Fixed odds hit stride in New Jersey; rest of America is next

Oceanport, N.J.

Dallas Baker grew up in Sydney, Australia. The beach suburb Manly, to be exact, about a half-hour north of Royal Randwick Racecourse.

That was where he became immersed in a betting culture that routinely positioned pari-mutuel wagering at arm’s length from fixed-odds bookmakers. Like anyone in Australia having a punt, Baker would have felt like he was in a department store for horseplayers.

The idea of locking in odds before a race without waiting until post time became second nature for Baker as it has for the 25 million people who live down under.

“I do have an Australian accent, so I might be biased,” Baker said. “But I’m not being biased in saying it is the best horse-racing wagering market in the world.”

Now, as the head of international operations for BetMakers, Baker has been tasked with replicating that bold position in America on behalf of a company that serves a B2B role between tracks and bookmakers. It came first in New Jersey, where BetMakers is in the early days of a 10-year contract to run fixed-odds wagering. Then, with Colorado on deck and other states lining up, the plan is for a rollout across the rest of the country.

“I think this is the future horizon,” said Dennis Drazin, the Monmouth Park boss and the lawyer who was credited with the strategy that got the U.S. Supreme Court to legalize sports betting in 2018. “I think that five years from now, people will do this like they’re doing in Australia and other jurisdictions. Certainly it will become part of the overall handle, and I think it’s going to grow the revenue.”

Last weekend’s $1,017,500 Haskell Stakes (G1) at Monmouth was the biggest stage yet for fixed-odds racing in New Jersey. Before that, BetMakers processed its first bet May 6, nearly 11 months after the state legislature unanimously approved the concept for horse racing.

On Saturday, Baker said BetMakers attracted “$80,000 on the day” in win, place and show bets. By comparison, those pools brought in more than $600,000 in pari-mutuel bets. That meant fixed-odds wagers accounted for “about 12 percent of the total win-place-show on the track,” according to Baker.

“We thought around the 10 percent mark would be about the number, and we are a tick over that,” he said.

While Haskell victor Cyberknife paid off at more than 7-1 in the pari-mutuel win pool, savvy bettors at the track could have gotten him at odds as long as 10-1 via BetMakers, where he closed at more than 8-1.

Still at the top of Baker’s short-term to-do list was the launch of Monmouth Bets, the mobile app allowing horseplayers anywhere in New Jersey to make fixed-odds wagers on races at 13 tracks – and counting – across North America. Baker hoped to have it running in time for the Haskell, but it was not ready. He said Wednesday “it is now live” for users at the track and that the statewide footprint could be in place by the end of the week.

At his table near the BetMakers betting windows in the Monmouth Park grandstand, Baker spent nearly an hour fielding questions for Horse Racing Nation’s Ron Flatter Racing Pod, where the entire conversation may be heard. These are excerpts from that interview.

Fixed-odds betting, Dallas. At long, long last, it comes to America.

We actually celebrated our third-year anniversary when we first met (Princeton lobbyist) Bill Pascrell III, who was one of the driving forces behind an idea that we had in our office in Newcastle (Australia) a couple of years before that actually coming to fruition. He’s got a great relationship with Dennis Drazin, and they were behind the (sports-gambling ban) being repealed. We did it again with fixed odds. But yeah, it’s been a long journey, that’s for sure. And great to be now live getting close to almost three months into the program.

You could almost call it a soft launch by comparison to the Haskell, right?

Definitely. This is all about proof of concept at the moment. We’ve only got five tellers here (near the grandstand entrance) and a few others around the track. It’s been intentionally done that way just to get all the kinks out, just to build up the program and get it right. The next main step is hopefully Monmouth Bets. The team is working phenomenal hours to try to get this up and running. Then obviously, people can start betting online. The main thing about this program is to get it onto the track here first, move to Monmouth Bets and then move out to the other bookmakers as well, too. That’s when we really start to see the program developing the way that we want it to.

Can you provide a snapshot of the first three months in terms of churn or revenue that you have had, which is then going to mushroom maybe, as you say, 100-fold?

I think the numbers that we’re talking now, we’re going to have a couple of zeros on the end as soon as we get online. We’ve almost got to about a half-million dollars turnover (before the Haskell), which is about on par with where we thought we’d be. We definitely didn’t go about setting any world records. The main thing is getting the systems up and running. Naturally, it’s been a live venue. It’s commensurate with the crowds. We’re still not back to the pre-COVID levels yet. We’re seeing a lot of people having some really good-sized bets. We’re happy to take a good bet. The most important thing is the customers are enjoying it. Rather than saying, “I bet something at 5-1, and it started 5-2 or even money,” you’re hearing stories about, “Oh, this went off at even money on the tote (pari-mutuel), but I got 5-2. How good is that?” So it really is the vibe and the feel of it that’s really what’s been the most pleasing thing.

I lived for three years in your home and native land, Australia. I experienced firsthand pari-mutuel and fixed odds alongside one another, so the education process for me was immediate. What has it been for customers to come in and see them side by side? And what do you find to be the biggest challenge in providing a learning curve?

The challenge is for us the fact that we’re in decimal odds. It was something that we were talking about and debating. Do we do fractional? Do we do decimal? Do we do American odds? We thought that the decimal odds are probably the easiest thing to explain. I know for traditional racing people, it is a little bit hard to get your head around that $3.60 actually means 2.6-1, or $21 means 20-1. It just includes your ($1) stake. We thought we’d go through the pain in the early days. Remembering the No. 1 part of this program is tailoring it to the sports-betting public, for people who probably don’t know what 9-5 means, $2.80 is a lot easier to say. So that’s one of the challenges. And just the other things about deductions. Obviously, if a horse is a scratch, you get your money back, and then there has to be a deduction. So that changes the price. Just little bits and pieces like that in the educating process.

My condensed version is that fixed odds are probably the best way to go for a vertical bet, but because of the exposure that you might have, multi-race bets might be better with pari-mutuels. Having said that, are you addressing the possibility of horizontal bets? In what way would they be coming to pass with you?

This is only the small start, but being able to parlay, the technology we’ve got allows up to eight legs. As we move to online, you’ll see a lot of these features come into play. So instead of just having to play the Pick 5 or the Pick 6 or the Pick 4, you will be able to say, “I want to have runner X at Monmouth into runner Y somewhere else to runner Z somewhere in Australia.” You’ll be able to have multi-jurisdictional parlays. You can try back all the eight winners into each other (at one track). You can actually set your ticket so it is a life-changing experience. There are other bets that will come through, sort of proposition-style derivative bets, as we call them. You’ll be able to say horse A vs. horse B just to beat each other head to head. All little dinky things that have proven to be really successful and really popular overseas, we’ll gradually roll in as well, too.

Let me throw the devil’s-advocate things that I have heard, and I am sure you have. Aidan Butler from 1/ST Racing, who himself cut his teeth as a bookmaker in England at racetracks there, said his concern about having fixed odds alongside pari-mutuel was that it could weaken the economic structure in racing that is built on pari-mutuel betting. What is your retort to that?

Well, one thing is we bought a tote company (Sportech), so we think the tide is going to actually survive and thrive, and we think there’s a lot of room for growth in the tote (pari-mutuels). The better the circular flow is for the customer, the better the options. You tell me any industry that doesn’t benefit from servicing their customers better. Our customers are the punters. They’re the people at the windows having the bets, so you’re giving them a better option to start. The worry about cannibalization, everyone tells me, “You keep using Australia (as the example).” Well, one, that’s where we cut our teeth. I do have an Australian accent, so might be a bit biased. But I’m not being biased in saying it is the best horse-racing wagering market in the world. The handle has stayed pretty much the same on the tote, and Australian racing has gone from roughly about a $12 billion annual handle to almost $40 billion. And $30 billion of that has come from fixed-odds betting. My point being, if the racing industry is getting a whole heap of extra funding, what does it care whether it comes from the tote, whether it comes from fixed odds, whether it comes from an exchange or whether it comes from any other form of wagering? It’s not the racing industry’s objective to protect a tote company or a fixed-odds company or anything else. The objective is to get as much money back into the industry as possible.

I presume you have a takeout rate that is baked into the deal that you have with the state of New Jersey. What is that?

Basically, 4 percent of every bet that is struck goes back into the industry. When we start importing tracks, about 2 percent of that will go back to the host track. The other half of that stays with the local industry.

And as far as overall takeout, I know that is more difficult to ascertain because it is not pari-mutuel. But in that sense, is there a goal or a target in terms of what you want to hold?

As the marketplace grows, the percentages will become more competitive. Generally, you know, depending on the size of the field, one of the advantages with fixed odds is that you don’t have to bet to 120 percent, which is roughly what the tote is. Whether there’s two runners or whether there’s 20 runners, the market percentage is a lot lower in a smaller field. It generally comes down to a percentage per runner than it does to the total field. Generally, you’d like to see the markets finishing at about 115 percent. That’s the closing price. If you were to factor in the best-priced bet, you’re down to 100 percent. Remembering at the moment we’re One-Eyed Wallys here at Monmouth. When other bookmakers start coming in, you increase the marketplace, and then natural competitiveness comes into place. The bigger the marketplace, the more competitive it can be. Like the more money you hold, the better the margins can be for a gambler. We’re going to hold the most money on the Haskell over the weekend, so the prices that will be on the Haskell will be more competitive than on race 1 (on a Friday).

One other concern that has been voiced – and often loudly – is that if somebody wins too much, they will be cut off. True or not true?

No. Look, it has been an ongoing issue with bookmakers around the world. From the bookmakers’ perspective, I sit on both sides of the fence. If you can just look at the top of the list, and you’ve got 10 people who win every day, and you’ve got the ability to be able to just say, “I don’t want your business,” it’s hard to argue if you can do it. But what is important, I think, is everybody being able to have the opportunity to have a fair bet. This is the model that we have here at Monmouth Park and the model that was brought into Australia, where bookmakers were barring people. You didn’t even have to win. You just had to back a horse at the right price. “Sorry, we don't want your business.” You could have had an absolute losing day, but if you back a horse at the right price, you get barred. So what was brought into Australia was minimum bet limits on the day of the race. Depending on the size of the venue, the bookmaker has to stand each person to lose up to $2,000, up to $5,000, depending on the venue and where that bookmaker is placed. When you’re talking about a marketplace of 20, 30, 40 different bookmakers, that’s a significant amount of money. That’s exactly the same model we’ve got here at Monmouth. We have a bet limit to win $2,500 at the moment. That will increase as we get further down the track, and we’ve imposed those rules upon ourselves to do that. I think that’s important for the industry.

How soon before you’re not just in New Jersey?

Colorado has already approved. Colorado could go tomorrow. There’s a little bit more work to it than just clicking your fingers and flicking switches, as we found out over the last few weeks. We’ve got a lot of interest from the obvious states – the states that have embraced sports betting. Most of them do require legislation. Colorado was able to get through regulatorily, but most will require legislation. We’re in deep discussions with a lot of states, and most of their legislative sessions start in quarter 1 or quarter 2 next year. That’s when you’ll probably see a lot more movement on it. I was very pleased to hear (state senator Joseph) Addabbo saying that he’s very seriously considering putting it through the processes next year in New York. That obviously would be huge. In the next two to three years, we’re going to see a lot more states with fixed-odds betting get up and running. That’s where the marketplace really grows, and that’s where the industry really flourishes out of it.

So it’s a matter of not too much time as I sit in Kentucky that I would be able to have access to the fixed odds at Monmouth Park.

At the moment, it’s in New Jersey. Being a racing bet, there is the thought that you might be able to bet across state lines on it. You originally have to be a New Jersey resident to open an account, but one of the main things that we’re trying to get the states that are taking it on board is to make it a racing bet. One, because then it applies to the Interstate Horse Racing Act. And two, generally a racing bet is taxed less than a sport bet. Like here in New Jersey, there’s no tax. If it was a sports bet, depending on the best place, it’s roughly 10-12 percent. The less it’s taxed, the more that can be put back into the racing industry.

You know you will have fully arrived here when you see someone getting on the train at Monmouth to go back to Penn Station with their high-heeled shoes over their shoulders like they are leaving the Melbourne Cup.

It’s always a good look, isn’t it? Yeah, we’ve all been there. You look at the simple numbers of $10 billion or $12 billion being turned over on U.S. racing with 330 million people in the country. Australia does $30 billion or $40 billion with 25 million people. So if that isn’t an opportunity, I don't know what is. With all due respect to everyone in the horse-racing industry in the U.S., this is the most immature market in racing in the world. Don’t take that as some arrogant Australian saying it. Take it to say get behind it. Embrace this industry, because this can turn very, very quickly. There’s 30 million people on sportsbooks at the moment who are registered with accounts. That’s 30 million people who are potential targets for the racing industry. They’re ready to be targeted. If you’re a trainer or you’re a horseman or a jockey or whatever, if you know someone in Australia, pick up the phone and ask them how much how bigger and better the Australian racing industry is now compared to what it was 12 years ago, and how much more money they’re all making and how much more sustainable it is. That can happen here. And it can happen a lot quicker than it did in Australia.

BetMakers is a Horse Racing Nation sponsor. The quote from Dennis Drazin came from his conversation last month with HRN’s Carolyn Greer.