Report regarding the International Symposium of Horseracing Held in Tucson, AZ  12/5 and 12/6,  2017.

 

The following topics of interest were discussed.  

 

Sports Betting at Racing Venues:

 

On December 4, 2017, the US Supreme Court heard arguments in a case between the NCAA and New Jersey over federal prohibition of a state's ability to permit  sports betting in the state.  Under PASPA, Professional and Amateur Sports Protection Act - a federal statute most states are barred from allowing sports betting to occur. The current federal prohibition on sports betting on college sports and other sports venues is virtually nationwide. If New Jersey prevails, sports betting would probably spread across states in the US that legislate for it. In this regard, 3 attorneys familiar with the case spoke at the symposium.  Each was of the opinion that the Court would more than likely rule in favor of New Jersey's position and hold that the federal prohibition (PASPA) on sports betting is unconstitutional.

 

If (when)  that occurs, it may open up opportunities for the horse racing industry. As a trade off for support of sports betting at our racetracks in New Mexico,  we should be able to through negotiation or statute carve out an enhancement for racing purposes much like the present 20% of net take that goes  to the industry from the track's casinos. Greater purses would likely add to more interest in the buying and selling of horses either for racing  or for breeding purposes.  In sum, if sports betting became a reality at racetracks  a portion of the revenue generated could be utilized to further  enhance purses and for the breeding of race horses.  Preparation for this should be a top priority for our collective industry.

 

The biggest challenge to sports betting in New Mexico would be securing legislative support to create sports betting legislation and dealing with potential conflict with the tribal gaming authorities which would more than likely want to have sports betting to themselves. The Horsemen, Tracks  and Breeders as stakeholders in racing in New Mexico need to be prepared for this.  We  need to do what is necessary to insure that if sports betting is permitted in New Mexico that our industry as a whole will benefit from it.  

The following states are already in play regarding the legislative requirements to allow for sport betting on college sports and other sport options (NBA, NFL etc.). Mississippi,  Kentucky, California  New Jersey, New York, Pennsylvania and West Virginia.  Note the states listed are all racing jurisdictions except for Mississippi which has riverboat casinos. 

 

Discussion of Reasons for Drop in Handle and decreased foal crops was discussed as well as possible solutions to the problems.

 

Our industry has suffered a severe drop in handle from a high of $16 Billion per year as recent as 2005 to about $10 million per year presently.

Several factors has led to this decrease.  First the foal crops have diminished from a high of 47,000 in 1985 to about 34,000 in 2016.  Reasons for this are: the tax package of 1986 where passive losses could no longer be deducted from active business income.   This led to a large number of smaller to mid size breeders leaving the industry.  The decline in the  number of race horse owners and breeders occurred because the tax benefits of charging expenses to other non horse related income could no longer be made.  The recession of 2006 took a big chunk out of the breeding and racing industry as money for racing and breeding dried up due to business and personal financial failures. (Foreclosures on real property, job loss,  as well as many other circumstances. )

Less race horses created shorter fields and reduced betting handle. Previous coupling of entries ceased and a field was left with a few owning the field.  Not a healthy betting environment  This vicious cycle also resulted in a greater than 33%  loss to handle during this time.

 

The following was recommended as a way to staunch the exit of owners and breeders and fans from our industry.

  Reduce takeout on bets. This arguably would lead to higher return to the bettors as well as a perception that there was value in making a bet on a horse in a race.  Present takeout amounts to 25% or so  of handle in the exotics, trifectas etc,  to 22% for straight bets and the pick 4, 5,6.  Reducing the takeout would result in more money being returned to the  winning better who would in turn bet it in other races. This re-bet or churn is what makes for total handle for the day. The better the movement of money the more money there is for purses and operating expenses.  

 

Doing outreaches to  bring in more  racing fans and prospective owners is necessary for a healthy industry.  The suggested way to do this is  by making the sport attractive both as entertainment and a sport where most can participate.  Such outreaches would include billboards and other media at or near a racetrack  that would be directed at prospective new owners and fans, and not just those who are already in the game. Guided tours of the track during workouts in the morning as well as  meet and greet programs for prospective new owner were suggested. In Florida for example,  the FTOBA has partnered with the Florida Department of Agriculture to develop  an outreach plan to reach new prospective owners.  This program in part of uses billboards in proximity of a race track that are designed to excite and educate prospective new owners.  Others are targeted to the new fan. At all times the outreaches are directed to a centralized website where more information is available.

Electronic access to betting and to information via smart phone, tablet and computer is also available.

 

The message taken from this portion of the program was that we need new blood in the industry in the form of new owners, fans, trainers and breeders. 

 

Tax policy: ( Not there yet.)

 

The currently proposed tax law appears to be quite friendly to horse ownership.  It would allow for a 100% bonus depreciation of the purchase price of a yearling in the year of purchase.  The bonus depreciation would likely apply to new  equipment purchases for use  at racing or breeding farms as well. 

 

Other ideas:

 

Other ideas included creating greater integrity in the racing of horses. This would include more out of competition drug testing and enforcement to weed out the bad apples and ensuring that safety of horse and rider is key to a positive review by the public.  Principles that we as Horsemen would certainly support.  Negative media coverage is not good for our sport.

 

International Simulcast

The US receives simulcast signals from many new venues, Korea, Singapore, Hong Kong, Japan and others.  It is growing at tracks across the US and Canada. Why? These venues run drug free,  and average 14 entries for race in the case of Japan and Hong Kong 10 about 11+ for  Korea. What seems to be lacking however is reciprocity where signals from US tracks being sent to these and other countries. This must looked at.  For example, Japan only accepts signals for a race that is graded as one of the top races in the world ( there are 100 such races on the list), and that has at least one  Japanese  bred or based horse running in it.  This occurred for the first time in 2016 when Japan allowed simulcast of the Arch de Triumph from France.  This race had a Japanese connected entry, was a Group 1 race and generated $40 million in bets for the one race.  While great for Japan, not so great for the sender of the signal (pride aside).  

 

 

Finally, tax withholding of monies due foreign based owners and jockeys was discussed.  This doesn't affect us here too much. Gist of it all is to abide by the treaty between the US and foreign country if there is one,  withhold 30% for taxes and payout the rest.  If the track's bookkeeper doesn't do the right thing,  the track could be surcharged for the amount not withheld. 

 

All in all the symposium was very well attended and produced.  In sum, the symposium left more questions than answers.  I believe that each point that was make was very valid especially a future that may include sports betting at a track near you.

 

Pat Bingham