Cannibalization Remains Key Concern For U.S. Fixed-Odds Wagering Expansion

January 12, 2024
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Fixed-odds betting has often been cited as a way to modernize the U.S. horseracing industry, but one of the challenges for those in the business remains concerns over how it affects pari-mutuel wagering.
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Fixed-odds betting has often been cited as a way to modernize the U.S. horseracing industry, but one of the challenges for those in the business remains concerns over how it affects pari-mutuel wagering.

States have been slow to allow either sportsbooks or racetracks the ability to offer fixed-odds wagers on horse races, rather than utilize the traditional pari-mutuel or pool-based wagering system where odds can change for players after a bet has been placed.

One state that has taken the plunge is Colorado, which approved a two-year pilot program in November to allow sportsbooks to offer fixed-odds wagering and collect data on its impact. 

“One of the things we talk about in the very beginning we were not taking anyone else out, horsemen, horse tracks,” said Dan Hartman, the former director of the Colorado Division of Gaming. “We were trying to get a product that worked along with horseracing.”

Lonny Powell, CEO of the Florida Thoroughbred Breeders and Owners Association, said a big part of the concern is whether fixed-odds cannibalizes the pari-mutuel system and affects how each part of the industry, including racetracks, horsemen, and breeders, would be compensated.

“I think everything should be on the table,” Powell said. “I am very interested as I’m sure a number of other folks on some of the data [from Colorado], because the one concern is can you do pari-mutuel and fixed odds in parallel without just consuming the economics of the pari-mutuel, because it’s all about economics.”

“It will not be something we will be pursuing in the legislature in Florida this session, we will not be pursuing anything like that, but I do think we have to keep our minds open to it,” he added.

In addition to Colorado, New Jersey has approved fixed-odds wagering on horse races. However, legislation to allow fixed-odds betting has also fallen short in other states, including Louisiana and New York.

DraftKings made a strong commitment to horseracing in March with the rollout of its standalone DK Horse application, which allows pari-mutuel wagering in partnership with Churchill Downs International, but remains a strong supporter of fixed-odds wagering.

“It’s something we think is complementary to pari-mutuel, not cannibalistic,” said Chris Cipolla, senior director of horse racing for DraftKings, calling fixed-odds “a massive opportunity.”

Cipolla said one of the advantages of fixed-odds is being able to offer proposition wagers that are not a part of the pari-mutuel system.

“That’s where we think the opportunity is to even expand the scope broader to people that may not be interested in horseracing now with pari-mutuel,” he said. “While the odds have gotten better and it’s not changing as much late, it’s still confusing to a novice horse player that they place a wager at five- or ten-to-one odds and then at post time it can be even.”

“It’s something that can be used to introduce new horse players to the industry, and then also bring them into the pari-mutuel rules, because the pari-mutuel rules do have a lot to offer once you understand what they are.”

Despite some of the criticisms of the pari-mutuel system, Steve May, senior executive for government affairs for Gaming Labs International and a former horseracing regulator in Minnesota and Kentucky, pointed out that the system has continued to adapt over time.

“I think there's a real misconception about racing and pari-mutuel wagering that it's a completely stagnant technology, but it is constantly evolving,” he said. “I've been around this industry for about 15 years now and I have personally seen numerous changes that experimentation is going on.

“I just don't want everybody to think that the pari-mutuel system is a stagnant and non-changing form of wagering and credit goes to the tote system and the racetracks for coming up with new and and different wagers,” May added.  “At least try them, throw it out there, see what sticks, and I think that's what the fixed-odds is, just another experimentation on wagering.”

Cipolla, Powell and May spoke last week during a panel discussion on horseracing at the National Council of Legislators from Gaming States winter meeting in Fort Lauderdale, Florida.

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