Daily Racing Form National Digital Edition
Recent announcements signal new direction for Jockey Club
SARATOGA SPRINGS, N.Y. – The Jockey Club intended to telegraph its intentions to bolster racing in distressed markets with last Sunday’s Round Table announcement that it would consider buying racetracks in the future but has no immediate plans to acquire any racing assets, the chief operating officer of the organization said in a followup interview this week.
The Jockey Club announcement was meant as a “signal” to the racing industry that the organization was prepared to use its financial wherewithal to either acquire or lease racetracks in major markets should those racetracks face the prospect of closing, according to Jim Gagliano, president and COO of The Jockey Club, who earlier in his career served in a variety of racetrack management roles.
“It’s a signal because we think it’s important that the industry knows we can take on that role,” Gagliano said. “We’re not looking to compete with others, but if there are racetracks in peril, that is something where we could serve as a backstop to the industry. But we don’t have a target. And that target may not reveal itself for years.”
The announcement was one of a handful of measures The Jockey Club’s board approved last week signaling a new direction for the breed registry, a non-profit that also co-owns a number of large racing companies, including Equibase, which is the official data supplier for the racing industry (Daily Racing Form is a customer of Equibase). Equibase is owned in partnership with the Thoroughbred Racing Associations, a trade group of racetracks in North America.
While The Jockey Club in the past five years has inserted itself far more aggressively in racing issues such as medication regulations and related integrity concerns, the organization has maintained an arm’s-length distance from direct involvement in racetrack operations or wagering markets, aside from funding reports examining industry trends. But that seemed to change with Sunday’s Round Table, in which the organization also announced that it would support an industrywide reduction in takeout rates for straight wagers and the authorization for racetracks to offer fixed-odds betting.
The Jockey Club also said that it would seek to underwrite an experiment testing single-pool wagering, a concept in which all parimutuel pools for a race or series of races are merged into one pool, with odds imputed by using algorithms weighting the amounts of money bet on wagering interests across all bet types. Single-pool wagering has been conducted in Hong Kong for several years, though the practice has been limited to the merging of two bet types.
Gagliano said that the decision in May by the U.S. Supreme Court invalidating a federal law prohibiting states from authorizing sports wagering will likely lead to a surge in new bet types on sports, creating both a threat and an opportunity for racing. The racing industry needs to be ready with its own counterpunch, Gagliano said.
“We’re going to all be talking about betting in a different way in the years ahead,” Gagliano said. “We need to start thinking about these issues now. There’s going to be a lot of new wagers that have appeal to the American public, and we have to be able to compete with them.”
Single-pool wagering could conceptually allow for the creation of new bet types, since the agglomeration of all bets in one pool would allow tracks to offer wagers that would not normally draw enough money to ensure a segregated pool’s liquidity – in other words, providing protection to bettors who do not want large wagers to dramatically impact their payoffs. For that reason, single-pool wagering is favored by teams that operate robotic wagering programs that dump hundreds of bets into the pools at the last moment before the pools are closed. The extraordinary access of the robotic programs to the racing industry’s pool data and the use of lucrative rebates to keep the programs in business is a controversial topic in racing, especially among the sport’s most critical customers.
So far, only one state, New Jersey, has passed laws that explicitly authorize singlepool parimutuel wagering, and Gagliano said this week that The Jockey Club is currently analyzing regulations on a state-by-state basis to determine how to proceed with the experiment. Although Gagliano said that single-pool wagering “is clearly parimutuel,” he said The Jockey Club would have to work closely with any state that would host a single pool so as not to run afoul of laws.
“As with a lot of racing regulations and rules, some of them are 80 years old,” Gagliano said. “There are different phases to the experiment that need to be discussed.” Still, Gagliano said that such an experiment, conducted in partnership with the firm that developed the concept, Longitude, could be launched as soon as next year.
As for The Jockey Club’s potential to operate racetracks, Gagliano said that the organization does not have a firm idea for how any acquisition or lease might be structured, stating that the deals would have to be analyzed on a caseby-case basis. According to the organization’s most recent tax return, the non-profit parent company had $53.3 million in net assets at the end of 2016, with consistent cash flows among its numerous companies measuring in the tens of millions of dollars each year.
The announcement that The Jockey Club might get involved in the operation of racetracks has led to speculation that the organization might seek to lease racetracks attached to casinos in which management has shown little commitment to racing but continues to underwrite the sport because the lucrative casino license is tied to the racing license, such as in Pennsylvania and West Virginia.
Gagliano said that The Jockey Club will seek to intervene in any market in which the racing industry is best served by the continuation of live racing.
“Our first priority is racing and breeding,” Gagliano said. “If we could ever come to an arrangement that matches those priorities, we certainly could consider that.”