By most any measure, this year’s Pegasus World Cup was a smash.
The 12-race day at Gulfstream Park in Florida resulted in a record handle for the event: $43.8 million wagered. That’s a number big enough for the industry to brag about, to insist things in horse-racing wagering are headed in the right direction.
But Patrick Cummings will tell you that haul is only half the story.
Cummings is the executive director of the Thoroughbred Idea Foundation, a group that acquired Florida state records for the Pegasus World Cup and learned that while, sure, the number was a monster, it’s a little deceptive.
“We found that one customer — one — accounted for 15% of the total,” Cummings said. “So there’s $43 million and change bet, and this one customer bet about $6.7 million. So did you have a great day? Yeah, great handle. But if it's a record because one person has helped you kind of come over the top, what does that really tell us?”
The industry’s “overall greatest need,” Cummings said, is to “enliven mainstream participation in horse wagering.” And single mega-bettors aren’t going to do that.
As legalized sports gambling spreads — it’s now legal in 30 states plus Washington, D.C., according to the American Gaming Association — it’s more important than ever, some wagering experts say, for horse racing to modernize and broaden its appeal to a range of bettors.
It might take a reduction in the amount siphoned off wagerers’ wins. It might mean opening up a whole new brand of betting.
However horse racing evolves, handicapper Ed DeRosa said, “it’s absolutely essential” to keep pace with the increasing sports-betting options. And there are a number of options for how to do that.
Fix the breakage
Kentucky has taken one important step already, Cummings said, in passing House Bill 607, which effectively eliminates “breakage,” the rounding-down of payouts to the nearest dime or 20 cents.
When you collect your Derby winnings this week, you’ll notice prices are on a round number. A win bet pays $11.20, for example. At Churchill Downs, that’s rounded down to the nearest 20 cents.
After House Bill 607 goes into effect in August, that same bet next could pay $11.39, for example.
“That doesn't sound like it's a lot to people; you’re just paying me pennies,” Cummings said. “But over the last five years in Kentucky parimutuel racing wagering, around $35 million has been held back from customers in these rounded-down dividends. It's estimated to about $60 million a year nationwide that gets held.”
It’s not an overnight game-changer. But it’s a step not only in putting money in bettors’ pockets, but appealing to bettors unfamiliar with horse racing.
Take down the takeout
A similar step — one that could increase payouts to bettors and put horse-racing wagers more in line with bets on other major sports — is to reduce takeout, the percentage of money host tracks subtract from betting pools before payouts.
Takeout money matters to tracks. It’s used for operating costs and profits.
But DeRosa advocates tracks lowering their percentages. At Churchill Downs, he noted, has a takeout rate of 17.5% for win, place and show bets and 22% on “most multi-horse wagers.” That’s compared to “typically 5.5%,” DeRosa said, in fees on other sports wagering.
“A lot of people think bettors aren't attuned to that, or they don't notice,” DeRosa said. “And my counterargument is even when betters don't know, they feel it in their pocketbook over time, whether they know it’s takeout or what it is. You're losing more when you lose and winning less when you win. I think racing fails to kind of recognize that the price of it absolutely holds people back.”
Expand the fixed-odds menu
Maybe the biggest step horse racing can take to draw in bettors more accustomed to other sports is to implement fixed-odds wagering, a format more familiar to fans wagering on the NFL, NBA and other leagues.
A fixed-odds wager is the sort you’d make if you were making, say, an NFL futures wager.
If you bet the Cincinnati Bengals today to reach the 2023 Super Bowl at +1,800 those odds are locked. If the Bengals make the big game, your $10 bet pays $190.
That’s a stark contrast to the Derby, where you can bet on a winner at 3-1 odds an hour before post time and see the horse go off at 3-2. You’ll be paid on the odds when the race goes off, not the odds when you wagered.
“For the rank and file such as myself, even someone who waits can wait until the horses are going in the gate, you're really not getting a true indication of what the price is going to be until the race is off,” DeRosa said. “It's just a bad user experience.”
And one vastly different than the wagers bettors are accustomed to in other sports.
In New Jersey, where sports betting is legal, Derby Day is the expected launch of fixed-odds wagering on races at Monmouth Park, Cummings said. By the end of 2022, he said, New Jersey could offer a look at how bettors are responding to fixed-odds wagering in horse racing.
Churchill Downs doesn’t currently have a deal to offer fixed-odds wagering on its races to American bettors. And for now that doesn’t seem imminent.
But fixed-odds betting could open up horse racing to all new wagers.
Cummings envisions a world where bettors could bet an over-under on total Derby Day wins for a jockey. Or where fixed-odds futures bets turn the Derby into a longer-term betting centerpiece.
“I think (Churchill Downs has) an opportunity to dominate the horse racing fixed-odds landscape with the Kentucky Derby and use it as a talking point,” Cummings said. “Basically from the first two-year old-races that are run at Keeneland, and then when you get into the summer at Saratoga and Del Mar, they could be pricing horses to win the Kentucky Derby, to make the Kentucky Derby field.”
The way Cummings sees it the sport’s “greatest need is to enliven mainstream participation in horse racing wagering.” Fixed-odds betting, he said, is one key way to do it.
“It's about just kind of enlivening, modernizing wagering on horse racing,” Cummings said. “It’s about embracing that modernity and trying to bring a sport to a 21st century consumer that pretty much today has a 20th century betting menu.”