Racing Symposium: Fixed-odds wagering dissected

Racing industry conferences have been dominated over the past five years with discussions of fixed-odds betting and sports wagering, and the Global Symposium on Racing was no different. Much of the discussion has centered on the opportunities available to racing in partnering with sports-book operations and abandoning, at least in part, the 100-year-old practice in the U.S. of restricting betting on racing to pari-mutuel wagering, along with the drawbacks and potential pitfalls to those decisions.

Many of the discussions have been simplistic, at best, and have boiled down to the contention that fixed-odds betting will give U.S. horseplayers more options and allow them to avoid late-odds changes that don’t work in their favor, as if fixed-odds betting is frictionless and always works in the horseplayers’ favor (it’s still a no-no to point out that late-odds changes in the pari-mutuel pools work in favor of some bettors).

But a fixed-odds panel on Wednesday got a little bit into the nitty-gritty after Peter Fornatale Jr., the public handicapper most associated with handicapping tournaments, asked the panelists from the audience what they would do in order to keep U.S. bookmakers from cutting off players that win consistently. That triggered a discussion that drew back the curtains a bit on how modern bookmaking actually works.

Dallas Baker, the head of international operations for BetMakers, which has a contract to run the fixed-odds operation at Monmouth Park, acknowledged that cutting off winning bettors has been a “problem” in the United Kingdom and Australia. But he also began talking about a dynamic that many U.S. players, accustomed to the pari-mutuel pools, probably don’t understand.

In markets in which bookmaking exists alongside pari-mutuel wagering, such as the United Kingdom and Australia, there’s a fair amount of laying-off going on between the bookmakers and the pari-mutuel system, as bookmakers attempt to “balance” their books in order to minimize risks and potential losses. There’s also laying-off between bookmakers. It’s a system in which inefficiencies at one bookmaker or in the pari-mutuel system are ironed out as money begins flowing between the various other bookmakers and the pari-mutuel system, what Baker referred to as “circular flow.”

In fact, that system of off-loading risk became even more complex after exchange wagering made its debut in many betting markets just after the turn of the century, as bookmakers could then hang up bets on the exchange to target individual bettors scattered across the country – or another bookmaker with a commercial account seeking to off-load some of its risk.

“The more options a bookmaker has [to off-load bets], the more bets they can take,” Baker said. “Adding a strong exchange helps as well.”

New Jersey did have a betting exchange, but it closed in 2020 after failing to attract enough customers to provide liquidity. An unspoken reason for that lack of liquidity was the lack of bookmakers seeking to off-load bets.

Simon Fraser, a panelist and the senior vice president for the international technology division of 1/ST, then began talking about another factor that has delayed the establishment of fixed-odds wagering in New Jersey, the very common American practice of moving races off the turf to the dirt, hardly a factor in most other European betting markets, in which racing is conducted almost exclusively on turf.

Every U.S. handicapper with any experience knows that the main track-only eligibles are usually cinches to compete well in races that are moved off the turf. After all, that’s why their trainers entered them as main track-only eligible. And that has become a problem as bookmakers eye the U.S. market, because of fears they will get clobbered if main track-only entries and off-the-turf races aren’t handled with special rules.

“One [off-the-turf] race can ruin a whole race meeting worth of races to a bookmaker if you don’t get that info out quickly,” Fraser said.

Fraser said he has been working over the past several years to get the communications and infrastructure system set up to handle those informational needs. After all, if bookmaking is going to work in the U.S., it will need a lot of bookmakers participating, not just to ensure competition in the market, but to provide places to lay off bets.

“For so many years the customer in U.S. racing has been the bettors and the [racetrack] owners,” Fraser said. “Racing customers are now going to move from bettors and owners to bookmakers, and bookmakers are going to have different requirements and demands than is customary in the U.S. racing world. Everyone in this room is going to have to be cognizant of those differences.”