Sports Betting: Racing's Friend or Foe?

The Supreme Court of the United States will hear oral arguments Dec. 4 in the case of Christie v. National Collegiate Athletic Association which could bring sports betting to Monmouth Park. Today, in the second of a three-part series [click here to read part one], The Thoroughbred Daily News looks at the situation beyond New Jersey and whether or not sports betting is a serious threat to the industry or something racing can join forces with in a profitable partnership.

Some time in the first half of 2018, the Supreme Court of the United States will announce its decision in the case of Christie vs. National Collegiate Athletic Association, which will determine whether or not sports betting is legal at New Jersey's racetracks and casinos. It could additionally determine that the federal law, The Professional and Amateur Sports Protection Act (PASPA) of 1992 preventing it is unconstitutional. If that happens, legal sports betting could spread rapidly across the U.S. The court could also rule against the state of New Jersey, but most believe that won't happen. And even if it does, there are other ideas and bills floating around Washington that could pave the way for sports betting.

The bottom line is that the prohibition on sports betting outside of Nevada in this country is almost certain to eventually crumble and that America's already rabid appetite for sports betting will soon be able to be satisfied through legal means.

When the Supreme Court announces its decision and if it rules in favor of New Jersey, it will mark the most dramatic change in the landscape of gambling in the U.S. since New Jersey opened the Atlantic City casinos, the first U.S. casinos outside of Las Vegas. Forbes Magazine cites a report by the consulting firm Eilers & Krejcik Gaming that estimates that by 2023 there will be a total of 32 states offering regulated sports betting, which may result in a market worth $6.03 billion in annual revenue.

And what will it mean for racing? The only certainty is that a new and powerful form of legal gambling will be out there to compete with the sport. That's the same sport that, in the vast majority of states, is the only form of legal online betting and is the only sporting event that can be wagered on. How can racing compete with such a potent new competitor, a gambling game that is expected tp be far more popular than racing? People are searching for answers and solutions.

The best-case scenario is that the sport can find a way to be part of the equation, that it will get a cut of sports bets, just as it gets a cut of revenue from slot machine play at the many racinos across the map. The worst-case scenario is that racing and its needs will be ignored by state and federal lawmakers and that sports betting will cannibalize racing's already stagnant handle. Several states have already passed bills or are working on bills that would allow for them to have sports betting in the event New Jersey wins. In virtually all cases, there are no provisions that require a part of sports betting revenue to go to racing. New Jersey is an outlier because the Monmouth Park horsemen's group operates the track and its primary interests are improving purses, adding racing dates and capital improvements.

In October, Pennsylvania passed a bill allowing for a substantial expansion in gambling that includes a provision for sports betting. Sal DeBunda, the president of the Pennsylvania Thoroughbred Horsemen's Association, does not believe racing would benefit from sports bets, even from those bets placed at the state's three Thoroughbred racinos.

“I doubt it,” DeBunda said when asked if Pennsylvania racing would get a cut. “Every time there's been any expansion of gaming in Pennsylvania, we haven't gotten a piece of it. The legislature in 2016 called for a study–the horsemen did not ask for it–of horse racing. The study was done by a state agency. They didn't farm it out. It was done by the state. That study said that if you want to protect horse racing, you need to include a percentage for them in any expansion of gaming. Their very own study said they should do that and they ignored their own study. Given the fact they did that, I doubt horse racing would get anything from sports betting.”

Meadowlands owner Jeff Gural agreed.

“I doubt if racing is going to get a cut of this,” said Gural. “Most politicians consider racing already heavily subsidized as it is.”

New York has also passed laws that will allow the state to open sports books almost immediately if the Supreme Court determines that PASPA is unconstitutional. The problem is the law allows for sports wagering at only four casinos and not at the NYRA tracks, the Resorts World Casino at Aqueduct, or Finger Lakes.

But racing's leaders are not about to go down without a fight and some are cautiously optimistic that racing will be better off in the end once sports betting arrives on the scene. Eric Hamelback, the CEO of the National HBPA, has a pragmatic view; he is worried about how sports wagering will affect racing, particularly when it comes to its monopoly on online wagering, but he does not believe this is a lost cause.

“I would hope that sports betting does help racing, that we could become partners with, say, the ADWs,” he said. “That we provide a menu and a pathway that's already been set and we open it up and let them in hopes of a symbiotic relationship. But as we've seen with some of the casinos, they want to dump us and get rid of us. They won't help racing, they won't update the backside, they won't help with something as simple as putting clay in stalls. They don't want to spend any money on racing. That's what has become the reality and I don't want to get into that situation. I hope our industry doesn't get into a situation where the door gets opened up and we get left behind.”

Efforts will likely have to be made on both the state and federal levels to convince lawmakers that horse racing is too important to be ignored and its future would be jeopardized if it is not given a slice of the sports-betting pie.

In New York, efforts are already underway to have the law changed so that sports gambling is expanded beyond the four casinos named in the legislation and to racetracks, racinos, Indian casinos and even OTBs. But even should that happen, there is no guarantee that the sport would get a cut.

“As of now, we get no cut,” said Rick Violette Jr., the outgoing president of the New York Thoroughbred Horsemen's Association. “It worries me big-time. You're in the hands of the state officials, the governor, the senate and the assembly. It will be the job of the horsemen, NYRA and the breeders to concentrate their efforts to make sure they don't take off on a tangent with one industry and then piece-meal disable an industry that provides 33,000 full-time jobs in New York. Fortunately, this is a jobs state and the governor is a jobs governor. We have a tangible industry in racing that adds so much to this state, and it's quantifiable…the billions of dollars and the millions of acreage, you have to protect what exists.”

It could be that the fight to protect racing will exist more on the federal level. Many experts believe that if the sports leagues lose, they then will go to Congress and ask it to enact federal legislation that covers sports betting. If New Jersey wins the case on the issue of states rights, it might seem that the court has decided sports betting rules and regulations are up to the states. Still, there are avenues to put the ball back in the court of the federal government.

It would not be in the best interests of the leagues to have 50 states having 50 different sets of rules on sports betting, including oversight and regulation. They would want a more manageable situation and one that they could possibly profit from. It's unlikely the leagues would ask for a cut of sports wagers, but they could ask for such things as rights fees for games shown online or in casinos and they could develop sponsorship deals with sports books, much like they have now with the Daily Fantasy Sports giants DraftKings and FanDuel.

Alex Waldrop, the president and the CEO of the NTRA, and his staff are already preparing to preach their case on Capitol Hill.

“One scenario we are looking at at the NTRA is that PASPA is not just repealed but is replaced by some federal legislation,” Waldrop said. “We think that would be the sports leagues preference if they're forced to allow sports gaming. You can see sports leagues arguing to be granted content user rights and royalties. The leagues are going to want to make money on this. They are not going to want to see this go state by state.”

Waldrop continued, “We're working hard with the American Gaming Association to try to come up with an orderly process for this to proceed. The NTRA is going to be at the table and make sure that whatever happens, the horse industry gets its share and has a stake in the outcome and we are protected. By that, I mean we are going to have an opportunity to participate and, if not, in some way we are compensated. Technically, right now we are the only legal sports gambling there is outside of Nevada and we are for the most part the only form of legal online gambling, so we stand to lose the most. We will be at the table and will want to be compensated for the loss of that right we have.”

“The possibility of sports betting has the potential to be a positive for horse racing if the result is a repeal of PASPA because then there will be a reexamination of the issue by Congress and we will have the opportunity to shape any legislation that is forthcoming.”

But will anyone in power listen or be sympathetic to racing, which figures to be one hand among dozens seeking a piece of the pie? Even if racetracks around the country are allowed to offer their own sports betting, what guarantees do horsemen's groups have that the tracks will use some of the money to go toward purses?

“We have a monopoly on online wagering and are the only sports people can bet on legally,” Hamelback said. “We need to protect our own investments and our industry because this could go in a bad direction if we're not paying attention.”

People are paying attention, but how these potential problems are addressed remains anyone's guess.

In tomorrow's final segment of Sports Betting and Racing: Will the Marriage Work? The TDN will explore some creative options racing might consider should it get shut out of legalized sports betting.