Ray Paulick<br>Editor-in-Chief

Ray Paulick

Offshore Drilling

If the National Thoroughbred Racing Association is able to move forward with the recommendations made by the widely supported Wagering Technology Working Group--formed quickly after the 2002 Breeders' Cup Ultra Pick 6 scandal threatened to inflict serious damage to pari-mutuel wagering and the industries that depend on it--offshore wagering hubs will be carefully scrutinized. That may be the best news to come out of this year's Jockey Club Round Table on Matters Pertaining to Racing, which primarily focused on security issues.

Those hubs may or may not have contributed to the concerns that former New York City mayor and current security consultant Rudy Giuliani developed during the investigation of the pari-mutuel system by his company and Ernst & Young. But the hubs are of great concern to many American track owners and horsemen who are helplessly watching an increasingly larger percentage of handle go offshore, and a smaller percentage of that money being returned to the industry.

A number of these offshore sites offer rebates to their best customers--something many tracks simply can't do, thus giving a competitive advantage to a sector that has no stake in the industry. There are some significant American-based rebate operations, too. Those businesses do not operate a live race meeting and are able to retain a bigger part of the takeout, giving them leverage to offer rebates.

The offshore sites are not regulated to the degree racetracks are. That is one reason so many Internet gambling companies have flocked to the Caribbean. It is doubtful U.S. rebaters are examined as closely as tracks, either.

Some of those offshore businesses may be the "weakest links" that could be a gateway into the pari-mutuel system by computer hackers. The report said the security of the entire industry is only as strong as the weakest link; considering the fact so little is known about many of these operations, that is a troubling statement.

It is hoped the proposed National Office of Wagering Security will quickly recognize the potential danger some of these loosely regulated businesses pose. NTRA commissioner Tim Smith said once the industry establishes minimum, uniform security standards, only "trusted users" would be granted access to pari-mutuel pools. I'm not sure how many of the offshore hubs would fit the criteria.

Overall, it would seem a prudent strategy to greatly reduce the number of wagering hubs now in existence, both offshore and in the U.S. That is going to happen if racetracks and regulators follow the lead and adhere to the industry standards developed by this new office.

Most tracks have opted to do business with offshore operators, fearing they will lose handle to rival tracks. If the rebaters are eliminated, tracks are almost certain to feel a short-term pinch. In the long run, bringing handle back to the industry stakeholders will benefit tracks and horsemen.


During his remarks to the Round Table, Giuliani said the industry made all the right moves (he didn't mention the hiring of his company for a handsome sum) in a textbook case of crisis management. The actions were so fundamentally sound, he added, the Breeders' Cup Ultra Pick 6 incident would definitely be a chapter in his next book. "You actually will benefit by what happened here," he said.

Do bettors think the pari-mutuel system is perfect? Hardly. Heavy last-minute bets that cause late odds changes posted on the tote board midway through a race continue to anger fans. Experts say the late money is wagered before betting is cut off, but not everyone is convinced. That calls into question the integrity of the betting, which Giuliani said is "at the core" of why people bet.

If technology is not upgraded to eliminate this and other potential problems, integrity will suffer.