Debate Over Rebates Continues at Law Conference

A track operator and a leading handicapper at an Albany Law School conference Aug. 5 were unable, not surprisingly, to agree whether the growing use of rebates in the racing industry is a good thing.

But Jim McAlpine, president of Magna Entertainment Corp., and Paul Cornman, who bets $1 million a year from a complimentary Las Vegas hotel room that has been turned into his own betting mecca, agreed on one thing: Rebates are here to stay. In what form, though, remains uncertain.

One panelist, Stan Sadinsky, chairman of the Ontario Lottery and Gaming Commission, which runs the province's casinos and racetrack video lottery terminal operations, said governments may need to turn to more regulations to ensure that bettors are protected, especially in dealing with offshore betting hubs that have been attracting more and more bettors in recent years with the lure of rebates. Banning race signals to offshore companies could end up hurting tracks.

But one idea, he said, would be to require those sending signals to the rebate companies to get more information on the ownership of the rebate companies. "Short of prohibition, I think there are some things you can do to make it a safer climate," Sadinsky said.

But McAlpine said regulators "should let the free market take care of it." He said governments should encourage more, not less, broad-based betting options, and make legal the concept of rebates for tracks in all states to let them better compete with offshore and Indian reservation betting companies.

McAlpine termed as "poachers" betting companies that entice consumers with rebates racetracks can't offer. He said the rebate companies benefit by undercutting tracks and operate with little or no overhead. They avoid having to kick in any revenue for purses or racetrack infrastructure expenses.

"There's not a level playing field," McAlpine said.

McAlpine said he believes "poachers" are handling $1.5 billion in racing bets each year, and attracting more and more deep-pocket bettors who can afford to lose their bets knowing rebates will make them whole. He said he knows of one individual who, through the use of a high-tech betting system, wagers more than $200 million a year supported by the rebate system.

Chris Scherf, executive vice president of the Thoroughbred Racing Associations, said rebates are creating a public relations problem for the racing industry because bettors think racetracks have been overcharging them. "These are our bettors, and we now have a situation where the tail wags the dog," Scherf said of the relationship between rebate betting firms and racetracks.

Cornman said rebates should be encouraged to help draw more big bettors to the industry. "Anyone who is at the track every day should get something," he said.

After the panel discussion, Bennett Liebman, head of the Albany Law School program on racing and wagering, said it is clear the "racing industry really needs to come to grips with this issue."