The following is an excerpt from a piece written by Ed Bain on his time at the DRF Expo.

---------
We broke for lunch and during that time I had an interesting conversation with
one of the owners of United Tote regarding the really big bettors in racing that
were betting millions. He stated that there are only eight players or consortiums
betting on racing in the world and almost all were individuals who headed a group.
I said there is this impression that there are thousands of big players betting
millions each day. He laughed and said no believe me I know them all, there are
only eight because he has tried to recruit them to bet through United Totes host
tracks, but with out much success. He stated this was because they can’t offer the
rebates that an off shore rebate shop can. We talked about how these consortiums
bet by using computer programs hooked into the tote systems and the advantages
they have. He stated that these groups of bettors could not beat the take, without
the rebate, they would lose money. I shook my head, and said it would seem to me you
would have to show a positive Return On Investment before you could bet millions
through a rebate shop. He stated no, they have found a way to beat the system by
betting millions each month by enticing off shore rebate shops to take their bets
and use their influence and computers, which were hooked directly to the betting pools.
He stated “they also have another advantage other than exploiting betting pools with
their computer programs. They have about a ¼ of a mile run before the tote companies
betting windows close”. I said “A ¼ of a mile?” He nodded “Yes.” I said, “Now that
is a true advantage. Because if you have a computer program that can identify lone speed
and let you have a ¼ mile to decide to place a bet, I would label that cheating. That’s
an unfair advantage that we as every day players don’t have. If I was a speed player
betting lone speed, I only have to get a hit rate percentage on my ability to find lone
speed, then I would bet millions.” Our conversation went from that to how they bet
finding betting pools that were undervalued, and to make money they had to have the
rebate because without it they weren’t good enough to make a living betting on the horses.
------------------------

I'd like to say a few things about it.

1. The United Tote rep is being remarkably frank here. This surprised me in view of what he is saying openly.

2. That there are only a handful of huge groups makes perfect sense. Moreover, I would say these groups do not compete with each other else cannibalisation would certainly take place. In that sense there must be some sort of agreed carve up of the tracks between these groups.

3. That they are getting "1/4 of a mile" again makes perfect sense. Not in the way Ed describes it as being a tactical form advantage ie lone speed etc (although it could be used as that too), but primarily
as a mathematical advantage. A key component of extracting the economic inefficiency out of a pool is knowing the final race handle. This is what giving them 1/4 mile is all about. Knowing the exact handle enables them to calculate the optimum amount they can inject into the pool to maximise return on capital outlay.

4. This relates to the last sentence. The only (endemic) economic inefficiency that I am aware of that existed in racetrack betting markets is the fav-longshot bias. In very simplictic terms, that favs are underbet and longshots overbet. Somewhat counter-intuitive but that is why it lay dormant for so long though it has been known for a long time now, just maybe not exploited for practical reasons which computers, networking and (particularly) rebates solve. The fact that some people say the bias is now gone is maybe testament to these groups ability.

If I am right, or even if I am wrong the Tote rep's words still surprise me. He is clearly not scared of a court case. This implies it is all legal. In that case, your betting system is legally corrupt if they are shutting shop then giving 25 secs more to these groups.