I will not comment on this, want to see other peoples takes, reprinted from DMTC forum by Oaklawn Park official.


I’ve spent the past couple of days peeking into various chat/bulletin rooms gauging the buzz regarding computer bettors. This board contains the greatest number of fans trying to understand the issue. I’ve enjoyed reading the posts.

Two nights ago I received an email from a poster on this board (scorequick). He asked me to offer some thoughts on the issue.

As most of you know, Oaklawn removed rebate/computer wagering shops from its pools during the 2004 season. The motivation for the decision was to ensure fairness for the racing fans, especially those supporting the game in the nation’s grandstands and OTB’s. It was the right thing to do.

Last week, the NTRA released the results of a study which examined the effects of rebate/computer players. Oaklawn participated in the NTRA study by providing its 2003 and 2004 wagering data. The study analyzed the dynamics of Oaklawn’s wagering pools with the rebate/computer shops participating in 2003. Those dynamics were contrasted with the behavior of Oaklawn’s pools after the rebate/computer shops were removed in 2004.

The conclusion, which is included in the final report, is that Oaklawn’s effective takeout rate for its remaining simulcast sites went down 1.64% after removal of the rebate/computer shops.

As a result, some $3 million that would have been siphoned out of the pools by the rebate/computer shops went instead to stateside racing fans holding winning tickets.

Also…the late odds drop phenomenon disappeared at Oaklawn when the rebate/computer shops were removed.

HOW DO THE COMPUTER/REBATE SHOPS OPERATE

Some basic knowledge of the industry’s economic model is required.

When Oaklawn sends its signal to California, the fans in California are betting into Oaklawn’s pools, not separate pools (you already knew that).

Oaklawn’s WPS (win place show) takeout is 17%. So, California wagering sites offering the Oaklawn signal take 17% of the handle off the top. The other 83% is returned to winning wagers wherever they occur in the Oaklawn network.

From this 17% California must pay Oaklawn for its signal...let’s say the fee is 3% of handle.

Now California has 14% left (17% - 3%). Forgetting state and workmen’s comp obligations for the sake of simplicity, this 14% is split (7% & 7%) between the California wagering site and California’s horsemen (purses).

The 3% paid to Oaklawn is split between Oaklawn and the Oaklawn horsemen, building Oaklawn’s purses.

As you can see…the horsemen benefit on both sides of the equation, sending and receiving. They should, owning and training thoroughbreds is an expensive business. Solid purses will bring good owners to the game. If we don’t have thoroughbreds we don’t have a sport.

THE REBATE SHOP

Most rebate/computer shops are secondary pari-mutuel organizations (SPMO’s). The NTRA study defines SPMO’s as follows:

Does not conduct live racing;

Provides rebates to bettors, up to 10% or more;

Is based primarily on telephone account wagering with a limited customer base with some customers using personal computers in their handicapping and wagering activity and being afforded special pari-mutuel access or service;

Owners and/or operators are not clearly defined;

Is out-of-country, an Indian gaming facility, or is not in the geographical mainstream of U.S. racing locations;

Has little or no U.S. regulatory oversight;

Has significant level of business contrasted by no visible marketing or advertising;

Has consistent and often substantial money settlements due from host track; and

Tax withholding policies and practices in relation to U.S. regulations are unverified.

These SPMO’s have a tremendous advantage over U.S. sites. They have no obligation to local purses.

Let’s revisit the economic model. Here’s what happens to the same 17% takeout at an SPMO:

3% to Oaklawn (fee)
4% to the SPMO
10% rebate to the player (no purse obligation frees up this cash)

U.S. horsemen and track management were foolish to allow this model to evolve. I’ll agree with Steven Crist on that point.

Big players from U.S. grandstands moved their handle to these sites. They set up accounts and wagered by phone. Tracks were unable to match the rebate offer because of the obligation to place half of the takeout into purses (where I think it belongs).

The NFL supports player salaries by selling broadcast rights to television for billions. Racing, with no such luxury, funds the sport by committing a piece of the wagering dollar to purses.

The off-shore rebate shops circumvent the purse obligation, jeopardizing the sport’s foundation.

THE COMPUTER PLAYER

SPMO’s offer select players direct wagering connectivity to the tote system. In the aftermath of the pick-6 scandal, that fact alone is ominous.

Direct access to the wagering network enables the computer player to electronically scan and analyze wagers placed by all other players. Just prior to the start of a race, the “linked” computers comb pools seeking underplayed wagering combinations relative to the merits of the horses. The program pays special attention to exacta combinations; it can look at all of them in a b l i n k.

When the program robotically pulls the trigger, a complex array of wagers, mostly exotics, is spread over the underplayed combinations. Essentially claiming all overlay value the pools for that race had to offer. They are taking the cream off the top.

Getting this electronic “last look” enables the computer program a consistent win of 97-cents on each dollar wagered. That’s a steady loss of three cents on the dollar.

However, add the ten cent rebate and it’s a seven cent winner on the dollar. Consistently!

That’s how it works. It’s a sure thing. If they wager $100 million in a month they will make $7 million. There’s no risk. NO RISK! That’s why I call it siphoning, not wagering.

The effective takeout for these computers is 3%, not 17%. That means the effective takeout on everyone else playing in the pools is greater than 17%.

The NTRA study spells this out very clearly. U.S. players are guaranteed to lose faster when participating in pools accessed by rebate/computer shops.

These robotic wagering computers scan every race…at every track…every day. You’re always competing with them, unless you are wagering on Oaklawn or Tampa Bay Downs.

Many racing jurisdictions worldwide have banned computer robotic wagering. Australia is one of them. With no place left to go, all computer bettors are trying to plug into U.S. pools. The result will be more strain on purses and even smaller payouts for the U.S. grandstand player.

IS IT UNFAIR

Some say these are just smart handicappers with no real advantage. Others see it as progress. “Don’t stand in the way of technology” a friend of mine in the racing business argued the other day.

Consider these analogies:

If you sit for a game of poker in a casino you’ll soon discover that the house does not care which player wins the pot. The house gets a cut of every pot, regardless of winner

Pari-mutuel wagering is much the same. A cut is deducted from the pools and the balance is returned to winning tickets. The tracks care nothing about who wins the pools.

Imagine yourself at one of these poker tables. There are six of you playing when a seventh player arrives. The new player pulls a laptop computer from a bag and sets it up on the table. The laptop has a sophisticated lens that scans the cards on the table as well as the amount of chips in the pot. Everyone at the table laughs at the geek and his computer. Play continues.

The laughing soon stops as the computer player consistently wins pots. With more chips in front of him the computer player begins betting more aggressively…winning even bigger pots.

Exasperated, the players complain to the dealer that the computer player has an unfair advantage. The dealer scoffs…saying that the computer player is creating bigger pots, a portion of which goes to the house.

Now…what would you do? Would you stick around and lose, or would you get up and leave?

The critical difference between the poker table analogy and the pari-mutuel network is at the poker table you can see the computer player. In the pari-mutuel pools you can’t. He’s hidden.

Is that fair?

One more analogy…

A small set of investment traders quietly obtain computer access to the pipeline of trades. They view these trades just before they transact on the major exchanges.

With this unique access, the investors are able to see how all other investors are about to trade. Placing their trades based on this privileged knowledge, the investors consistently beat the market.

Is this fair? Would the SEC shut this down? Would people go to jail?

The rebate/computer wagering model is bad for racing and fundamentally unfair to 99% of the fans.

That’s why we cut ‘em off at Oaklawn.

Bobby Geiger