Sports betting as it relates to the horse-racing industry could be a boon, but also could do serious damage to the horse-racing business, according to panelists at a session of the Global Symposium on Racing in Arizona.
The consensus of three experts on the topic—Chris Krafcik, managing director of Eilers & Krejcik Gaming; Kate Lowenhar-Fisher, a gaming lawyer in Nevada; and Richard McGuire, executive director at Sportech, was that sports betting could pose a danger to horse-racing.
“Be aware of the opportunity and threats to your business,” McGuire said. “Unless you grasp that threat, and engage with it, you’ll run into a lot of problems, quite frankly. Sports betting, as we all know, is here. I believe it’s the single greatest opportunity for many of you in this room, but is also the single greatest threat to your business going forward.”
The panelists warn that sports betting is a thin-margin business, unlike slot machines. “The term ‘golden goose’ and the pie-in-the-sky kind of discussion about sports betting in the United States—the economics of a sports book are not a mystery,” Lowenhar-Fisher said. “They have a lot of history and evidence about how a sports book can earn money in a regulated marketplace and how a sports book can be murdered because of unreasonable taxes, fees, and so forth.
“In Nevada the sports books are an amenity to our patrons. They’re not a moneymaker—never have been…
“There are basic things that kill profitability in the sports book arena, because it is a slim-margin business that requires a lot of art and not a lot of science. If you have taxes and fees that exceed the Nevada model, you might be in trouble. If you have taxes and fees that are levied on handle rather than revenue or win, you’re likely to have a problem. As soon as you overtax, you lose your market share, and it’s very easy to tax so many people, but a tax on turnover clearly affects the odds. The mass market participants will either bet less or, more likely, will head to the illegal markets.”
Krafcik also talked about potential competition between racing and sports betting in jurisdictions like California.
“In many states there will be friction between sports betting operators and racing on the question of revenue sharing,” Krafcik said. “We further anticipate friction, particularly in states like California, where racing enjoys special political clout. That could slow or even stall the development of sports betting.”
