse Racing Board, which has launched an inquiry into whether threatening to close an account for making legal wagers conflicts with its licensing requirements.

Almost all bet-takers reserve the right to close accounts at their sole discretion, so XpressBet did not do anything its customers have not technically agreed to, but the situation is complicated by MI Development’s common ownership of XpressBet, Santa Anita, and Golden Gate. The tracks could not refuse an in-person show bet if they offered one, so it is unclear whether their offtrack-betting arm can do so.

“If an ADW is afraid of losing money on a minus pool, they can request the track to remove that pool from the betting menu,” Meadow said. “Tracks have done this many times in the past. But once a track decides it is going to allow wagering on a pool, no ADW or simulcast center or OTB or Joe’s Bar and Grill should be allowed to block any wagering. . . . An ADW is a state-licensed entity which is supposed to take all bets on a wagering menu.”

Occasionally, horses are so heavily bet that even at $2.10 there is not enough money from losing wagers to pay the 5 percent winners and to cover statutory commissions. This creates a “minus pool,” where someone has to make up the difference. This used to be the sole responsibility of the track, but the growth of simulcasting led to a shift of that responsibility to whoever accepts the bet.

The $2.10 minimum payoff is a longstanding curiosity of the American parimutuel system. It was not instituted as a consumer protection, but as a mechanism for tracks to pay off at a lower price point than the standard method of rounding down to the nearest 20-cent increment – to pay off at $2.10 rather than $2.20 on heavily-bet horses. (Arkansas became the last major racing state to go down from $2.20 to $2.10 last year.)

In the long run, show betting remains profitable for the tracks because the rounding-down outweighs this sole instance of rounding up – the occasional $2.10 payoff on a horse who should only pay $2.06 is more than made up for by all the ones who should pay $2.39 but are rounded down to $2.30 in New York and $2.20 elsewhere.

The argument against providing true payouts like $2.06 or $2.39 has always centered on the flimsy issue of forcing mutuel clerks to deal with pennies. The real issue is that all those confiscated pennies add up to several million dollars a year in each of the largest racing jurisdictions, a sort of slush fund that is usually split between the track and the state and that neither is eager to give up.

In an age where most of the handle is bet offtrack and increasingly through wagering accounts where no one is counting out small change, it is time to re-examine these policies. A horseplayer whose $2.39 payoff is being knocked down to $2.20 is having a 47 percent rounding tax applied to his rightful winnings – on top of a 15-to-20 percent takeout.

As long as tracks continue to offer show betting, horseplayers should not be threatened with account closure for making perfectly legal bets at state-mandated payoffs. Wagering companies have every right to lobby a for a change in that minimum, but any change should be balanced by truer payouts across the board.