New Jersey’s pioneering effort to offer exchange wagering on horse racing in the U.S. comes to an end on Oct. 1 when Betfair exits the stage – or does it?
Monmouth Park operator Dennis Drazin told NJ Online Gambling on Thursday that he still believes in the concept that is so popular in the United Kingdom and Australia.
And that is why Drazin said he is beginning discussions with potential alternatives to Betfair, whose parent company runs the national network TVG as well as 4njbets.com for mobile wagering in New Jersey.
There are several aspects to the alternative wagering – including “fixed-odds,” which allow players to lock in odds on their horse at the moment of their bet without having to worry if later big-money plays on the same horse might shorten the price.
Exchange wagering also permits “in-race” betting after races begin – a concept no longer seen as so exotic to gamblers who are now making the same sort of split-second decisions on traditional professional sporting events.
After several years of discussion, Betfair launched exchange wagering in New Jersey in 2016. That allowed Europeans to directly take on Garden State gamblers in head-to-head offers of prices on races – in contrast to the classic parimutuel style of betting where “the house” keeps 15% to 20% of the total amount wagered.
The 12% takeout for exchange wagering has proven to be problematic on both ends. Traditional racetrack officials have worried if the new gambling would cannibalize the parimutuel handle, while gamblers familiar with a 5% exchange takeout in the U.K. – analogous to newfangled sports betting in the U.S. – found the takeout unappealing on their end as well.
Horse racing states prove resistant to innovations on betting
The resistance of horse racing leaders in the key states of New York, Florida, California, and Kentucky spelled doom for exchange wagering in New Jersey – even with a partnership with appealing Woodbine harness racing in Ontario. The overall product didn’t produce a critical mass of options that could convert “old-school” players to a new option – nor entice enough of a new breed of customer, either.
“For a variety of reasons – including a customer base used to exotic wagering and a reluctance by major U.S. racing associations to embrace the different business model – it never hit the critical mass to be viable,” Betfair executive Kip Levin said in a statement.
Exchange wagering also allows for betting on horses to lose – not just win, place, or show. That intrigues gamblers who are confident that a heavy favorite is poorly priced – but who are less confident on who will win instead.
But some industry officials worry that could entice owners who have inside information on issues with such a favorite to profit by their confidence that their own horse will not win the race.
The resistance to legal, regulated gambling that is well-established outside the U.S. is not unusual.
A familiar American tale
Casino gambling did not gain momentum outside of Nevada and New Jersey until the 1990s, and online casino gaming that launched in Delaware and New Jersey has been mimicked by only a handful of states – even as it has proven to be a lifeline for brick-and-mortar casinos
in states such as New Jersey during the COVID-19 crisis.
Drazin said that on the one hand, he has received positive feedback from gamblers who are enthused to lock in odds at the time of their bet – while on the other hand, getting resistance from many traditional horse players.
“I guess it’s hard to teach old dogs new tricks,” said Drazin, a lifelong horseman and a former chairman of the New Jersey Racing Commission.
In fact, Drazin said that the demographic of exchange wagering participants is 18 years younger than parimutuel bettors.
The future of U.S. gambling, Drazin said, is a “one-stop shopping” approach that allows mobile-friendly gamblers to toggle from sports betting to online casino to horse race betting and to whatever else comes along.
It’s just going to require a whole different way of thinking for our industry,” Drazin said.
Can horse racing piggyback onto a new betting concept?
Sporttrade, a Philadelphia-based gambling startup, last month announced a deal with Twin River
with the goal of offering the first sports betting “exchange” in New Jersey.
But that isn’t expected to go “live” until next year – and the company’s press release made no reference to horse racing.
“By applying capital markets technology and market structure to the US sports betting ecosystem, we are creating something revolutionary,” said Sporttrade
founder and CEO Alexander Kane.
“Sporttrade will establish a first-of-its-kind sports betting venue that will be fair, liquid, and transparent, and we look forward to offering customers innovative betting products at significantly lower costs than traditional sportsbooks,” Kane added.
That seems to tap into the idea of offering a product similar to stock market “day trading.”
Could that be extended to horse racing? It will be a tough sell as long as the country’s largest horse racing states are resistant to innovation.
Betfair, in spite of its best and considerable efforts, could not change that horse racing mindset. Now we may see if Drazin can entice a new partner who might somehow produce a more persuasive message.