The following pages contain policy recommendations made by the NTRA Players’ Panel after studying several subjects of serious concern and importance to the customers of horseracing.

 

There are eight areas specifically addressed in this document. They are:

1. Integrity of Pari-mutuel Pools/Late Mergers
2. Pari-mutuel Takeout Rates
3. Taxation
4. Rebate Policies
5. Arbitrary Transfer of Wagers to the Favorite in Multi-Race Wagers Following Late Scratches
6. Integrity of Entries/Late Scratches
7. Customer Service
8. Uniform Medication and Drug Testing

 

The NTRA Players’ Panel was formed in the spring of 2003 to examine an array of pari-mutuel wagering issues related to integrity and fairness, and to advise the industry on recommended standards and practices. The panelists have been selected to represent the several major circuits of the country. Their views do not necessarily represent those of the National Thoroughbred Racing Association or its member racetracks and horsemen. An earlier draft of these recommendations was circulated to industry stakeholders for their input.

 

The Panel is led by NTRA Players Representative James Quinn, a noted author and handicapper who has served the industry in numerous capacities, including consulting for Santa Anita Park since 1995 in Player Development. Customers may continue to address any wagering related queries to him via e-mail at jquinn@ntra.com. The other 11 Representatives on the Panel are:

 

Ponti Compagna, retired businessman, Texas

Paul Cornman, professional handicapper, New York

Dave Cuscuna, securities trader, Florida

Andy Cylke, certified public accountant, California

Cary Fotias, securities trader and author, New York

David Gutfreund, commodities trader and television commentator/handicapper, Illinois

Ken Kirchner, NTRA, Kentucky

Mike Maloney, businessman, Kentucky

Barry Meadow, racing writer, California

Jim Mineo, teacher, Florida

Maury Wolff, economist, Maryland

A.  Integrity of the Pari-mutuel Pools/Late Mergers

The late mergers of simulcast pools at the host tracks following the off-times have resulted in unacceptably late and significant drops in the odds after the horses have left the starting gate.  The phenomenon has contributed to a perception that sophisticated bettors are using technology to past-post the races, and to a real loss of value that subverts the handicapping and wagering goals of all bettors.

 

            Recommendations:

1.      Reduce the final two cycles of data processing and odds changes to 10-15 seconds.

 

2.      Totes should “force cycle” the win pool every 10 seconds after the pools close to update the final odds as quickly as possible and prevent delays from individual sites.

 

3.      Eliminate the cancellation times at all tracks (hosts) and simulcast sites (guests).

 

4.      Transmit the win-wagers from the hubs to the hosts prior to the aggregation and transmission of other pari-mutuel pools at the hubs.

 

5.      Transmit the exacta-wager pools in priority to the other exotic pools, provided the transmission does not delay the calculation, transmission and posting of the win odds.

 

6.      Post the odds-changes to the closed-circuit broadcasting system (i.e. simulcast signal) prior to posting the odds changes on the tote boards.

 

7.      Post the final two cycles of wagering data at the host tracks and on the host tracks’ Web sites.

 

8.      Require the totes to post reports of cancelled wagers during the final three cycles of wagering, including amounts, wagering sites and window numbers.

 

9.      Inform the bettors as to how their wagers are being processed from the guests to the hubs to the hosts.

 

10.  Do not merge simulcast pools at the host tracks more than 30 seconds after the off-time of any race.

 

B.  Pari-mutuel Takeout Rates

In today’s world of full-card, around the clock simulcasting, takeout rates are a major factor for regular and serious players.  With dozens to hundreds of wagers being made in a single day by each player, the cumulative impact of high takeout rates impacts a substantially larger portion of a player’s bankroll than in prior year’s when wagering was limited to a single nine-race card.

 

The current system of legislated takeout rates in most states deprives the tracks and horsemen of the flexibility to adjust takeout rates to meet market or competitive conditions.  Virtually all known studies of the dynamics of pari-mutuel wagering indicate an inverse relationship between takeout rates and handle, such that a reduction in takeout inevitably results in significantly greater handle.

 

            Recommendations:

1.      Conduct a series of executive seminars on the history and effects of takeout rates for state legislators, track officials and horsemen.

 

2.      Beyond minimal standards, shift the authority and responsibility for establishing takeout rates from legislatures and state racing regulators to the local tracks, with the transition and its effects to be monitored by the racing boards and state commissions and reported to the legislatures.

 

3.      Promote the incremental reductions of takeout rates on exotic wagers.

 

4.      Deregulate to the point where takeout rates ultimately can be determined and adjusted based on market conditions.

 

C.  Taxation

Bettors today are confronted with Federal income tax laws that are arbitrary, complex, and unfair.  Although the statutes have been in the Internal Revenue Code for a long time, the set of problems created by the laws were confined to relatively few bettors prior to the expansion of exotic wagering.  As a result of exotic wagering, many bettors now are routinely subject to withholding taxes from winning tickets.  In many cases the withholdings are excessive and erode the bettors’ cash flow, while simultaneously reducing the tracks’ daily and weekly churn by millions of dollars.  The expansion of exotic wagering also has created a dramatic increase in the number of successful wagers large enough that they must be reported to the Internal Revenue Service, both by the tracks and by the bettors on their individual tax returns.

 

At present, where winnings and losses have been reported on tax returns, racetrack bettors can have their income tax increased significantly, even when they have suffered a net loss or, at best, a breakeven situation with regard to their pari-mutuel wagering.

 

            Recommendations:

1.      Increase the federal withholding threshold on racetrack winnings from the current $5,000 to $25,000.

 

2.      Raise the IRS reportable income and odds thresholds from the current $600 for a bet paying 300-1 or more to $1,500 and 750-1, respectively.

 

3.      Lower the federal withholding tax rate on racetrack winnings from the current 25 percent to 10 percent, or to a level commensurate with the potential tax liability.

 

4.      Allow professional bettors who report their gambling activities on Schedule C to opt out of withholding requirements, and allow them to satisfy their tax obligations by filing quarterly estimated tax payments.

 

5.      Allow bettors using wagering accounts to be subject to withholding based upon their total account activity.  Winning tickets would be subject to withholding only if a bettor’s account had net income at the time of, or as a result of, the winning wager.  Prior withholding from the account would be considered in determining the current amount to be withheld.

 

6.      Determine net winnings for both IRS reporting and withholding rates by deducting the actual amount bet from the gross proceeds, instead of deducting only the base amount of the winning wager.

 

7.      Allow wagering losses to be deducted against winnings “above the line,” and not as an itemized deduction.

 

8.      Allow net racetrack wagering losses in any tax year to be carried forward to future tax years against winnings, similar to capital losses, net operating losses, et al.

 

D.  Rebate Policy

A relatively small number of bottom line-oriented bettors are responsible for a significant percentage of industry handle. These bettors are extremely price sensitive.  The explosion of available handicapping information, combined with high takeout rates, has made it very difficult to bet large amounts and still show a profit.  One or two percent changes in their effective takeout rate will result in significant changes in their handle. If tracks continue to raise the price of their simulcast fees, they risk a dramatic decrease in handle from this group. Pricing some off-track distribution partners out of the market through higher fees will not bring handle back on track, but rather will reduce total handle and net revenues as happened in Nevada in the late 1990s.

 

Businesses that pay a rebate and co-mingle into the pari-mutuel pools pay millions of dollars in host track and horsemen’s fees due to the high wagering volume their discounting creates. The competitive nature of their business has forced them to trim their margins to one or two cents on the dollar. Any changes in fees charged to these rebate operators will likely be directly passed on to their price-sensitive customers. 

 

Rebates have created a new set of opportunities for bottom line-oriented customers, resulting in hundreds of millions of new dollars being brought into the industry, as well as dramatically increasing levels of play from those already involved in pari-mutuel wagering. 

 

Recommendations:

1.      An industry rebate policy that lowers takeouts in some fashion is desirable. The current system, which takes advantage of the differences in regulatory climates across jurisdictions, and competition among vendors, has succeeded in lowering takeouts to most of these customers, and has substantially increased wagering on horseracing.

 

2.      Rather than increasing the costs to their most price-sensitive customers through charging higher fees to certain distribution partners, racing should look for ways to decrease the costs to all.  The number of wagering opportunities simulcasting presents allows racing to come closer to the higher volume, lower takeout model that casinos have effectively used to achieve an optimal takeout rate.

 

3.      Racing should continue to take advantage of the efficiency created by the current system in pricing its product to these bottom line-oriented bettors.  This will enable racetracks and horsemen’s groups to continue to benefit from the increased handle created by rebates.

 

4.      There are large numbers of customers betting without rebates who can be better served by racetracks than they are today. Many of these bettors are more interested in the social interaction and entertainment provided by the on-track experience, while the high-end gamblers are motivated strictly by bottom-line considerations. The intrinsic value of being on track is high enough to these bettors that a small rebate offered in conjunction with a package of individually customized services would provide enough incentive for them to remain on track. Dining room tables, private high-roller rooms, comped food, box seats, admission and parking stickers are some of the basic rewards that tracks can provide.

 

5.      Any mechanism that either directly or indirectly lowers takeout rates will result in greater handle, profits and a healthier industry.

 

E.  Arbitrary Transfer of Wagers to the Favorites Following Late Scratches in Pick-3 and Pick-4 Wagering

When late scratches occur in Pick-3 and Pick-4 wagering, after wagering pools have been opened, most jurisdictions arbitrarily transfer the combinations that include the scratched horses to the betting favorites. The practice is patently and irredeemably unfair to bettors.  Racing’s regular customers and bigger bettors have been abused most often. For example, when the key horse they have singled in the middle leg of a $200 Pick-3 wager has been scratched en route to the gate, bettors are unfairly assigned the favorite they were betting against.  The changes advocated below are modeled on current practices already in place in New York.

 

            Recommendations:

1.      Where late scratches occur in the first leg, refund all monies for the combinations that include the scratched horse(s).

 

2.      Where late scratches occur in the middle and final legs, provide consolation payoffs to the bettors that have combined the scratched horses with the winners in the other legs, similar to traditional procedures applied to late scratches in Daily Doubles.

 

3.      In Pick-3 and Pick-4 wagering, where one horse of an entry is a late scratch, the other horse should compete as a non-betting interest for purse money only, with the bettors obtaining refunds or consolation payoffs, as determined by the situations above.

 

4.      In Pick-6 wagering, provide bet cards that allow bettors to select alternate horses in each of the six legs; no consolation payoffs.

 

F.  Integrity of the Entries/Late Scratches

Stakes races apart, horses not intended to run after being entered to run routinely are supposed to be scratched at a specified time 24 hours prior to when the races will be run.  Late scratches routinely should occur only for legitimate medical and soundness reasons, as validated by the track veterinarians.  Many horsemen have instead been scratching out late for competitive reasons after examining the entries, the assigned posts, and the probable pace. This illicit practice has exacerbated the problems associated with small fields while proving to be annoying and unfair to bettors.

 

            Recommendations:

1.      Horses that qualify as late scratches for designated medical and soundness reasons must remain on the veterinarian’s list, unable to race, for 10 days.

 

2.      The use of two arbitrary late scratches in fields of 10 or more should be limited to full fields of 12 or more horses.

 

3.      Accountability procedures should be implemented to document the integrity of late scratches, i.e.,

·        vets would indicate in writing when horses have been treated, for what conditions, by what procedures, and by whom;

·        trainers would indicate in writing when horses on the vet lists will have worked out and when they might be intended to run;

·        stewards would indicate in writing the horses on the vet lists that have been randomly selected to be tested to verify that the intended medical treatments have been administered; and

·        the results of random testing of horses on the vet lists should be provided to the public on a periodic schedule.

 

4.      Punitive measures, to include fines and suspensions, should be invoked against repeated abusers of the scratch rules, as determined by the stewards.

 

5.      Abolish the use of “conditional” entries in jurisdictions where the practice is currently in place.

 

6.      Following gate scratches of favorites and heavily bet contenders, allow a three-minute delay so that bettors might cancel or restructure wagers. Following gate scratches of longer-priced horses above 6-1, allow a one-minute delay.

 

G.   Customer Service

Full-card simulcasting and the advances in the exotic-wagering menus have held out serious implications for customer services.  Most tracks have not effectively identified their on-track and off-track customers’ contemporary needs and desires. The important enhancements and reforms can be grouped under two broad categories, information services and simulcast productions.  A third category of preferred services can be designated as miscellaneous services.  Track officials should be mindful that on-track customers will be playing multiple tracks simultaneously and that approximately 85 percent of the handle on the live product will be wagered at simulcast sites.

 

            Recommendations:

1.      Information services

1.1  Will-Pays

·        Win-Place-Show payoffs, Doubles, Exactas, and Quinellas should be posted in $2 denominations.

·        Trifectas, Superfectas, and the serial bets of three races or more should be posted in $1 denominations.

·        The Pick-6 should be posted as a $2 bet

Reasoning: this is the way the great majority of horseplayers bet, and the reporting standards should reflect the wagering habits of the customers.

 

1.2  Late Changes

·        Late scratches, surface changes, jockey changes, and equipment and medication changes should be updated continuously throughout the programs.

·        Electronic “crawl” boards should be a continuous part of the on-track closed-circuit programs, or an adjunct to the tote boards in the infields.  Designate special “fields” on scratch vouchers for surface changes from turf to dirt.

·        Designate special “fields” on scratch vouchers for the parts of entries, i.e., 1, 1A, 1B and 2, 2A, and 2B.

 

1.3  The Probables

·        Exacta probables are best reported on electronic matrix boards that display all the possible combinations. This method is preferred over the more traditional method of scrolling probable payoffs, which can be inefficient and time-consuming.

·        There is no need to display the probable payoffs for Trifecta combinations; instead tracks might display the amounts to win-place-show for each horse in the Trifecta pools, as well as the odds equivalents in percentages as between the win pools and the Trifecta pools. For example, Horse A has 25% of the win pool, but only 10% to win of the Trifecta pool. 

·        The odds equivalents in percentages can be reported for each horse in each of the exotic pools available for the race. For example, Horse A has 15% to win of the Trifecta pool, 12% to win of the Superfecta pool, and 10% to win of the Pick-3 pools.

 

1.4  Workouts

·        Procedures for monitoring and reporting workouts should be modeled on the California system and should include the use of official clockers.

·        All workouts should be reported accurately and in a timely manner to the wagering public and to Equibase and Daily Racing Form.

 

2.      Simulcast productions

2.1  Graphics

·        Basic race information is best displayed top left, or top right, in a way that does not obscure the inspection of the horses from head to toe.

·        Sites should provide a continual electronic “crawl” of the late changes at all the simulcast tracks, updated throughout the programs, as simulcast bettors at most locations cannot hear the simulcast audio feeds and track announcers.

·        Race information should include the next post time(s) at the simulcast track(s).

 

2.2 Body language

·        Horses must be shown from head to toe.

·        Each horse should be shown in post-position order in the paddock and while walking during the post parade.

·        Horses should be shown warming up, particularly when favorites and leading contenders begin to stride out. Unusual incidents also should be shown.

·        Trainers should be directed to use white wraps on the front and back of horses, as preferred to dark or gray wraps that are hard to see on a television monitor.

 

2.3  Camera positions

·        The consistency of camera angles from track to track needs to be improved.

·        Simultaneous front and rear shots of the breaks from the starting gates are preferred to pan shots or head-on shots alone.

·        Split screens of the leaders and the entire fields are preferred during races.

·        Use wide-angle shots of the entire fields coming off the far turn and into the upper stretch.

·        Toward the finish, provide close-up shots or wide-angle shots of the leading contenders as dictated by the competition.

 

3.      Miscellaneous

·        Perks and special services to large bettors should be considered very important. These include special betting areas offering privacy and convenience when wagering, as well as individualized information services.

·        Courtesy signs should be placed at SAMs and mutuel windows requesting that “For the convenience and consideration of all bettors: please make your wagers quickly.”

·        Consider providing a “Bettors’ Concierge” for high-profit customers.

·        Develop well-integrated programs of fan education for novices, intermediate-level and advanced customers.

·        Conduct handicapping and wagering seminars for novices, with a special emphasis on programs for women customers.

·        On event days, including giveaways, concerts, and micro-brew festivals, use survey methods of some kind to identify people who express an interest in learning how to play the races. Invite the newcomers to re-visit the track for free, and to participate for free in tutorials for beginners and novices. In addition, provide the newcomers who participate in tutorials with track programs and copies of Daily Racing Form.

 

H.  Comment on Medication and Drug-Testing

Along with manipulation of the wagering pools, the NTRA Players’ Panel recognizes the improper use of therapeutic medications and/or the administration of illegal drugs by horsemen as the most serious and direct threat to the integrity of the sport.

 

The perception among many bettors is that the illegal use of medication and drugs has become a serious problem, as evidenced by inexplicable form reversals and the occasional unusually high win-percentages of horsemen whose long-term statistics have been significantly lower. When these circumstances become prevalent at a track, large bettors will reduce their handle significantly and the handicapping and wagering tendencies of all bettors are compromised.

 

The NTRA Players’ Panel discussed the medication and testing issues at some length.  The panel has determined that it lacks the expertise to promote specific recommendations on this issue. However, the panel supports the call for uniform standards by the Racing Medication and Testing Consortium.