System Would Increase Revenue From Account Bets

An electronic commerce company hopes to introduce a Web-based program that would convert legal pari-mutuel Internet wagers into on-track bets, thus increasing the share of revenue to tracks and horsemen.

Todd Stinson, who developed a digital online payment program called E-Cash, said he decided to consider a program for the pari-mutuel industry after the Breeders' Cup Ultra Pick 6 fraud of 2002. Called "Virtual Tote," the program creates virtual pari-mutuel tickets and can send wagers directly to racetracks through a closed-loop system, he said.

It's not a tote system or an Internet wagering system; rather, it can be used in conjunction with betting systems. Stinson said he already has discussed Virtual Tote with tote and racetrack companies, which would pay for the service.

"It would allow racetracks to get a majority of the takeout," Stinson said. "Our industry is the only industry I know of that voluntary gave away its content. It's a flawed system. Even advance deposit wagering companies are working on small margins. Tracks are selling their signals at ridiculously low prices."

Stinson presented his program to the National Horsemen's Benevolent and Protective Association Jan. 22 during the organization's winter convention in Tampa, Fla. Horsemen could be called a captive audience given their belief that they aren't receiving their fair share of revenue from some Internet wagering outlets, legal or illegal.

Stinson used the following example: If account wagering in California produces $500 million in handle for one year, the 5% blended rate paid for signals would provide the tracks with $25 million in revenue. Under the Virtual Tote system, the $500 million would be considered on-track money, so the 17% blended takeout rate would produce $85 million for the tracks.

Revenue to horsemen in the form of purses would increase along with the revenue splits.

"I'm not here to try to put the ADWs out of business," Stinson said after his presentation. "This is a conduit to start a paradigm shift that would let the tracks and horsemen control their own destiny. In theory, the product you just saw could eliminate rebate shops."

Stinson said the final tests on the system should be completed by the second quarter of 2006. He already has reserved a Web domain called ontrackbet.com that would accommodate the system.

There are some legal issues, including determining where a wager is actually made, and whether the system would conform with the 1978 Interstate Horseracing Act, which legalized simulcasts across state lines.

"There certainly are implications for horsemen across the board," said Doug McSwain, counsel for the National HBPA. "The law hasn't caught up to where technology has moved. There could be cautionary issues here."

McSwain noted the IHA requires consent from regulators in the host and receiving states when signals are transmitted. "When you move into a virtual system, you've essentially cut out one of these racing commissions," he said.

National HBPA affiliates Jan. 22 also heard about the "PrimeTote AutoBet Advanced Order Wagering" program, which can process tens of millions of conditional wagering calculations in 200 to 400 milliseconds, according to company officials. The idea is to eliminate the perceived advantage held by big-money arbitrage, or "batch," bettors that use computer programs to determine value combinations and wager just before pools close.

Herb Connor of PrimeTote said the company is in discussions with tote companies about integrating the program into account wagering services. It would allow players to make conditional bets--$50 to show on a horse if the horse has less than 10% of the show pool, for instance--based on how much is in specific pools. The bets would be canceled if the conditions don't apply in a given race.

Connor said with PrimeTote, wagers would be accepted or rejected at the final wagering cycle. "We know right when the final wagering cycle happens," he said. "We're hoping this allows the average bettor to compete against syndicates and 'whales.' "

In another technology presentation, Robert Seefeld of Sona Mobile outlined a mobile platform he said works across a wide range of devices and operating systems. He said the system has the potential to create a "virtual OTB" with low capital costs.

"The world is moving toward portable, but obviously this is just one way to make a wager," said Seefeld, who works for Sona Mobile in its entertainment and gaming division. "It's critical to be allowed to bet on horse racing anywhere in the world."