A pair of state Assembly committees on Tuesday each unanimously approved a bill to permit fixed-odds wagering on horse races in New Jersey, with a vote of the full Assembly scheduled for Thursday.
But what lies beneath is a long-simmering tension between the state’s thoroughbred and standardbred industries that has yet to be resolved — and that still could imperil the bill.
When Ralph Caputo, the chairman of the Assembly Tourism, Gaming, and the Arts committee, described the disconnect as a “family feud,” he most certainly was not talking about a popular game show.
Leading industry officials — many of whom have decades of experience in horse racing and involvement in previous disputes — spent a total of more than two hours in the committees with still more airing of grievances.
That’s in spite of the fact that there was a unanimous consensus “conceptually” — as several of those who testified described it — in favor of an addition to traditional parimutuel wagering that has proven to be extremely popular in Australia and in the United Kingdom.
Sports betting may make fixed odds a necessity
Monmouth Park operator Dennis Drazin, who spent six years in federal court, along with state officials, before the U.S. Supreme Court ruled in 2018 in favor of his effort to end Nevada’s virtual monopoly on sports betting, is spearheading this latest proposed innovation as well.
Drazin said that the widespread popularity of sports betting — some months in the past year have seen nearly $1 billion wagered in the state — accelerates the need to bring fixed-odds wagering to horse racing.
“A horse can be in the gate and he’s [listed with odds] at 2/1,” Drazin said. “Then by the time the horse is one furlong down the track, he’s 2/5, and the public says, ‘How are people betting after the fact?’ And they’re not.”
But a flurry of sometimes massive bets just before the start of a race — leading to a late change in the odds — frustrates many casual bettors, Drazin said. With fixed odds, a bettor who chooses a horse at 10/1 odds 10 minutes before a race knows that they will receive 10 times their money should the horse pull off the upset.
That mirrors the expectations of sports bettors, who already lock in their odds at the moment they make a bet.
Meanwhile, ambiguity among state officials about how to characterize a horse racing bet — is it the same as a sports bet, or isn’t it? — enabled DraftKings to offer fixed-odds wagering as part of its sports betting menu on Monmouth Park’s Haskell Invitational in 2018 and 2019, Drazin said.
The issue there is that the tracks received no compensation for that betting. And unless this bill passes and then becomes law, that same risk would apply to both the Haskell and the Hambletonian event at the Meadowlands Racetrack this summer.
There is widespread agreement on Drazin’s business acumen. A.J. Sabath, a lobbyist for the Standardbred Breeders & Owners Association of New Jersey, even called Drazin a “visionary” during testimony before Caputo’s committee.
But more than 18 months after Drazin signed a fixed-odds agreement with Australia-based company Betmakers — the first of its kind in the U.S. — the state’s harness racing leaders still were not comfortable with the bill before the committees.
Freehold executive wants bill scrapped
That chasm was most explicitly bared during testimony by Chris McErlean, the president of Freehold Raceway. While Sabath and other state horse racing officials also expressed concerns, McErlean took it a step further.
“This bill, we feel, has been flawed from the beginning,” McErlean said, noting the extensive similarity to language in a decade-old bill to permit exchange wagering in the state. “It will create an uneven playing field between the racetracks and the horsemen.
“We therefore think there should be major modifications to this bill. In fact, we think a bill should start from scratch, with an industry consensus to create a bill that everyone can agree on.”
Lobbyist Bill Pascrell III — who brokered the agreement between BetMakers and Monmouth Park even before the COVID-19 pandemic exploded in March 2020 — could be seen vigorously waving his hands in disgust on the COVID-related Zoom call that substituted for a traditional Trenton hearing.
McErlean added that Freehold is 50% owned by Penn National, the largest racetrack operator in North America with extensive fixed-odds experience in Great Britain. He said that while he supports bringing fixed odds to New Jersey, “We don’t feel that this is an issue that should be singled out for one potential company, or vendor, or racetrack. And we feel that we have been frozen out of the process since the process started. We have offered many suggestions, and they have been dismissed out of hand or not responded to.”
The two issues on the table
Ultimately, the dispute comes down to two things: tolerance of risk, and money.
Drazin plowed ahead on the sports betting front from 2012-18 even as the standardbred industry in the state and Atlantic City casino leaders were content with front-row seats — although Meadowlands Racetrack operator Jeff Gural gave financial backing to Drazin’s seemingly quixotic quest.
Similarly, harness racing officials would prefer to see Monmouth Park take the lead on fixed-odds wagering as well — with the former group moving forward only if it proves successful at the Oceanport track.
Drazin said that BetMakers has agreed to indemnify the standardbred industry against any potential adverse financial impact to parimutuel wagering.
“They have nothing to lose here,” Drazin said. “Yet at the same time they want to sit back and do nothing, they are asking you [committee members] to give them 50% of the money generated [from fixed odds wagering]? I think that’s very unfair.”
But Sabath said that no final deal has been reached with BetMakers and that “the devil is in the details.”
Drazin said he believes that the new influx of legal sports bettors in the state — a much younger demographic than that of horse racing — can generate far larger betting handle.
But for the more risk-averse standardbred leaders, their focus is on the much lower “takeout” for the tracks from fixed-odds wagering. If all the new method of betting did was shift dollars away from parimutuel betting, the tracks would absorb a net loss of revenue. Drazin, however, said that Australia’s massive fixed-odds handle has been derived from “new money,” not from track regulars who continue to prefer the traditional parimutuel system.
The bill’s long and winding road
The bill was approved by the powerful state Senate Budget and Appropriations Committee by an 11-0 vote in November that notably included the vote of state Senate President Stephen Sweeney.
But the bill had languished since, and Drazin expressed frustration, saying Gural told him that he had just gotten to finally reading the bill last weekend. Drazin added that a number of harness racing leaders told him they were still “confused” by some of the language in the bill.
“Having a potential floor vote [Thursday] gets people to the point where they have to take the issue seriously,” said Drazin, who is a personal injury and medical malpractice attorney.
“In my other life as a trial lawyer, we try cases all the time,” he added. “And the time you get a consensus, and get the case resolved, is when you have jurors in the box ready to make a decision.”
Sabath objected to the notion that his clients might not be taking the dispute “seriously,” adding that he continues to seek a solution to the impasse.
But how to split the revenue from new sources of wagering — which Drazin insists will not cannibalize the parimutuel pools — appears to be another minefield in the long-running competition between leaders of each breed.
Drazin noted that about two-thirds of wagers are of the “exotic” variety such as daily doubles, trifectas, and superfectas — and those bets would not be part of a fixed-odds menu that would stick to win, place, and show betting. That, he said, makes the stakes here lower than might first appear.
But a representative for the thoroughbred breeders, another party in the case, expressed concern that his colleagues would not receive a designated revenue stream from the new betting.
Tuesday’s quick turnaround
Sabath pointed out that typically, a bill that needs the approval of two committees means that there is time in between to hash out differences. But the Tourism, Gaming, and the Arts committee vote came at almost the same time that the Assembly Appropriations Committee began its session on Tuesday.
Appropriations Chairman John Burzichelli, after being made aware of the rift among the horsemen, invited Drazin, McErlean, and Pascrell to speak before his committee as well.
Part of Pascrell’s frustration presumably stems from the fact that his client BetMakers already is all-in on fixed-odds wagering, as evidenced by its $50 million purchase in December of Sportech, a “tote company” that provides hardware and operational services to more than 200 racetrack, casino, and betting venues. About 70 Sportech employees work in New Jersey.
Yet all these months later, many of the same points of contention remain unresolved.
Another complication is the fact that at Monmouth Park, the horsemen and the track operator are one and the same. But Freehold is a track operator and partner with the standardbred horsemen, so they split whatever revenue is derived at the track and from simulcasting.
To add to the confusion, a who’s who of leading standardbred industry figures in the state originally sought to be placed on the record in opposition to the bill, only to request successfully for their names to be removed from the lot of objectors.
Unanimous — but not without qualms
Caputo said that his committee deliberately stalled the bill for months in hopes that a horse racing industry consensus could be reached before a vote.
“We have come closer, but at this point, I’d like to move on,” Caputo said.
One Assembly member voted in favor “with some hesitation,” while another said he did so only based on his faith that the bill’s sponsors will continue to push for peace among the dueling industries.
Burzichelli, who made the final vote for passage in the second committee, also did so with some reservations.
“It concerns me that there is discontent within the family,” Burzichelli said.
Now, the parties involved have all of one day to reach an agreement before the bill potentially gets approved and sent to Gov. Phil Murphy’s desk for a signature.
And next weekend, Monmouth Park begins its annual summer meet — whether the “family feud” has been resolved, or not.
Photo by Tommy Gilligan / USA Today Sports