For a long time, horse racing has been a niche sport in the United States. It doesn’t enjoy the mainstream appeal that football or even golf does. Consequently, it has relied on the same bettors and fan base to maintain its profitability. Horse racing fans and bettors don’t mind the pari-mutuel betting system. However, pari-mutuel betting can feel inaccessible to new bettors. That’s one of the reasons it’s been difficult to expand horse racing’s appeal beyond its traditional fan base. And in a sport that depends on gambling for revenue, barriers to new bettors are crippling.
However, the introduction of fixed-odds betting into horse racing may change that. Fixed-odds betting is easier to understand and avoids the frustrations new bettors find when they try pari-mutuel betting. With the rise of legal sportsbooks, fixed-odds betting has become accessible to millions of new bettors. Bettors can lock into their chosen odds and odds are affected far less by other bettors under a fixed-odds system. So, it could attract many more bettors, which would increase horse tracks’ profitability.
But changing from the pari-mutuel system will take a long time. There are many stakeholders involved in the process of change. Some are more willing to try fixed-odds betting than others, which compounds the difficulty of offering fixed-odds betting. But some horse tracks are willing to try and some analysts have been pushing for this change for years. In interviews with Gaming Today, Dennis Drazin, Chairman and CEO of New Jersey’s Monmouth Park, and North America Consultant at SIS, Michele Fischer, offered their insights into fixed-odds betting and what it could mean for US horse racing.
Horse Racing Today: Why Pari-Mutuel Betting Is Stunting Horse Racing’s Growth
Pari-mutuel betting is different from the fixed-odds betting bettors find at sportsbooks. With fixed odds, oddsmakers set odds for bettors to wager on. Once bettors place their wagers, they’re locked into the odds that they’ve chosen. So, when bettors place their bets, they know what their prospective rewards are.
Pari-mutuel betting is different. All the money goes into one pool of money that’s split between winners. Since odds and rewards are subject to ongoing calculations, bettors’ odds can change after they place their wagers. Even though wagers stop when the horses begin running, the final bits of math can skew odds after the race begins. It’s a major point of contention for bettors. Dennis Drazin offered some thoughts on how that customer experience would change with fixed-odds betting:
“I think in practicality what will change is the experience that customers have–which they complain about now–where they make a wager pari-mutuelly, they bet a horse 2-1, the horses break out of the gate, [and] by the time all pools come in and all the computer betting comes in, the horse goes half a furlong, and the odds are 3-5 [or] 2-5. And people complain and they think that there’s something wrong with that, that people are betting after horses break, which they’re not.”
Even in an honest pari-mutuel system, new bettors can be uncomfortable with the odds fluctuations that come from the pari-mutuel pool’s ongoing calculations. But it’s a niche type of gambling that new sports bettors are unfamiliar with. Sports betting with fixed odds is more intuitive with a smaller learning curve than pari-mutuel betting. Being limited to pari-mutuel betting also limits horse tracks’ abilities to reach new bettors.
How State Regulations Complicate The Addition Of Fixed Odds
Horse tracks aren’t governed by just one group. There’s an owner of some variety that runs the park day-to-day. But there are a lot of moving parts when it comes to making the fundamental change from pari-mutuel betting to fixed-odds betting. Michele Fischer offers some critical reasons why.
“If you look state by state, some regulations specifically say that you cannot take a sports wager on horse racing,” said Fischer. “For example, Indiana and Pennsylvania, but most of the states are silent on it.”
Some states just won’t let their horse tracks deviate from pari-mutuel betting. Laws like that are likely legislative overreaches to a legitimate problem. Early during sports betting’s legalization effort, states had to differentiate between sports betting and horse racing. They likely didn’t want to force horse racing to change from their pari-mutuel system. However, their protections for the horse racing industry can now get in the way of tracks that want to offer fixed-odds betting. But that’s not the only obstacle. A lot of people have to agree to the change, first.
“We have something very unique in the United States compared to any other country: the Interstate Horse Racing Act,” said Fischer. She went on to describe the stakeholders implicated by the IHR. “If you read [the IHR], it basically says that to take a wager or a bet on horse racing–doesn’t say pari-mutuel, doesn’t say fixed odds–you need to have host track approval, the recognized horseman’s group, and the host and guest states’ racing commissions.”
So, each track has to reach an agreement with the relevant horseman’s group to offer new wagers. Between state regulations and tedious negotiations, adding fixed-odds betting to horse racing will take a while.
What Bettors, Horse Tracks, And The Horse Racing Industry Get From Fixed-Odds Betting
If it’s so much effort, bettors may wonder why horse tracks would bother trying to offer fixed-odds wagers. However, the effort is expected to have important benefits for bettors, horse tracks, and the horse racing industry. Here’s what these critical stakeholders have to gain from the addition of fixed-odds betting at horse tracks.
Bettors would be the primary beneficiaries of a horse racing industry that embraces fixed-odds wagering. They would get:
- More wagers
- Guaranteed odds
- Increased payouts
Fixed-odds betting would be offered alongside pari-mutuel betting. Pari-mutuel betting is still the best way for horse tracks to offer exotic wagers–wagers on multiple horses. But fixed-odds betting would entice bettors who may have just discovered sports betting and want to try wagering on horse racing.
“It’s not an either-or type of situation,” said Fischer. “Fixed odds and pari-mutuel wagering can be complementary to each other, too. And the key is that you don’t cannibalize the current pari-mutuel system. But you offer an expanded distribution and wagering opportunities that are not on the tote.”
The new types of wagers offered by fixed-odds betting would also give bettors odds that they could lock into. The odds wouldn’t change because fixed odds aren’t affected directly by the amount of money other bettors wager. So, bettors could lock into the odds they choose.
Finally, fixed odds would likely offer higher payouts than pari-mutuel odds. Since winnings aren’t split between winners in a fixed-odds system, fixed odds can increase winnings for most bettors. However, there are exceptions to that rule, which is why horse tracks would continue offering pari-mutuel betting alongside fixed-odds betting. “The pari-mutuel pools can be advantageous when you see horses at like 5-1 or 20-1,” said Fischer. “Especially when your favorite’s over-bet, you can probably get a better deal on pari-mutuel. But your favorites and longshots may be more advantageous on fixed-odds if you lock in at the right price.”
So in a fixed-odds system, professional bettors can shop around, and recreational bettors have an accessible betting option. For once, every bettor wins.
Horse tracks have a specific goal when they compete. They’re not only attracting bettors to their horse tracks. They’re primarily competing to attract the best horses. Horse tracks attract great horses by offering large purses, the pools of money that are split among jockeys. So, offering fixed-odds betting isn’t a sustainable advantage that will elevate one track over another. Dennis Drazin thinks that in the long run, every horse track will offer a similar version of fixed odds.
“At the end of the day,” said Drazin. “I think everyone will be offering the same thing and all of the casino and sportsbook operators will be offering the same thing. They may have different odds, but I don’t anticipate that it will affect the competition between the tracks to a significant extent.”
But what will change is the amount of revenue that horse tracks can generate. Gambling is an important revenue stream for horse tracks. So, adding fixed-odds betting to the horse racing menu will generate more revenue for horse tracks. “Fixed-odds could be a growth path for US horse racing,” said Fischer. “Horse racing in the United States is very stagnant and it’s been relegated to basically a niche sport at this point in time.” Offering fixed odds on horse races through a sportsbook would expand horse racing’s audience and optimize a critical revenue stream.
Cannibalization At Horse Tracks
Some stakeholders are concerned about a pari-mutuel product and a fixed-odds product cannibalizing each other. They’re worried that offering a fixed-odds product would take all the pari-mutuel bettors and attract them to the fixed-odds product. The fear would be that pari-mutuel betting wouldn’t be profitable anymore. That concern seems unfounded for two reasons.
First, pari-mutuel betting will always have a home at horse tracks. As we’ve said, clever bettors can compare between pari-mutuel and fixed-odds wagers to find the best deals. Second, pari-mutuel pools are also where bettors will find exotic bets. The professional horse racing bettors still have value to extract from pari-mutuel betting. Some novice fixed-odds bettors may even learn the ropes of pari-mutuel betting. Both wagering systems offer something important for certain types of bettors. The best way for horse tracks to maximize revenue will likely be to allow both types of wagering.
The Horse Racing Industry
The horse racing industry is currently struggling to compete against mainstream sports. Lots of people watch NFL games. Few people hit the local horse track on a Tuesday afternoon. If horse tracks across the United States offered fixed-odds betting, the entire horse racing industry could benefit.
“Horse racing is considered a niche sport, and it’s been really struggling to attract new fans,” said Fischer. She goes on to list some of the other horse racing industry’s issues. “We have a shrinking horse population. Fewer horses are being bred today in America and so the competition between the tracks is often about attracting the horses.”
Disinterest in horse racing makes it difficult to fund horse breeding or other forms of growth in the horse racing industry. However, a larger pool of bettors and a newly engaged fanbase could give the horse racing industry a much-needed boost. Especially if horse races can fill downtime in sportsbooks.
“You keep looking at it from a [sportsbook’s perspective] and you have nothing on a Monday night [or] a Tuesday afternoon,” said Fischer. “You just don’t have a lot of content. And suddenly, you just put horse racing into that slot [and] it’s something for someone to bet on. Those tracks might not even be the best tracks out there, but they’re filling a time when they’re not going up against the NFL on a Sunday afternoon.”
Offering fixed-odds wagers on horse races through sportsbooks could be a rising tide that lifts all boats. As more horse tracks offer fixed-odds wagers, more bettors could take interest in horse racing and bet on it. It could bring horse racing more mainstream attention, which could create new growth opportunities for horse racing.
International Competition In The Horse Racing Industry
Fixed-odds horse racing won’t just affect horse racing in the United States. It’ll also impact American horse racing internationally. “Right now, we send our signal, as do the other American tracks, overseas,” said Drazin. “And they do wager fixed odds on us and we get some revenue back. But I think what you’re going to see is the tracks from around the world will offer fixed-odds wagering here in the United States. And it will help grow the business throughout.”
If horse tracks in the United States offer fixed-odds wagering, they’ll be able to offer on their own races and international races. Fixed odds would open up yet another revenue stream for American horse tracks. “I think that [fixed-odds betting] will certainly provide additional opportunities for the European racing venues to offer fixed odds here in the United States and begin in New Jersey,” said Drazin. New Jersey is about to begin its foray into fixed-odds betting in horse racing. If bettors want to see whether it’ll work, New Jersey is the place to begin watching.
New Jersey’s Experiment With Fixed-Odds Betting
New Jersey is considering a bill that would allow the state’s horse racing tracks to offer fixed-odds wagers. If the bill goes through, Monmouth Park could become the first horse track in the United States to offer fixed-odds wagers. However, not everyone in the horse racing industry is as enthusiastic about the potential change as Dennis Drazin is.
“The standardbred industry is not sure yet whether they want to engage in fixed-odds wagering,” said Drazin. “I think their preference as we speak today, which could change tomorrow, is they would like to start with the thoroughbred product at Monmouth and they’d like to see whether or not it cannibalizes the product.” In other words, New Jersey’s standardbred industry wants the thoroughbred industry to try fixed-odds wagering first to see whether it works. “I know for certain that the standardbred industry believes in fixed odds and they will eventually participate,” said Drazin.
The standardbred industry is risk-averse and doesn’t want to lose its pari-mutuel product. Pari-mutuel betting has been horse racing’s only option for decades. Making a foundational change like introducing fixed-odds betting is intimidating. “They’re a little concerned that if people are going to switch over and bet on fixed odds that they won’t bet as much on their pari-mutuel product,” said Drazin. “So they’re a little worried about cannibalization, and they want to make sure they’re doing the right thing.”
That reticence aside, there’s a lot of enthusiasm for fixed-odds betting in horse racing. New Jersey’s fixed-odds bill passed the Assembly 74-0-1 and has moved on to the State Senate. If it passes the Senate, the last stop is the Governor’s desk. Despite some anxieties, fixed-odds betting in horse racing is likely coming to New Jersey in 2021.
How Horse Racing Is Uniting Different Gambling Industries
Since sports betting became legal in the United States, there’s been a rise in companies that allow bettors to place money on their opinions. It doesn’t seem to be caused by sports betting legalization, but it may be accelerating the prediction industry’s growth. More people are becoming used to betting on sports, and many of them are likely open to putting money on other events, too. This openness likely allows companies like PredictIt, Kalshi, and Grin Gaming to thrive in the same industry without stepping on each other’s toes.
The diversification within the online gaming industry seems to be part of this wider trend of offering bettors more things to bet on in fewer places. Daily fantasy companies also offer sportsbooks and online casinos. Some racetracks have become hybrid racinos or sportsbook operators. And if fixed-odds betting is allowed at horse tracks, horse racing could be listed on popular sportsbooks. Horse tracks would become integrated into the larger ecosystem of online gaming. But doing so profitably remains a challenge that horse tracks will have to overcome.
“Everyone talks about how great it would be to have fixed odds on horse racing,” said Fischer. “But there’s figuring out what is fair. When we look at Australia, they did something called race field legislation and it basically mandates the fee a bookmaker pays to a racetrack for sports betting. And it’s very clear what the fee is in each jurisdiction to offer horse racing and it eliminates that need to negotiate with the individual racetracks.”
The United States probably won’t make a legislative move that disruptive. But horse tracks and bookmakers will have to reach an agreement that’s financially sustainable for both parties. Negotiations like those will take time but could be lucrative for everyone involved.
Partnerships and Cross-Marketing Opportunities
As horse tracks become more integrated with sportsbooks, partnerships between them will flourish. It will require immense cooperation among industry players. But as Dennis Drazin points out, the horse racing industry is familiar with intense cooperation, compromise, and negotiation.
“In order for New Jersey, for example, to offer fixed odds once the legislation passes, we can do what we want with our own in-state signals,” said Drazin. “But if we want to offer signals from the other racetracks from around the country or around the world, we need to get their consents and the racing commissions have to consent and horseman groups and racetracks will have to consent. So I think that will lead to more cooperation. We all do that now on the pari-mutuel side.”
“And on the casino and sportsbook side, there are going to have to be commercial agreements. I think there will be arrangements between casinos, sportsbooks, and racetracks, and then I believe that the gaming industry, the internet, the sportsbook, the casinos will offer incentives for horseracing customers to wager on their products.”
Clearly, the horse racing industry is becoming an interconnected web of gambling offerings for bettors with many stakeholders involved. Once those agreements are reached, bettors should expect to see a flood of horse racing promotions.
“I think that there are gimmicks that can attract you to betting [horse] racing,” said Drazin. “Like maybe a gaming company would offer [a] stake race every Saturday and call it the X-company mile or the X-company sprint or whatever it may be. So, I think there’s a lot of cross-marketing opportunities that will make everyone better partners.”
As we look ahead to what horse racing can grow into in the United States, industry cooperation will be an integral determinant of either its success or failure.
Looking Ahead To Horse Racing’s Future
By itself, fixed-odds betting won’t turn horse racing into a mainstream sport. That transformation will come from increased bettor interest and a wider fanbase that includes recreational bettors alienated by the pari-mutuel system. It will also likely be driven by online betting. Apps are convenient betting instruments, and the success of online sports betting has more than proven that. “I do think the majority of the wagering will continue to be online not live in-person [after introducing fixed-odds betting],” said Drazin.
Fixed odds would open new potential revenue streams for horse tracks to leverage. However, horse tracks make less money off each fixed-odds wager. But there may be so many new bettors that the volume of bettors makes up for the lower profit margin of each fixed-odds wager.
“I think that when you introduce horse racing to the consumers that bet sports and casino gaming, you’re now going to get a lot of people to cross over,” said Drazin. “So, while the takeout is less for the racetrack, I think that if we grow the business–it probably won’t happen in year one or year two–but by five years down the road, the racetracks will be profiting from fixed odds.”
In the excitement surrounding fixed-odds betting in horse racing, it’s easy to forget how high the stakes are for the horse racing industry. Michele Fischer offers a final reminder of why fixed-odds sports betting is critical to horse racing:
“Horse racing is always going to exist. People love horses. They love to compete their horses. But at this point, with everything else happening in sports wagering, if we don’t step up, it could go the wrong way. So that’s why I feel like it’s make or break time for horse racing.”