NTRA Players' Panel Issues Recommendations

The National Thoroughbred Racing Association Players' Panel, formed in the wake of the Breeders' Cup Ultra Pick 6 fraud of 2002, has issued policy recommendations on subjects of "serious concern and importance" to pari-mutuel customers.

The panel, which meets periodically, was formed in the spring of 2003. It discussed its concerns during the NTRA Marketing Summit and Annual Meeting held in Las Vegas last fall.

Edited from information provided by the NTRA, the following is a list of areas of concern, along with recommendations:

A. Integrity of the pari-mutuel pools, and the late merger of wagers
The late mergers of simulcast pools at the host tracks following the "off" times have resulted in unacceptably late and significant drops in the odds after the horses have left the starting gate. The phenomenon has contributed to a perception that sophisticated bettors are using technology to past-post the races, and to a real loss of value that subverts the handicapping and wagering goals of all bettors.

Recommendations: of data processing and odds changes to 10-15 seconds.

-- Totes should "force cycle" the win pool every 10 seconds after the pools close to update the final odds as quickly as possible and prevent delays from individual sites.

-- Eliminate cancellation times at all host tracks and simulcast locations.

-- Transmit the win wagers from the hubs to the hosts prior to the aggregation and transmission of other pari-mutuel pools at the hubs.

-- Transmit the exacta-wager pools in priority to the other exotic pools, provided the transmission does not delay the calculation, transmission, and posting of the win odds.

-- Post the odds changes to the closed-circuit broadcasting system (simulcast signal) prior to posting the odds changes on tote boards.

-- Post the final two cycles of wagering data at the host tracks and on the host tracks' Web sites.

-- Require the totes to post reports of canceled wagers during the final three cycles of wagering, including amounts, wagering sites, and window numbers.

-- Inform the bettors as to how their wagers are being processed from the guests to the hubs to the hosts.

-- Do not merge simulcast pools at the host tracks more than 30 seconds after the "off" time of any race.

B. Pari-mutuel takeout rates
In today's world of full-card simulcasting, takeout rates are a major factor for regular and serious players. With dozens to hundreds of wagers being made in a single day by each player, the cumulative impact of high takeout rates impacts a substantially larger portion of a player's bankroll than in prior year's when wagering was limited to a single nine-race card.

The current system of legislated takeout rates in most states deprives the tracks and horsemen of the flexibility to adjust takeout rates to meet market or competitive conditions. Virtually all known studies of the dynamics of pari-mutuel wagering indicate an inverse relationship between takeout rates and handle, such that a reduction in takeout inevitably results in significantly greater handle.

Recommendations:
-- Conduct a series of executive seminars on the history and effects of takeout rates for state legislators, track officials, and horsemen.

-- Beyond minimal standards, shift the authority and responsibility for establishing takeout rates from legislatures and state racing regulators to tracks, with the transition and its effects to be monitored by the racing boards and state commissions and reported to the legislatures.

-- Promote the incremental reductions of takeout rates on exotic wagers.

-- Deregulate to the point where takeout rates ultimately can be determined and adjusted based on market conditions.

C. Taxation
Bettors today are confronted with federal income tax laws that are arbitrary, complex, and unfair. Though statutes have been in the Internal Revenue Code for a long time, the set of problems created by the laws were confined to relatively few bettors prior to the expansion of exotic wagering. As a result of exotic wagering, many bettors now are routinely subject to withholding taxes from winning tickets.

In many cases the withholdings are excessive and erode the bettors' cash flow, while simultaneously reducing the tracks' daily and weekly churn by millions of dollars. The expansion of exotic wagering also has created a dramatic increase in the number of successful wagers large enough that they must be reported to the Internal Revenue Service, both by the tracks and by the bettors on their individual tax returns.

Currently, where winnings and losses have been reported on tax returns, racetrack bettors can have their income tax increased significantly, even when they have suffered a net loss or, at best, a break-even situation with regard to their wagering.

Recommendations:
-- Increase the federal withholding threshold on racetrack winnings from the current $5,000 to $25,000.

-- Raise the IRS reportable income and odds thresholds from the current $600 for a bet paying 300-1 or more to $1,500 and 750-1, respectively.

-- Lower the federal withholding tax rate on racetrack winnings from the current 25% to 10%, or to a level commensurate with the potential tax liability.

-- Allow professional bettors who report their gambling activities on Schedule C to opt out of withholding requirements, and allow them to satisfy their tax obligations by filing quarterly estimated tax payments.

-- Allow bettors using wagering accounts to be subject to withholding based upon their total account activity. Winning tickets would be subject to withholding only if a bettor's account had net income at the time of, or as a result of, the winning wager. Prior withholding from the account would be considered in determining the current amount to be withheld.

-- Determine net winnings for both IRS reporting and withholding rates by deducting the actual amount bet from the gross proceeds, instead of deducting only the base amount of the winning wager.

-- Allow wagering losses to be deducted against winnings "above the line," and not as an itemized deduction.

-- Allow net racetrack wagering losses in any tax year to be carried forward to future tax years against winnings, similar to capital losses, net operating losses, et al.