Horseplayers are warned that computers ‘are not going away’

With the message that “computers are not going away,” the impact of batch betting was illustrated Thursday in Saratoga Springs, N.Y., where an influential racing conference was told how big a bite it is taking out of the pari-mutuel pie.

“It’s very frustrating, especially to new horseplayers used to sports betting, used to fixed odds, to bet a horse at 4-1 and see it go off at 8-5,” said Marshall Gramm, an economics professor at Rhodes College in Tennessee and a professed computer horseplayer. “Our middle-market player, our player who’s a weekend warrior and bets a significant amount of money, I’ve talked to many of them, and they’re betting a lot less. They’re getting squeezed out as a result of the shark-eat-shark environment. It’s a lot tougher for all players.”

In a panel discussion at The Jockey Club’s 71st annual roundtable conference on matters pertaining to racing, the head of a think tank offered statistics that cast a harsh light showing how batch betting rose from 8 percent of the market 20 years ago to 33 percent last year. It also showed how overall racing handle adjusted for inflation in the same period of time dropped by half.

“In the past two decades, the greatest source of growth has been a handful of high-frequency bettors,” Thoroughbred Idea Foundation executive director Pat Cummings said.

The initials CAW were heard plenty during the panel’s 20-minute presentation. They have come to define computer-assisted wagering, which 20 years ago accounted for $1.2 billion of all legal wagers on U.S. and Canada racing. Adjusted for inflation, that would be $1.9 billion now. From that figure the CAW portion of the handle more than doubled to about $4 billion last year.

By comparison, all other forms of pari-mutuel bets dropped from nearly $14 billion in 2003, or $22.5 billion in current dollars, to about $8.1 billion in 2022. With inflation factored in, that meant a decline of 64 percent.

Add it all up, and handle went from $15.2 billion adjusted to $24.4 billion in 2003 to $12.1 billion last year, a plunge of 50 percent.

Computer dollars went from 8 percent of the market 20 years ago to 33 percent last year.

“The CAWs are individuals with well-resourced staffs,” Cummings said. “They develop couture models to assess vast amounts of data. They deploy finely homed algorithms to efficiently place bets often at the last possible second, all while receiving significant rebates for their play.”

Usually quoted as being 10 percent, the rebates offered by racetracks to attract CAW money are a bone of contention for players who do not enjoy such benefits. In contrast, their technology ranges from modest handicapping software to an old-fashioned, paper copy of past performances.

The New York Racing Association made itself an exception two years ago when it began cutting off CAW players from win bets with two minutes to post time and later extended the rule to the daily late Pick 5. It also scrapped the Jackpot 6 that had been dominated by batch bettors making thousands of wagers every minute to cover myriad combinations.

“We had a lot of complaints from customers and even people in the industry specific to the win pool itself and the late odds drops,” NYRA executive Joe Longo said. “Because there is effectively no CAW in the win pool at all, you are seeing payouts that, when you’re comparing to the other pools that they are in, are substantially higher.”

Longo admitted that because more money comes into Saratoga, Belmont Park and Aqueduct, NYRA pools are more liquid, so other racetrack operators might not have as easy a time economically cutting off batch bettors.

There is the idea that fixed-odds betting can solve a lot of this problem. New Jersey already has it with BetMakers gradually making inroads into the market, particularly with its MonmouthBets in New Jersey.

“It could be here (in New York) sooner than we know,” Longo said, “but in order to protect the pari-mutuel markets here, if the reason you’re going to move from pari-mutuel to fixed odds is the volatility, we then remove the volatility from the win pool, long term this is something that’s going to benefit us.”

In spite of skepticism to the contrary, Longo was confident fixed odds would not cannibalize the existing pari-mutuel structure, because racetracks still would lever the betting parameters. At the same time, he said racing has to realize sports betting with its own fixed odds is here to stay, so why not join that parade?

“I think we’re kidding ourselves with the expansion of sports betting around the world and even more so in the U.S. here that it will take off,” he said. “There’s no reason to not think that it wouldn’t, particularly with prop bets and everything else that can be used as an angle to get more casual folks into the game.”

Gramm, who said he owns 113 racehorses, has lived both sides of computer play. He has gone from betting maybe $1,000 a week to wagering with his betting partner as much as $25 million a year and accepting rebates that he said have helped him turn a profit.

“There’s no turning back, right? The computers aren’t going away,” Gramm said. “We can’t step back in time.”

With that in mind Longo said why not find a way to start leveling the betting field, especially with regard to the terms of engagement racetracks offer batch bettors.

“If we can come up with one industry-wide CAW policy, whether it’s the win pool or any other pool, and allow customers to know you can bet with confidence, this eliminates the whole idea of the boogieman in the room,” Longo said. “You can bet and expect what you’re going to bet is what you’re going to get.”

Longo said talks to create such industry norms are going on “in the backgrounds” with the possibility of some ideas coming forward “in the next couple months.”

In another page from the if-you-can’t-beat-’em-join-’em book, Gramm urged players to embrace new technology, even if they do not turn themselves into big-time players.

“This is our future,” he said. “Giving people the tools to do computer-assisted wagering. Helping current horseplayers bet more efficiently is I think the way to go, because the competition is fierce, and there’s no walking back from it.”