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‘Rebaters’ stake their
pari-mutuel claim

Dec 16, 2003 7:52 AM

The subject was pari-mutuel "rebates" and the ensuing panel discussion was one of the last though most enlightening at last week’s 30th Symposium on Racing, sponsored by the Race Track Industry Program (RTIP) at the University of Arizona in Tucson.

Rebating to bettors, banned by law in Nevada, has nonetheless grown through the past decade to a position where rebaters, in some instances, are dictating to racetracks just how much they can charge for a simulcast signal, under threat of withholding their big play.

There are about seven major rebaters, including one off-shore company and several off-track betting hubs and simulacast racetracks.

Some 20 years ago, Chuck Di Rocco, publisher of this newspaper, pioneered race signal simulcasting after exposing the industry to the country’s first full-card simulcast program that originated at Arlington Park and was shown at the Union Plaza hotel/casino in downtown Las Vegas.

After a long series of negotiations, Nevada’s gaming regulators placed a cap of 3% on the amount that could be charged by the state’s licensed race disseminators for the signals from the various racetracks that wanted to participate.

Largely because of Nevada’s success with simulcasting, individual racetracks began in the early 1990’s to import racing signals from other racetracks, thus expanding their wagering menus. Now, it is widely recognized that most of the country’s major racetracks would not be able to survive without revenues generated from simulcast outlets.

Initially, the "Di Rocco 3% cap" became the norm in the simulcasting industry, but as tracks began demanding a higher percentage fee for their product, disputes arose. In Nevada, a confrontation developed a few years ago when Hollywood Park withheld its signal from the state’s race books in order to charge a higher percentage. As a result, regulators approved and race book operators agreed to pay a higher fee for the signals.

Even while that issue was being laid to rest, the issue of rebates was arising. In the late 1990s, some race book operators began rebating to their biggest bettors, somewhere between 5% and 12% of the total amount of money that they wagered. Because of a developing price war among the major casinos over these "under the table" rebates, the practice was banned by the Nevada legislature.

Note that there is a current movement in Nevada to legalize the practice of rebates, but the issue won’t be broached until the next legislative session next year.

Some race book operators took their rebating activity to other areas, including the Caribbean, and developed a thriving wagering business.

In fact, according to David Cuscuna, one of the country’s most successful professional gamblers who specializes in pari-mutuel wagering, more than $1 billion was wagered on thoroughbred racing by just under 1,000 rebate recipients last year. These rebaters placed their bets at seven wagering outlets in the U.S. and offshore.

While focusing on pari-mutuel outlets, Cuscuna reportedly has wagered "enough purse money to fund a Breeders’ Cup."

At last week’s symposium, he willingly debated (and defended) his role, and that of other rebaters, with Drew Couto, a consultant for the Thoroughbred Owners of California. Couto argued that thoroughbred owners were suffering from reduced purse monies because of the rebaters’ influence in designating the amount the tracks could charge for their signals.

Although the debate failed to resolve the issue, it shed plenty of light where there previously was mostly darkness.

However, it was generally agreed that the two groups were not that far apart in their approach to the cost of simulcasting.

It was also generally agreed that the racing industry would suffer severely if the more than $1 billion in rebaters’ action were withdrawn from the total handle.

In Nevada, the next step would appear to be adding state-licensed race books to the ranks of rebaters. That could bring back old business that sought more fertile betting fields, and perhaps cultivate a new breed of race bettor.