The industry's embrace of computer-robotic wagering through the high rebates required to sustain these players has resulted in a less attractive game for all other horseplayers, according to an expert presenting March 25 at the Association of Racing Commissioners International conference in New Orleans.
Thoroughbred Racing Protective Bureau vice president of wagering and analysis Curtis Linnell presented a TRPB study looking at North American pari-mutuel handle in March 2016 that determined CRW players accounted for 15.9% to 20.2% of total handle during the month and cashed out between 17.9% and 23.1% of all March pari-mutuel winnings.
That success rate resulted in lower payouts for every other bettor in the pari-mutuel pools. While these large-volume players are making the betting product less attractive to all other players by lowering winning payouts, racetracks, for now, see the added liquidity of their handle as more valuable than their negative impact on payouts.
"There is a dampening effect on the rest of the market in the form of lower payouts, that's an undisputable fact," Linnell said. "Now does the additional liquidity offset that? A lot of tracks would say yes."
CRW bettors are players—typically teams of players—that rely on computer programs to scan for value in pari-mutuel pools. The computer programs then allow these teams to pour money into each pool where they find value, thanks to the capability of making thousands of wagers in an instant. They have profited under the model.
"You can see that the cashing skews slightly higher than the betting as a percentage of handle, and that's before rebates and everything else," Linnell said of the March study by TRPB, a wholly owned subsidiary of the racetracks' Thoroughbred Racing Associations. "Those are the numbers."
Dick Powell, of Racing and Gaming Services, which caters to CRW bettors, said large rebates on CRW handle make the business model of the CRW player possible. He noted that many CRW players try to break even on their wagering, and then make their money on rebates. Linnell's study indicates CRW players are doing better than breaking-even on their wagers.
"For racetracks, CRW players add liquidity to the pools, which is a very good thing for a racetrack," Linnell said. "The trend is toward greater access to computer-robotic wagering platforms. So racetracks in general have permitted in, and in lots of cases welcomed, CRW players. Not all of them."
Linnell said Oaklawn Park is the largest track to not allow them. Arkansas State Racing Commissioner Mark Lamberth said that decision has worked very well for Oaklawn, disputing a contention by Powell that on-track wagering has suffered at the track since it banned CRW players a dozen years ago.
Powell said CRW players are merely successful horseplayers, who typically gather more information than other bettors in the pools. He said when he worked as a track executive when racing first began to offer off-track wagering, he noticed that on-track bettors, who at that point in time had more information available than off-track players, fared better than the horseplayers off site. He said bettors in the $50 lines fared better than the $2 players.
But Powell also noted that CRW players are highly reliant on the rebates they receive to make their model work.
For tracks, the about $2 billion poured into pools last year by CRW players has not translated to big profits. Linnell said the percentage of total pari-mutuel handle going to tracks has never been lower, in large part because of the industry's embrace of rebating its largest-volume players.
Linnell noted that nearly $5 billion has disappeared from Thoroughbred pari-mutuel pools since 2002, a trend that might lead many businesses to look at their pricing structure. But instead of lowering its takeout for all players, which would be a more attractive model to new- and medium-level horseplayers, the industry has taken the approach of rebating its very top players. That approach means that tracks receive less benefit from every dollar wagered by these players.
(Takeout is the money kept largely for tracks, purses, taxes, and these days rebates. Essentially it's the price a bettor pays to bet a horse race.)
Rebates to CRW players, in part, are funded by all other players paying those higher takeout rates. Linnell noted that events like Breeders' Cup, which do not offer much in terms of rebates to these players, see relatively low action from CRW players. Powell suggested that this drop was more attributable to the number of European-trained horses at Breeders' Cup that CRW players may not have a model.
Linnell said there currently are about 21 CRW teams with the largest team accounting for 40% of CRW handle. Looking at the various percentages, that equates to about $750 million wagered in 2015 by that single CRW team. Linnell said the top three CRW teams account for 65% of CRW handle and the top six account for about 80% of the CRW handle.
It's a possibility that CRW players could face added scrutiny by states updating their laws on daily fantasy gaming. On March 23 at the ARCI conference, Massachusetts Gaming Commission staff attorney Justin Stempeck said the state's attorney general will soon add a list of protections for daily fantasy players and that would address CRW-type players in daily fantasy.
After that panel, Stempeck said the state plans to require daily fantasy sites to provide robotic-wagering options to all players. He said one of the two largest sites has agreed to that requirement.
"For instance, if someone was playing in a thousand games and news broke of a late injury, this would allow them to update all 1,000 of their lineups in an instant," Stempeck said.
Linnell said he knows of one smaller ADW site that has added some robotic wagering options for all of its players but the leading sites have not added the option.
After addressing the business impact of CRW, Linnell also outlined regulatory concerns. He noted that CRW players have been very cooperative with the TRPB, which has been able to readily track their wagers. TRPB has conducted on-site reviews of the largest operations.
In an effort to prevent odds manipulation, CRW players are not able to cancel wagers through their programs. Panel experts and audience members agreed that the standard is for CRW players to call in such cancellations and provide a valid reason—a late scratch for instance—for the change. The experts said CRW players make bet cancellations less frequently than other bettors.
The most visible problem associated with CRW players has been late odds changes. Powell said those odds changes can be caused by a large wager by any player. While Linnell acknowledged that can be the case, he said 90% of the time late odds shifts are caused by CRW players.
Linnell said traditionally pari-mutuel pools used to become more stable as post time approached, because of the building percentage of money in the pools relative to the final pool. He said that now, with such a high percentage of handle coming from CRW typically bet at the last possible moment, those pools have seen high volatility.
"These teams are a big percentage of the pool. They're estimating what the pool is going to be," Linnell said. "As a win position, if one or more of those top six teams are on the same position, you notice it."
With such large wagers coming late into the win pools, odds can shift even after the gates open as the tote takes time to calculate all of those last-second wagers. Those odds shifts have frustrated many players, a situation tracks have tried to address through increased odds cycles as race time approaches.
Linnell said Laurel Park recently stated updating its win odds every 20 seconds as the race approaches, which he said gets nearly all handle into the pool—allowing for improved reporting of what the final odds will be—before the race goes off. He said Canterbury Park will try 10-second cycles this year.
