Class-action lawsuit alleges conspiracy between racing companies, CAWs

A law firm has filed a class-action lawsuit in a federal district court alleging that companies in racing such as Churchill Downs and the New York Racing Association have engaged in a criminal scheme to conspire with the operators of computer-assisted wagering teams to defraud other bettors.

The lawsuit, which was filed in the U.S. District Court of the Eastern District Court of New York on Friday, lists a single plaintiff, Ryan Dickey, who is described as a current resident of Colorado who wagered “about $100 per weeks [sic] on racing” at a time when he was living in Kentucky.

The lawsuit alleges that computer-assisted wagering, which has comprised a significant portion of betting on U.S. horse races for two decades, “has resulted in the transfer of billions to a small group of bettors and the operators of racetracks and betting platforms.” The defendants in the case include the racing companies Churchill, NYRA, and the Stronach Group, along with various bet-processing entities associated with the groups.

Computer-assisted wagering is a significant source of controversy in the racing industry due to the advantages enjoyed by the well-capitalized teams that use the technology, such as the ability to send enormous numbers of bets into the pools just prior to the pools closing. The teams also receive volume-based rebates that often significantly exceed rebates available to other players.

While the participation of the CAW teams is controversial, the suit is the first to allege that the activities of the CAW companies represent a conspiracy abetted by racing companies, decades after the practice first emerged in racing.

The suit says the plaintiffs have conspired “to divert money from the betting pools to the [CAWs] [and] to the defendants and away from the nonprivileged or average bettor.” It claims that “as result of this scheme, the betting pools are not being operated lawfully as pari-mutuel wagering and have become illegal gambling operations.”

NYRA representatives declined to comment on the suit Friday night.

Representatives of Churchill Downs and 1/ST Gaming, which is the corporate entity of The Stronach Group, did not immediately respond to requests for comment.

Class-action lawsuits are often filed in order to draw more plaintiffs to the action, regardless of whether a legitimate legal principle is at stake. The access and volume-based rebates given to the CAWs have never been questioned legally in the past, and the advantages conferred on the teams are common practices among a plethora of legal businesses, such as high-frequency trading firms and loyalty programs.

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