NTRA commissioner Tim Smith: "Horseracing needs the ability to compete, innovate and meet the needs of its customers without excessive regulation."

NTRA commissioner Tim Smith: "Horseracing needs the ability to compete, innovate and meet the needs of its customers without excessive regulation."

Task Force Report: Regulations Impair Racing's Ability to Compete

Press release from the NTRA
The National Thoroughbred Racing Association presented findings of a study conducted by the National Economic Research Associates (NERA) for the NTRA Task Force on Economic Regulation today at the 27th annual University of Arizona Race Track Industry Program Symposium on Racing in Tucson, Ariz.

The task force, formed this year, was convened under Chairman Robert McNair to study key issues relating to the economic regulation of the Thoroughbred racing and pari-mutuel industries.

Presenting the findings were Louis A. Guth, senior vice president, NERA, in association with racing consultant Michael D. Shagan. The report concludes that excessive regulation impairs horseracing's ability to compete in the gaming and entertainment marketplace. It specifically recommends that:

  • Legislative and regulatory obstacles that prevent the Thoroughbred industry from freely marketing its product be removed
  • The horseracing industry be allowed the flexibility to design and price its products
  • Tax policies be modified to treat horseracing as a "typical business," specifically, pari-mutuel taxes should be based on takeout rates as opposed to gross handle
  • Programs for safety and integrity regulation be well established and adequately funded.

"Like any other industry, horseracing needs the ability to compete, innovate and meet the needs of its customers without excessive regulation," said NTRA Commissioner Tim Smith. "The work of the task force certainly makes a compelling case."

"This is a comprehensive look at the economic regulatory issues that challenge our industry," said McNair. "Clearly, we need to work toward economic de-regulation in several of the areas identified in this report if we expect true growth. This industry is not looking for subsidies, just the ability to compete on a level playing field."

In addition, the report concludes that much of the regulation of the pari-mutuel industry is a holdover from an era when it enjoyed a virtual monopoly on legalized gaming in the U.S.

"Most economic regulation of the industry was formulated at a time when pari-mutuel racing accounted for basically all of the gaming activity in the U.S. outside of Nevada," said the NERA report. "In this context, the rationale for economic regulation included (a) control of market power of licensed racetracks, and (b) control of the extent of permissible gaming. In addition, states saw wagering on Thoroughbred racing as a source of revenue....

"There are two major reasons why economic regulation of Thoroughbred racing should be reconsidered. First, the market power justification is suspect because of increased competition from other forms of gaming, and because of increased competition within racing due to simulcasting....

"Second, the business model for Thoroughbred racing has changed substantially... Today, racetracks are multi-faceted entertainment business activities, and a substantial portion of revenues are generated from out-of-state and thus are not even a part of the local state's revenue model. State legislators and regulators have had to struggle to accommodate regulatory policy to this new model, with less than complete success."

In addition to Robert McNair, the Task Force includes Douglas Donn, chairman of Gulfstream Park and past NTRA Board member; attorney Mark Fleder of New Jersey, director of the Thoroughbred Horsemen's Association; Rick Hiles, Kentucky-based trainer and president of the National Horsemen's Benevolent and Protective Association; Robert Kaminski, chairman of Lone Star Park; F. Jack Liebau, president and CEO of the Los Angeles Turf Club; Scott Mordell, CEO of Arlington Park; and John Van de Kamp, president of the Thoroughbred Owners of California and former Attorney General of California.

The complete report, "Time to Deregulate: The Case for Thoroughbred Racing," is available in downloadable format at the NTRA Web site, http://www.ntra.com.