By Sara Gordon
In a time where racing partnerships and syndicates are only growing in popularity, pushing for a transformation from “sport of kings” to expanded opportunities for racehorse ownership at a fraction of the cost, Morning Line Club (MLC) aims to push the envelope even further.
Taking a unique approach to bring new people into the sport, MLC is the world's first horse racing club to develop a U.S. Securities and Exchange Commission (SEC) compliant marketplace for trading shares of Thoroughbred racehorses globally. Simply put, the platform will function like the largely popular user-friendly investing app Robinhood, but instead of trading shares of stock, MLC members will be able to trade shares in horses.
“Our vision is to create a new alternative asset class focused on Thoroughbred racehorses. Instead of merely wagering on a two-minute race, with us you're investing in the career of a horse. This allows you to participate in profits from both racing and future breeding opportunities as well” said Joel Funk, CEO and co-founder of MLC.
The idea to combine advanced technology with the experience of horse racing was the brainchild of Funk, a transactional corporate attorney based in Chicago, Illinois, whose love for the sport and appreciation for Flightline (Tapit) piqued his interest in getting involved with racing partnerships. After extensive research into a variety of syndicate and partnership opportunities, Funk's eagerness evolved into a passion to improve the traditional model altogether.
“I realized that in order to turn my vision into reality, I had to partner with someone deeply entrenched in the racing world, someone with the contacts and relationships to help bring my idea to life,” said Funk.
That's when a friend of a client connected Funk with Tom Taaffe. With a 27-year training career highlighted by the brilliant Cheltenham Gold Cup winner Kicking King (Old Vic), Taaffe retired from training in 2021 and has since expanded his involvement in sales and breeding, including a role as the International Client Relations Consultant at Goffs.
An initial introduction between Funk and Taaffe led to more in-depth conversations and brainstorming sessions, with Taaffe soon signing on as the Co-Founder and COO of MLC while working with Funk to turn his idea into a fully-fledged reality.
Working alongside Radhika Clark, MLC's Director of Operations, who boasts an extensive background as a Thoroughbred bloodstock consultant, the MLC team officially launched their club in early September, nearly three years after the organization was founded.
How Does It All Work and How Does One Get Involved?
It all begins with a participant purchasing an 'entry fee,' which starts at $1,000. Each entry entitles the participant to receive at least two racing shares and two breeding shares in each horse in the specific portfolio open at the time.
Unlike traditional syndicates, where a participant buys a percentage of a share in a particular racehorse, MLC members will have access to an entire portfolio that will consist of approximately 50 horses.
“With this approach, they can invest – not just for a day – but in the career of 50 horses. This creates a continuous cycle where the investment can keep going round and around, allowing for progression into the breeding shed and back again. Plus, investors can exit at any time (subject to security regulations), and they can jump off the bandwagon by trading their shares whenever they choose,” said Taaffe.
A racing share is a fungible token that provides a participant an investment opportunity in the profits generated by a particular horse, while a breeding share is a fungible token that provides an investment opportunity if said horse is retained as a broodmare or moves on to a career at stud.
“We stand out from other syndicates because we don't apply any markup on the horses we purchase. When you invest your $1,000, that's your full capital requirement–no maintenance fees next year or the year after. That's it, you're done,” said Taaffe. “We return 80 percent of the purse money back to the shareholders based on their entry fee to encourage ongoing trading. You can reinvest in the secondary marketplace and cash out. There's liquidity, and that's never happened before either.”
Participants holding racing shares will receive collectively 80 percent of the purse money, minus any fees paid to jockeys, trainers and others by MLC. Meanwhile, those holding a breeding share, if and when a horse reaches that point, will receive collectively 50 percent of the breeding profits.
Along with receiving two racing shares and two breeding shares, participants will receive 20,000 points for every entry fee purchased. Participants will earn points for every dollar spent and earned on the platform. All points collected will unlock exclusive rewards based on the level status achieved, with levels ranging from Bronze (20,000 points) to Diamond (3,000,000 points).
The higher the level, the more perks and benefits the participant will receive, with opportunities ranging from invitations to trackside events, paddock passes, participation in winner's circle photos, box seats, jockey and trainer visits, special offers from MLC's brand partners, and more.
Secondary Marketplace
Arguably the most unique aspect of MLC is the secondary marketplace, similar to a stock market for Thoroughbred racehorses, which will be the world's first SEC compliant marketplace for buying, selling and trading shares in racehorses.
All transactions are handled on Liquidity.io's (Liquidity) end to end capital markets infrastructure. Liquidity's infrastructure uses a blockchain alternative trading system (ATS), a regulated trading marketplace that matches buy and sell orders of securities and then uses Liquidity Transfer Agency to bridge the transactions to Avalanche's C-Chain.
“If you like a horse or want to increase your stake in a particular horse, you can trade your shares on our ATS. This secondary marketplace allows you to trade with market makers and other community members. The value of the individual shares is not determined by us but rather by the community,” said Funk. “I believe the share values will fluctuate based on the horse's performance on the track, much like stocks. It's truly like a stock market for horse racing, infused with the excitement and on-track experiences that racing has to offer.”
MLC participants will be able to trade away shares or buy more shares in a specific horse depending on their personal preference.
“The really interesting part about Morning Line Club is that we aren't actually a syndicate, but instead, we are syndicate adjacent with the ability to allow our userbase the opportunity to trade out of horses by using our secondary platform,” said Clark. “In my experience with syndicates, when a horse isn't doing well or someone is unhappy with the placement of the horse, they are indebted due to having direct equity in the horse.
“The way we have structured ourselves will allow more flexibility and giving users more control over their experience in the club.”
For now, MLC requires participants to complete and submit a subscription agreement that attests to the participant's status as an “accredited investor,” pursuant to a RegD 506(c) under the Securities Act of 1933 and for the avoidance of doubt.
“Our platform allows individuals to invest in this market with far less risk than if they were to go directly to a sale and purchase a yearling for instance,” said Funk. “We are structured similar to a private equity fund. Just like a limited partner you make an initial investment – our minimum is $1,000 – into the club. As the managers of the club, we then deploy that capital into a diversified portfolio of horses, aiming to enhance your overall return on investment. However, unlike a private equity fund, once you invest, you maintain control over your own portfolio.”
Participants will be able to track their investment's performance and explore secondary market trading opportunities, while benefiting from regular updates on earnings and dividend distributions through profit sharing.
Building The Portfolio
The first portfolio that will be offered to investors will contain up to 50 horses, with the majority expected to be horses of racing age that are already at the track.
“We're buying horses that are currently racing – typically 10, 20, 30, or even 40 percent stakes – so our investors can experience instant action. In addition, we're also investing in a select few yearlings to diversify our initial club, though these will take some time to reach the track,” said Funk. “To clarify our financial structure, 80 percent of the invested funds are dedicated to the horses. Specifically, 60 percent is allocated for purchasing the horses, while an additional 20 percent is set aside in a reserve specifically for their ongoing care and maintenance. We manage all related fees and expenses.”
A portfolio containing up to 50 horses guarantees a continuous stream of racing action for participants to tune in to and experience alongside fellow MLC members.
“If we have around 50 horses on the platform, that translates to approximately 300 to 350 races a year in which our investors can participate. With our platform, participants can maintain a balanced perspective, as there will always be a steady stream of upcoming events to keep them engaged and informed,” said Funk.
Earlier this month, MLC had their first runner in the form of Brendan Walsh-trained 2-year-old filly Love Tempo (Ire) (Churchill {Ire}), owned in partnership with Magic Cap Stables, Karl Keegan, and Hayden Racing. Making her third career start going a mile and one sixteenth on the turf at Saratoga, she finished fourth in a Sept. 1 maiden special weight.
“One thing you learn in racing is to be patient. And that's why having 49 other horses is so beneficial; if one horse requires special attention, the others can continue to perform and carry the load,” said Taaffe.
Setting A Standard For The Future
The goal of MLC's unique approach is to combine advanced technology with classic racing traditions, not only with a one-of-a-kind secondary marketplace, but also with a variety of benefits offered by brand partners and promoted by celebrity brand ambassadors.
“Our aim is to attract exceptional brand partners, including hotels, airlines, and food and beverage companies. We've even lined up some celebrity chefs to enhance the hospitality experience which is a big component of what Morning Line Club is as well. While we focus heavily on the technology and the trading platform, we also plan to roll out the red carpet for our investors and participants with exclusive events, private dinners and more,” said Funk.
Funk, Taaffe, and Clark all believe MLC has something to offer any kind of person, from those already involved in racing to people who have been trying to find a way in, or anyone that's a sports fan and also enjoys dabbling in trading within a groundbreaking alternative asset class.
“We have a concept that we're excited to share not just in the United States but globally. Our focus is on trading rather than betting, and we see significant potential for this model to thrive in markets like China and Middle East where betting is illegal. This is not a bet but rather an investment in a security. “We want to connect with an audience around the world,” said Taaffe.
“We want to make this a fun game for people, like Esports and Fantasy Football, only it's real racing, real people, real money, and a real experience.”
To learn more about the Morning Line Club, click here.
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