Computer-assisted wagering's role is debated at symposium

Tucson, Ariz.

The future of horse racing as a pari-mutuel enterprise hangs in the balance of computer-assisted wagering, which accounted for a third of all wagering in 2022.

In aggregate, the CAW cohort has a much better return on investment than retail players. That means the higher the share of its handle, the more everyone else loses. This raises concerns about the long-term health of the everyday fan and weekend-warrior types who not only support racing through handle but also by attending events and owning horses.

According to data provided by Oliver Roeder, senior data journalist for Financial Times, retail wagering in the last 20 years has decreased by 60 percent while CAW has increased 150 percent.

"We’re talking about billions of dollars a year from a well-capitalized few whose money famously floods in moments before a race," Roeder said while moderating the a panel entitled "Computer-Assisted Wagering – The Good, The Bad and The Future" at the University of Arizona’s Race Track Industry Program Symposium on Tuesday in Tucson.

The panel, which was easily the most attended on day 1 of the industry confab, included National Thoroughbred Alliance executive director Pat Cummings, Monarch Content Management president Scott Daruty, Quantitative Trading CEO Don Johnson, New York Racing Association content manangement systems general manager Joe Longo and Parx chief operating officer Joe Wilson.

There was consensus among the quintet that “the good” of CAW is an emphasis on technology and its role in racing and attracting new players and maintaining them.

"Anyone can be a CAW player," Johnson said. "Access to data and cloud computing has never been more prevalent. This is all about how to attract players with that technology and pricing it properly."

"We should embrace technology," Longo agreed. "Overall, CAW is not a bad thing, but like anything else in life, it’s about moderation. NYRA is always looking at the landscape and how to better serve our retail players."

Moderation was on Cummings's mind as well.

"I do not believe we should ban it. I do not believe we need to get rid of it, but we need to control it better," he said. "Modernization is the future. You can’t backpedal away from high-frequency betting."

Daruty, who might have felt the target on his back most, was the most passionate defender, which makes sense as Monarch owner 1/ST Racing might be the most invested since Monarch bought into Elite Turf Club and later brought in NYRA as an equity partner. (Churchill Downs Inc., which was not represented on the panel, owns high volume bet taker Velocity.)

Daruty said the evolution of racetracks and horsemen wanting a bigger piece of the account-wagering pie as “the people putting on the show” led to Monarch’s involvement in Elite. Daruty was on a symposium panel years ago that discussed the issues with 3 percent host fees. Now 8 percent to 12 percent host fees are standard among top circuits.

"I’ve always been proud that this organization focuses on how to improve racing, sustain racing, and ensure it’s here long into the future," Daruty said of his tenure with Magna Entertainment, then Stronach Group and now 1/ST Racing. "My role in the company evolved into monetizing the content that tracks and horsemen produce. The more money we bring back to the people putting on the show, the more sustainable this industry begins.

"So we asked ourselves, why are we dealing with middle men between us and high volume players? Don’t we want a direct relationship with our biggest customers, visibility into what’s going on? Yes. So we made the decision to purchase Elite. I know there’s debate on that, but it’s a viable part of racing’s ecosystem."

Ah, not so fast, Mr. Daruty.

An earlier Symposium panel, ”Legends of the game: Racing’s iconic Turf Writers,” featured former Daily Racing Form editor Steven Crist and Beyer Speed Figure creator Andrew Beyer. More than those professional roles, though, both Crist and Beyer are the voice of gamblers for a generation of horseplayers, and neither agrees with Daruty.

"I think it’s unethical for racetracks to have ownership stakes in these syndicates,” Crist said of 1/ST and NYRA owning Elite. “They now have a financial ownership stakes in these syndicates, a financial incentive to just screw all their regular customers to make CAW teams more profitable because they’re sharing those profits.

"I really think that Stronach and NYRA should divest themselves of their ownership stakes,” Crist concluded.

"I couldn’t agree more," Beyer said. "It's a real scandal for racetracks to be so blatantly working against the interests of their bedrock customers. I am shocked. But I'm not shocked at anything that the Stronach Group does. I'm shocked that NYRA would be a part of something like that."

Crist did applaud NYRA’s efforts to carve out opportunities for retail players to avoid CAW handle. NYRA does not allow CAW into the win pool inside two minutes to post, and it does not allow CAW to play its $1, non-jackpot pick 6 wagers and the late pick 5. CAW can play the early pick 5.

"If you told (computer robotic wagering) tomorrow, 'Go away,' then national handle would drop 35 percent, and the industry would be in trouble," Crist said. So we need a way to keep CRW interested without punishing all the other customers, and the only road I see to doing that is what NYRA does."

Cummings encouraged racetrack operators to push players toward bets with lower effective takeout. He gave an example of a 15 percent takeout pick 5 in which retail players lose 40 percent. So advertised takeout is attractive, but CAWs win a greater share of the pool.

"Show me an inefficient market, and I’ll show you a group of people who will capitalize on that inefficiency, and the more difficult a wager the more inefficient the market," Cummings said. "The public is getting crushed on super-exotic wagers. We have to enliven markets where customers have a better chance to win. We’ve been pushing customers to bets they don’t win."

Daruty and Longo were very clear that CAW is not going anywhere, and Cummings and Crist acknowledged that in separate panels, even as critics of it do not see a path away from it.