Again, No Apparent Handle on Pari-Mutuel Handle

A two-hour discussion on account wagering and secondary pari-mutuel operations July 14 again revealed horsemen have knowledge of situations that suck revenue from purse accounts, but no definitive national strategy to recoup the money.

According to figures provided by Bob Reeves, an Ohio Horsemen's Benevolent and Protective Association board member who serves as co-chair of the National HBPA Wagering and Alternative Gaming Information Committee, the current simulcast pricing model cost horsemen and racetracks about $600 million last year because SPMOs kept too large a share of the 21% average takeout rate.

Reeves said SPMOs include more than account wagering services and rebate shops. Any non-Thoroughbred track, Greyhound track, jai alai fronton, casino, or off-track betting parlor not owned by a track qualifies as an SPMO for the purpose of Reeves' calculations.

"The gap is too wide and must be closed," Reeves said. "The simulcast economic model used to exchange race cards between Thoroughbred tracks works fine. But when you apply the model to something other than a Thoroughbred track, you're not getting your fair share. The industry has to come together and address the problem or we're all out of business."

Proposals for a tiered pricing system have gone nowhere. In fact, Bill Walmsley, the Arkansas HBPA board member who once sat on the board of directors of the National Thoroughbred Racing Association, said he broached the subject on more than one occasion.

"I had five votes against me every time," Walmsley said in reference to racetrack representatives on the NTRA board. "Even the big (racetrack) guys are afraid of each other."

"This issue is not a new issue," Ontario HBPA executive director Nick Coukos said. "We talk about it and talk about it, but don't do anything about it. I can assure the horsemen in this room we are going to do something about it."

Dave Benson, president of the Oregon HBPA and co-chair of the National HBPA wagering committee, suggested horsemen form a bureau that would monitor handle and collect the proper amount of revenue. He said there must be a system of checks and balances.

Some major racetracks hire companies to serve as settlement agents.

"It seems we almost need to form a collection company," Reeves said. "We need to be our own settlement agent. To get the situation under control, it seems like an obvious answer.

Horsemen painted a picture of an industry out of control. Account wagering companies take bets from residents in states in which it's not expressly legal to do so; another may not, but it receives revenue nonetheless because it sublicenses product to one of the other services. If a state has no agreement for source-market fees, no one seems to know where the money goes, according to horsemen.

In addition, horsemen said they don't share in the sublicense fees, which could run from 2% to 5.5% of handle. With third-party operators out of the way, tracks and horsemen would retain the money, they said.

Benson said through the first quarter of 2006, $286 million passed through the account wagering hubs in Oregon. Thus, about $28 million was produced for horsemen and tracks, he said.

"Are horsemen receiving their fair share of that money?" Benson said. "I don't think source-market revenue is being paid."

Lonny Powell, an executive with Youbet.com, was on hand for the meeting to listen and field questions. He disagreed with some of what was said.

"I know our industry is better off because of what we're doing," Powell said. "We are out promoting the core product. It's not a secret we're a sublicensee for some companies, but we're not at liberty to disclose that."

Other discussion touched on wagering outlets that take signals without horsemen's approval.

"They're doing it and laughing in our face," Louisiana HBPA president Sean Alfortish said.

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