Ray Paulick<br>Editor-in-Chief

Ray Paulick

Rebate Replay

A number of readers took exception to comments made in this space last week concerning account-wagering operators that attract customers by offering rebates of 10% or higher.

"The issue should be focused on horse racing's absurd takeout," one wrote. "A sports bet has a 4% takeout."

That may be true, but sports bets are not paying for the players' salaries or the stadiums. The economic underpinning of football, baseball, or basketball is not gambling (though some might suggest otherwise). Those sports live off television contracts, season tickets, and luxury suites. Last time I looked, it cost an average of about $50 for one ticket to an NFL game, and if a family of four wants to go to an NBA game and buy a hot dog, Coke, and program, it will set them back nearly $500.

Pari-mutuel wagering provides the money for purses and the revenue for racetracks to operate. If people didn't bet on football, there would be no direct impact on the sport, although it's likely television ratings would fall. If people stopped betting on horse racing, however, the industry as we know it would scarcely exist.

That's why it is so important the racing industry take control of who is betting, and where. Right now, as rebate operations grow, that isn't necessarily the case.

More troubling is the apparent lack of regulation involving some of these companies, particularly those in places like St. Kitts or Curacao in the Caribbean. In a business where government can ridiculously over-regulate (I'll never forget the track owner who complained that he couldn't raise the price of a hot dog without the racing commission's approval), offshore betting shops often get a free pass.

Simulcast contracts that include these offshore companies as wagering sites routinely are rubber-stamped without the racing commission asking any questions about ownership, management, or operations.

Questions about offshore companies seem especially relevant today, in light of the Breeders' Cup Ultra Pick 6 criminal case and subsequent questions about integrity and security in the totalizator system. Published reports have indicated that bettors using some offshore companies have been able to program their wagers in an arbitrage-type system. Also, many late-money wagers resulting in significant shifts in the odds have been traced to these same companies. Other horseplayers bitterly complain that bettors going offshore have some kind of an advantage.

Daily settlements suggest offshore players are winning more than their share. The settlements, an accounting of how much money was wagered and either won or lost at a specific simulcast site, frequently show bettors with one specific offshore company coming out ahead of the rest. An average of 80% is returned to the public every day (based on blended takeout of 20%), but this site outperforms that percentage. One racing official said the rebate company's customers are the winningest horseplayers in the business.

This is not to suggest the companies are acting illegally in any way. However, the same rules and regulations that apply to licensed racetracks and off-track betting companies inside the U.S. should apply to offshore operators as well. Integrity and security can't stop at our national boundaries.

Bad Math
One letter writer pointed out a mathematical miscalculation in my last column on rebates. If rebate companies are handling $1 billion per year in wagers, they are netting approximately $70 million in profits, based on a blended takeout of 22%, an average simulcast fee of 5%, and cash rebates to customers of 10%. My erroneous projection of $170 million in profits did not take into account the $100 million they would pay back to horseplayers in rebates.