Churchill Downs is a horse racing company and more. The Louisville-based racing and gaming corporation operates horse racetracks, the TwinSpires racing app, plus 28 regional casinos and gaming venues across 13 states. Sports betting in Kentucky is next for the industry heavyweight.
What’s not in the company’s plans is fixed-odds horse race wagering.
It’s not just a matter of legalization, although Kentucky has yet to legalize fixed odds horse race betting. (It was not included in the state’s sports betting bill passed this spring). According to comments made on a podcast last week by Churchill Downs Inc. (CDI) CEO Bill Carstanjen, fixed-odds horse race betting just isn’t really that good for horse racing.
Pari-mutuel betting – in which odds change based on how much money is pooled for a race – has more value for bettors, Carstanjen said in an interview on the July 12 episode of the Bet on Policy! podcast.
What he called “inefficiencies” in the betting pools means a bigger return for bettors than betting against a gambling house, he said. That return generates interest in horse racing that Carstanjen doesn’t see with fixed odds.
“You sometimes hear ‘Wouldn’t fixed-odds wagering be good for horse racing?’ No, I don’t really think so,” he said. “One thing you’d see as a player, you’d see a lot of that value disappear.”
Carstanjen said pari-mutuel horse race betting “from a customer perspective remains a pretty interesting game for experienced gamblers because you can still find a lot of value, a big return for your wagering dollar,” he said. “And the reason for that is you’re betting against other players. You aren’t betting against a professional risk platform of a gambling house.”
Sports Betting Yes, Fixed-Odds Horse Race Betting No
It’s an interesting position for a leading racing and gaming company that is expected to launch retail and mobile sports betting in Kentucky in September. Sports betting is fixed-odds betting.
But Carstanjen sees sports betting differently than fixed-odds horse race betting when it comes to the future of the horse racing industry. He said on the podcast that sports betting will help CDI expand its customer base beyond those who already put down the occasional horse bet.
The company has announced a sports betting partnership with FanDuel in anticipation of a September sports betting launch in CDI’s home state of Kentucky, with more sportsbook partnerships potentially on the way.
B2B relationships with sportsbooks – now live in over 30 states – is expected to expand the reach of the TwinSpires horse racing app owned by CDI and other Churchill Downs content to thousands if not millions of new customers, said Carstanjen.
In contrast, fixed-odds horse race betting is only legal in two states (New Jersey and Colorado) and live in one (New Jersey).
“For us, what’s been exciting potentially about sports wagering, is the fact that somebody has gone and recruited to their platform hundreds of thousands if not millions of customers,” Carstanjen said. “If we can just get access as a B2B provider to provide our content to those platforms, well hey, then the platforms get a risk-free return because they don’t have to take the back end of any bet on horse racing, and we get access to all of those customers.”
Pari-Mutuel Horse Racing ‘Historical’
Another issue for CDI is the long and rich history of horse racing in the US. When other forms of gambling, including casino gambling, were – and still are in many states – illegal in the US, pari-mutuel wagering was allowed. Kentucky legalized pari-mutuel wagering under its state constitution in 1891, making it one of the first states with legal horse race betting.
Churchill Downs has been home to the iconic Kentucky Oaks and Kentucky Derby races for 149 years, making the Derby the longest continually-run annual sports event in the US.
According to Carstanjen, that history makes pari-mutuel in US racing quite “historical” – not to be confused with previously-run races that appear on historical horse racing (HHR) machines owned and operated by CDI in numerous states, including the Bluegrass State.
“For most of America’s history, all forms of gaming were illegal with the exception of horse racing. And why wasn’t horse racing illegal? It’s because since the time people settled this country, they’ve been betting on horses,” Carstanjen said on the podcast. “From early times, it became pari-mutuel betting,” which is a pool with odds set in real-time based on money coming into the pool with a rake off the top for the tracks.
The approximate 20% takeout rate ensures profits for tracks under the parimutuel system, which Carstanjen believes also preserves more value for players.
“It creates a lot of value in the pools when you can still get 50-1, you still can get 25-1,” Carstanjen said. “And as you know in the fixed-odds world, you don’t (regularly) see odds like that. You don’t otherwise see big payouts like that. So our game from a customer perspective remains a pretty interesting game.”
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