Sports Gambling - Pari-mutuel Gambling

"Pari-mutuel" is a French term meaning "mutual stake." In pari-mutuel betting, all wagers on a particular event or race are combined together into a pool that is split between the winning bettors and the management. The larger the pool, the bigger the payoff. In pari-mutuel gambling, patrons bet against each other, not against the house. The principles of the pari-mutuel system were developed in France during the late nineteenth century by Pierre Oller.

The pari-mutuel system has been used on horse races in the United States since around 1875, but it did not really catch on until the 1920s and 1930s, when an automatic odds calculator called a totalizator came into use. The totalizator was a machine that took money, printed betting tickets, and continuously calculated odds based on betting volume.

Prior to this time, horse betting was conducted mostly by bookmakers who were notoriously corrupt. In 1933 California, Michigan, Ohio, and New Hampshire legalized pari-mutuel gambling on horse racing as a means of regulating the industry and gaining some revenue. Dozens of states followed suit over the next decade. Pari-mutuel gambling was also adopted for greyhound racing and matches of jai alai (a game similar to handball). Table 8.2 lists the states that currently allow pari-mutuel gambling in some form. A handful of these states permit pari-mutuel gambling by law, but do not have facilities or systems in place to conduct it. For example, pari-mutuel gambling on horses is permitted in Shelby County, Tennessee, but the state does not have a racing commission. Therefore, no parimutuel gambling takes place in Tennessee.

In pari-mutuel gambling the entire amount wagered is called the betting pool, the gross wager, or the handle. The system ensures that event managers receive a share of the betting pool, regardless of who wins a particular race or match. The management's share is called the takeout. The takeout percentage is set by state law and is usually around 20%.

Another important term is "breakage," which refers to the odd cents not paid out to winning bettors because payoffs are rounded. In other words, a winning ticket is not paid down to the penny. The payout on a $2 bet is typically rounded off in $.20 increments. The cents left over are the breakage. Although breakage amounts to only pennies per bet, it adds up quickly with high betting volume. For example, California horse racetracks accumulated more

TABLE 8.2

Pari-mutuel gambling, 2004
	Horse racing	Greyhound racing	Jai Alai	Additional features
SOURCE: Created by Kim Masters Evans for Thomson Gale, 2004
Alabama		X
Arizona	X	X
Arkansas	X	X
California	X
Colorado	X	X
Connecticut		X	X
Delaware	X			Slot machines
Florida	X	X	X	Card rooms
Idaho	X
Illinois	X
Indiana	X
Iowa	X	X		Slot machines
Kansas	X	X
Kentucky	X
Louisiana	X			Slot machines
Maine	X
Maryland	X
Massachusetts	X	X
Michigan	X
Minnesota	X			Card rooms
Missouri	X
Montana	X
Nebraska	X
Nevada	X
New Mexico	X			Slot machines
New Hampshire	X	X
New Jersey	X
New York	X			Slot machines
North Dakota	X
Ohio	X
Oklahoma	X
Oregon	X	X
Pennsylvania	X
Rhode Island		X	X	Slot machines & video lottery terminals
South Dakota	X
Tennessee	X
Texas	X	X
Vermont	X
Virginia	X
Washington		X
West Virginia	X	X		Slot machines
Wisconsin		X
Wyoming		X

than $10 million in breakage in fiscal year 2003. The funds were split between the state, the track operators, and the horse owners. The disposition of breakage is handled differently by each state. Takeout and breakage are subtracted from the betting pool before payouts are made.

Pari-mutuel wagering can be performed in person at the event or, increasingly, at off-track betting (OTB) facilities. The New York legislature approved the first OTB operation in 1970. Some states also allow betting by telephone or Internet when an account is set up prior to bet placement. Many races are broadcast as they occur by televised transmission to in-state and out-of-state locations (including OTB sites). This process, known as simulcasting, allows intertrack wagering (ITW) to take place. In other words, bettors at one racetrack can place bets there on races taking place at another racetrack.

A race book is an establishment (usually a room at a casino) in which ITW takes place on pari-mutuel betting events, such as horse and greyhound races. A race book typically features many television monitors that show races as they occur. Some racetracks also have ITW rooms that they call race books. Race books are included in many Nevada and Atlantic City, New Jersey, casinos, as well as some tribal casinos. Figure 8.1 shows race book wagering statistics for Nevada casinos from 1996 to 2003. Just over $516 million was wagered in Nevada race books during 2003.

According to statistics available at the Web site of industry analyst Christiansen Capital Advisors, LLC (www.cca-i.com), the total gross revenue (handle minus payout) on pari-mutuel gambling in the United States was $3.8 billion in 2003. Most of this amount ($3.4 billion) came from horse racing, followed by greyhound racing ($398 million) and jai alai games ($25 million).

Horse Racing

Horse racing has been a popular sport for thousands of years and was enjoyed by the ancient Greeks and Romans. It was popularized in western Europe when knights returning from the Crusades brought back fast Arabian stallions. These horses were bred with sturdy English mares to produce a new line of horses now known as Thoroughbreds. Thoroughbreds are tall lean horses with long slender legs. They are renowned for their speed and grace while running.

Thoroughbred racing became very popular among the aristocrats and royalty of British society, earning it the nickname the "Sport of Kings." The sport was transplanted to America during colonial times. According to the Jockey Club, Thoroughbred horse racing was taking place on Long Island, New York, as far back as 1665. However, the advent of organized Thoroughbred racing is attributed to Governor Samuel Ogle of Maryland, who staged a race "between pedigreed horses in the English style" in Annapolis, Maryland, in 1745. The Annapolis Jockey Club, which sponsored the race, later became the Maryland Jockey Club. Among its initial members were George Washington and Thomas Jefferson.

Thoroughbred breeding was prominent in Maryland and Virginia up until the Civil War (1861–65), when many operations were moved to Kentucky. Thoroughbred racing had already grown popular throughout the agricultural South at that time. In 1863 the Saratoga racecourse opened in northern New York. It is considered the oldest Thoroughbred flat track in the country. (A flat track is one with no hurdles or other obstacles for a racing horse to jump over.) The Jockey Club, the governing body of Thoroughbred horse racing, was established in 1894.

Horse racing remained popular in the United States until the 1940s, when it was severely curtailed during

FIGURE 8.1

World War II (1939–45). The decades following the war saw a sharp decline in the popularity of horse racing. Three reasons are commonly mentioned:

• Competition from other entertainment venues and leisure activities, such as theme parks, shopping malls, and television, increased.
• The horse-racing industry avoided television coverage of races during the 1960s for fear it would keep people away from the tracks. (This is now seen as a failure to take advantage of a major marketing tool.)
• Competition for gambling dollars from state lotteries and casinos came into being as those venues were legalized.

Despite the decline in attendance, the amount of money gambled on horse races has actually increased over the past decade. As shown in Figure 8.2, the parimutuel handle from thoroughbred horse racing was $15.2 billion in 2003, up from $9.4 billion in 1990. Just over 87% of the amount bet during 2003 was at OTB facilities. The OTB percentage has increased dramatically since 1996. Analysts believe that attendance at live racing will continue to decline in popularity as there are more and more OTB opportunities, including the Internet.

THE RACETRACKS AND THE RACES. There are about ninety Thoroughbred racetracks around the country. Some racetracks are only open seasonally, while those in warm climates are open year-round. Racetracks vary in size and in ownership; some are government owned and some are owned by private and public companies. Fortune magazine reported in October 2001 that most of the betting business associated with Thoroughbred horse racing in

FIGURE 8.2

the United States is controlled by a relatively small group of players. Two publicly traded companies, Churchill Downs and Magna Entertainment, account for approximately 50% of the business, while another 22% is attributed to the New York Racing Association and the New York City Off-Track Betting Corporation (NYCOTB). The New York Racing Association is a not-for-profit group that controls the Belmont, Saratoga, and Aqueduct racetracks. Analysts predict that the industry will continue to undergo consolidation, with corporations taking over most of the business. In May 2004 the chairman of Magna Entertainment announced at a shareholders' meeting that the company hopes to purchase Churchill Downs, Inc., before the end of the decade.

The three most prestigious Thoroughbred races in the United States are the Kentucky Derby at the Churchill Downs track in Kentucky, the Preakness Stakes at Pimlico in Maryland, and the Belmont Stakes at Belmont Park in New York. The races are held over a five-week period during May and June of each year. A horse that wins all three races in one year is said to have won the "Triple Crown." Only eleven horses have ever captured the Triple Crown—most recently, a horse named Affirmed in 1978.

According to the Jockey Club, there were 53,503 Thoroughbred horse races in a total of thirty-seven states during 2003. (See Table 8.3.) California hosted the most events, with 5,126 races, followed by West Virginia (4,520), Pennsylvania (3,851), Florida (3,806), and New York (3,704). The total gross purses amounted to just over $1 billion. The gross purse is the amount awarded to the owners of the winning race horses. California racetracks had the highest gross purse of nearly $189 million. New York ($131 million), Florida ($85 million), Kentucky ($80 million), and Illinois ($75 million) complete the top five highest purse states. As shown in Figure 8.3, the number of Thoroughbred races held each year has generally steadily declined since the early 1990s.

NON-THOROUGHBRED HORSE RACING. Although Thoroughbred horse racing is the most popular type of horse racing in the United States, other types of horse racing are involved in pari-mutuel wagering, chiefly harness racing and the racing of quarter horses and Arabian horses.

In harness racing, horses trot or pace rather than gallop. They have to be specially trained to run races in this manner. Typically, the horse pulls behind it a two-wheeled cart known as a sulky, carrying a jockey who controls the reins. Sometimes the jockey is seated on the horse rather than in a sulky. Harness racing is performed by a type of horse called a standardbred, which is shorter, more muscled, and longer in body than the Thoroughbred. In 1879 the National Association of Trotting Horse Breeders in America established the official registry for standardbred horses. While Thoroughbred horses were the favorite of high society, standardbred racing became popular among the common folk. Today, there are approximately thirty licensed harness racetracks around the country at which pari-mutuel betting takes place. Harness racing is also conducted at county fairs and exhibitions.

A third type of horse known for racing is the quarter horse, so named because of its high speed over distances

TABLE 8.3

Thoroughbred horse races by state or Canadian province, 2003
State/province	Number of races	Gross purses*
*Purses include monies not won and returned to state breeder or other funds.
SOURCE: Adapted from "2003 Analysis of Races by State or Province," in Fact Book, The Jockey Club, February 6, 2004, http://www.jockeyclub.com/factbook/compare%2003.html (accessed August 23, 2004)
Arizona	2,103	$14,907,871
Arkansas	505	$11,482,600
California	5,126	$188,866,549
Colorado	285	$2,572,565
Delaware	1,271	$33,037,425
Florida	3,806	$85,220,610
Georgia	11	$345,000
Idaho	293	$992,559
Illinois	3,024	$75,014,401
Indiana	1,001	$11,286,042
Iowa	770	$14,179,378
Kansas	283	$2,173,896
Kentucky	2,560	$80,292,971
Louisiana	3,426	$58,967,227
Maryland	1,964	$43,868,600
Massachusetts	1,374	$15,871,300
Michigan	1,054	$9,154,094
Minnesota	547	$8,808,271
Montana	145	$333,855
Nebraska	863	$5,246,405
Nevada	23	$62,850
New Jersey	1,194	$36,184,164
New Mexico	1,376	$21,966,206
New York	3,704	$131,413,851
North Carolina	18	$277,500
North Dakota	77	$287,264
Ohio	3,262	$26,116,132
Oklahoma	872	$6,720,250
Oregon	869	$2,985,126
Pennsylvania	3,851	$45,735,528
South Carolina	24	$590,000
Tennessee	7	$290,000
Texas	2,031	$29,644,944
Virginia	348	$8,410,300
Washington	880	$8,294,700
West Virginia	4,520	$73,826,390
Wyoming	36	$70,025
Total	53,503	$1,055,496,849
Canada
Alberta	1,236	$14,830,244
British Columbia	744	$12,055,226
Manitoba	589	$5,984,183
Ontario	2,667	$116,858,252
Saskatchewan	262	$662,025
Total	5,498	$150,389,930

of less than a quarter of a mile. They were originally bred by American colonists to be both hardworking and athletic. There are nearly forty quarter horse racetracks around the country.

Arabian horses are considered the only true purebred horses on the race circuit, as they have not been mixed with other breeds. Arabian horse racing is conducted at about fifteen tracks in the United States.

THE BETTING. The betting pool for a particular horse race depends on how much is wagered by bettors on that race. Each wager affects the odds. The more money bet on a horse, the lower that horse's odds and the potential payoff

FIGURE 8.3

becomes. The payout for winning tickets is determined by the amount of money bet on the winner in relation to that bet on all the other horses in that particular race.

First, the takeout is subtracted from the betting pool. This money goes toward track expenses, taxes, and the purse. Most states also require that a portion of the take-out goes into Breeder Funds to encourage horse breeding and health in the state. For example, Figure 8.4 shows the breakdown of each takeout dollar in California. (Note: In this graphic, "other states' takeout" refers to money used to pay interstate wagering fees to betting facilities outside of California that take bets on California races.) After the takeout and the breakage are subtracted from the betting pool, the remaining money is divided by the number of bettors to determine the payoff, or return, on each wager.

The odds on a particular horse winning first, second, or third place are estimated on the morning of a race and then constantly recalculated by computer during the prerace betting period. The odds are posted on a display called the tote board and on television screens throughout the betting area. The tote board also tallies the total amount paid into each pool. Bettors can wager that a particular horse will win (come in first), place (come in first or second), or show (come in first, second, or third). The payoff for a win is higher than payoffs for place or show, because the latter two pools have to be split more ways. For example, the show pool must be split between all bettors who selected win, place, or show. The approximate payoffs for a $2 winning ticket on horses of various odds are shown in Table 8.4.

Betting on horse racing is considered more a game of skill than a game of chance. Professional racing bettors spend a great deal of time on the observation and study of individual horses and consider previous race experience when they make their picks. This gives them some advantage over bettors who pick a horse based on whim—because they like its name, for example. Although bettors do not play directly against each other, an individual bettor's skill level does affect other bettors. This is because the payout odds in horse racing are adjusted based on the bets of the gamblers.

The Centre for Addiction and Mental Health (CAMH) in Toronto, Canada, publishes an electronic journal on gambling issues called eJournal. In October 2001 the journal analyzed important aspects of playing games of skill in an article titled "The Effect of Skilled Gamblers on the Success of Less-Skilled Gamblers." The article noted that the house edge at the racetrack is at least 17%, and even higher for bets such as exactas, in which the bettor must pick the two top finishing horses in a race in the correct place order to win.

However, previous research has shown that there are some expert bettors who make money on their bets on a consistent basis. Assuming that 10% of bettors achieve a positive return of 1% means that the average among the remaining players has to be around −19%, a substantial loss, to account for that 1% profit. Considering a house edge of 17%, the researchers concluded that a "fair amount of skill" would be required to achieve a return of −10%, and that even very skilled horse bettors could end up losing money. The article's final estimate is that only 1–2% of horse race bettors actually make money.

FIGURE 8.4

HORSE RACING IN CALIFORNIA. California led the nation in 2003 in terms of the number of races held and the purses paid to winning horses. The state has allowed pari-mutuel gambling on horse races since 1933, when a constitutional amendment was passed by the voters. California has six privately owned racetracks and nine racing fairs. Racing fairs are county and state fairs held at facilities including racetracks so that wagering on horse races can be conducted as one of many fair events. The fairs usually last only a week or two and are conducted at various times throughout the year. In addition to actually attending racetracks or racing fairs, gamblers can bet on horse races at twenty simulcast facilities around the state.

Thirty-Third Annual Report of the California Horse Racing Board: A Summary of Fiscal Year 2002–2003 Racing in California reports that the industry grossed $4.2 billion during 2003, the highest of any state in the country. This represented the seventh straight year that the total handle had increased (from just under $3.5 billion in fiscal year 1997). Figure 8.5 shows the handle amount broken down by on-track, off-track, and out-of-state wagers. Only 18.3% of all wagers occurred at the track during 2003. The vast majority of wagers were placed at off-track locations. Winning bettors received 80.5% of the

TABLE 8.4

Money paid out on a successful $2 pari-mutuel bet
Odds	$2 Bet returns	Odds	$2 Bet returns
SOURCE: "How Much Do I Win?," in Winning Techniques, Daily Racing Form, Spring 2004, http://www.drf.com/row/fan_ed/winning-techniques-2004.pdf (accessed September 26, 2004)
1–10	$2.20	3–1	$8.00
1–5	$2.40	7–2	$9.00
2–5	$2.80	4–1	$10.00
1–2	$3.00	9–2	$11.00
3–5	$3.20	5–1	$12.00
4–5	$3.60	6–1	$14.00
1–1	$4.00	7–1	$16.00
6–5	$4.40	8–1	$18.00
7–5	$4.80	9–1	$20.00
3–2	$5.00	10–1	$22.00
8–5	$5.20	12–1	$26.00
2–1	$6.00	15–1	$32.00
5–2	$7.00	20–1	$42.00

betting pool, or $3.4 billion. The state received revenues of $41.4 million.

In August 2001 California governor Gray Davis legalized a new betting method called Advanced Deposit Wagering (ADW), that permits betting over the telephone and Internet. Gamblers must put money into an account prior to making their wagers. The idea was heartily endorsed by the state's horse-racing industry. The manager of California operations for Magna Entertainment said racing would only flourish again "by bringing races to people, not bringing people to the races."

The new system began operating in January 2002. Approximately $4 million per month was bet via ADW soon after its introduction. Although analysts had predicted it would be a windfall for the racing industry, results were modest. During fiscal year 2003 ADW accounted for only 6% of all wagers.

THE ECONOMIC EFFECTS OF HORSE RACING. The horse-racing industry has a number of economic impacts on society, both within the industry and without. Examination of annual reports from the states' racing commissions shows that the industry accounts for payments in excess of $250 million in state taxes and fees each year. The largest single recipient during 2003 was the state of California, which received $41.4 million. Racetracks pay millions more to local governments.

The industry provides direct income to horse owners, trainers, and jockeys/drivers through purses. Figure 8.6 shows the purses paid out at Thoroughbred racetracks in the fifteen top racing states during 2003. California tracks paid out the highest gross purse for the year ($189 million), and the highest average purse per race ($37,000). The largest portion of a Thoroughbred race purse (typically 60%) goes to the owner of the first-place horse. The owner is responsible for paying the horse's trainer and

FIGURE 8.5

jockey. The owners of the horses finishing second and third typically receive around 20% and 12%, respectively, of a race purse. Harness track purses paid out during 2003 are shown in Figure 8.7. They totaled approximately $300 million. New Jersey was by far the state with the highest gross purse ($68 million), while Delaware had the highest average purse per race ($10,500).

The racing industry also supports a large business in horse breeding. In 1962 Maryland was the first state to establish a program to encourage breeders within the state through direct money payments. The practice spread quickly to other states involved in horse racing.

Figure 8.8 shows a flow chart developed by researchers at the University of Maryland in 1999 as part of a report titled Economic Impact of Horse Racing in Maryland. The report noted that the cash flows—between the wagering public; the racetracks and OTBs; the horse owners, jockeys/drivers, breeders, and trainers; and the regulatory government agencies—are cash transfers that do not create economic impacts. True economic impacts occur outside of the industry from expenditures on goods and services.

In these expenditures, racetrack/OTB operators spend money on land, labor, and other goods and services from various business sectors. Horse owners/breeders/trainers spend money on land, labor, veterinary care, and horse feed and supplies. All of these pump money into the general economy. The report concluded that the Maryland racehorse/racetrack industry was responsible for a total economic impact of nearly $600 million in the state, with roughly two-thirds of this amount attributable to the race-horse industry and one-third to the racetrack industry. The racehorse industry was also credited with creating just over six thousand full-time positions, while the racetrack industry created nearly three thousand positions.

Unlike the casino industry, the horse-racing industry has only a minor impact on tourism. Most racetracks are not typical tourist destinations that attract overnight visitors, who would spend money on lodging, food, and other entertainment. The exceptions are the races held as part of the Triple Crown. These racing events attract visitors from all over the world and bring a significant number of tourist dollars to local businesses.

HORSE FATALITIES AND INJURIES. Horse racing does have a price in terms of horse fatalities and injuries. There were 207 racehorse fatalities in California alone between November 2002 and November 2003. Nearly half (102) of the deaths occurred during races. Another eighty-one deaths occurred during training and the remainder during other activities. In addition, 411 racing-related injuries to horses were reported in the state. The New York State Racing and Wagering Board reports that 120 racehorses died in that state during 2003.

The horse racing industry has invested millions of dollars in veterinary research on injuries and illnesses that affect racehorses. The Grayson-Jockey Club Research Foundation is the leading private source of funding for research into horse health issues. The foundation dates back to 1940. For 2004 it allocated $850,888 toward twenty research projects at twelve universities conducting equine research projects. It has contributed more than $11 million since 1983. The foundation receives financial support from donations and from special racing events staged by horse racetracks.

Two horse health issues of major concern are mare reproductive loss syndrome (MRLS) and exercise-induced pulmonary hemorrhage (EIPH). MRLS is a mysterious illness that killed more than five thousand Kentucky foals (or horses less than one year old) during 2001. Analysts estimate that the MRLS tragedy had an economic impact of $336 million. EIPH is a common condition in racehorses associated with bleeding from the lungs during strenuous exercise. Horses that experience EIPH are called "bleeders" and can be temporarily or permanently barred from racing depending on state regulations and the severity of the problem.

COMPULSIVE HORSE-RACING GAMBLERS. In terms of the human cost of horse racing, studies have shown a greater concentration of compulsive gamblers involved in pari-mutuel gambling than in other gambling activities. Results from the Gambling Impact and Behavior Study, published by the National Opinion Research Center at the University of Chicago in April 1999, support this. Of horse and dog racetrack patrons, 15% were considered

FIGURE 8.6

FIGURE 8.7

"problem" or "pathological" gamblers, compared to 10% of riverboat gamblers, 9% of those who visited casinos in Nevada or Atlantic City, New Jersey, and 6% of those in tribal casinos. These findings were based on the analysis of hundreds of gamblers who admitted multiple gambling visits during the previous year.

Greyhound Racing

Greyhounds are mentioned in many ancient documents. English noblemen used greyhounds to hunt rabbits, a sport known as "coursing." Greyhound racing is called the "Sport of Queens" because it was Queen Elizabeth I of England who established the first formal rules for greyhound coursing during the 1500s. Greyhounds were brought to America during the late 1800s to help control the jackrabbit population on farms in the Midwest, and soon local farmers began holding races. Early races were held using a live rabbit to lure the dogs to race. In the early 1900s Owen Patrick Smith invented a mechanical lure for this purpose. The first circular greyhound track opened in Emeryville, California, in 1919.

Three major organizations manage greyhound racing in the United States: the National Greyhound Association (NGA), the American Greyhound Track Operators Association (AGTOA), and the American Greyhound Council (AGC), a joint effort of the NGA and AGTOA. The NGA represents greyhound owners and is the official registry for racing greyhounds. All greyhounds that race on U.S. tracks must first be registered with the NGA. The AGTOA represents greyhound track operators. The AGC manages the industry's animal welfare programs, including farm inspections and adoptions.

Wagering on greyhounds is similar to wagering on horse races. However, greyhound racing is not nearly as popular as horse racing, and its popularity has declined dramatically in the past few decades. According to the Humane Society of the United States (HSUS), the handle from greyhound racing declined by 45% during the 1990s, leading to the closure or cessation of live racing at sixteen tracks around the country. In addition, seven states specifically banned live greyhound racing: Idaho, Maine, North Carolina, Nevada, Vermont, Virginia, and Washington.

In 2003 approximately four dozen greyhound racetracks were operating in fifteen states: Alabama, Arizona, Arkansas, Colorado, Connecticut, Florida, Iowa, Kansas, Massachusetts, New Hampshire, Oregon, Rhode Island, Texas, West Virginia, and Wisconsin. (See Table 8.2.) Greyhound racing is also legal in South Dakota, but the state has no operating racetracks. Greyhound racing is most prevalent in Florida.

FLORIDA'S GREYHOUND RACING INDUSTRY. Florida has sixteen greyhound racetracks, by far the most of any state. Greyhound races are the most attended pari-mutuel event in the state, attracting 1.7 million visitors during fiscal year 2002–03. Paid attendance was up by 9% from the previous year. The greyhound racing handle in fiscal year 2003 was $533 million, down 7% from 2002.

The handle from greyhound racing in the state experienced a steady decline over the past decade from $850 million in 1994 to $533 million in 2003. (See Figure 8.9.) This occurred even as horse racing in Florida increased its handle. Greyhound racing accounted for 35% of the state's total pari-mutuel handle during 2003.

Greyhound racetracks paid $17 million to the state during fiscal year 2002–03, accounting for 64% of the

FIGURE 8.9

state's total revenue from pari-mutuel gambling. The taxes paid to the state declined by 12% from the previous year.

Florida's greyhound racing industry paid out purses totaling $32 million during 2002–03. According to the Florida Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering, almost all of the state's greyhound tracks actively sponsor greyhound adoption programs, and many have on-site adoption booths. The industry is required to pay 10% of the credit it receives for uncashed winning tickets to organizations that promote or encourage greyhound adoptions. These mandatory contributions amounted to $256,150 during fiscal year 2002–03.

THE ECONOMIC EFFECTS OF GREYHOUND RACING. According to undated statistics accessed in December 2004 on the AGC Web site (www.agcouncil.com), greyhound breeding farms and racing kennels represent an investment of more than $150 million and pump another $96 million per year into local economies. The AGC valued the nation's racing greyhounds at more than $200 million. The AGC says that greyhound tracks around the country employ more than 100,000 people and raise nearly $200 million per year in state tax revenues. The tracks are credited with donating more than $10 million per year to charities and community causes. This includes donations of approximately $1 million per year to greyhound adoption efforts.

CONCERNS ABOUT DRUGGING. In May 2004 the Tampa Tribune reported that forty-four racing greyhounds

TABLE 8.5

Racing greyhound breeding statistics and estimated number of dogs killed, 1986–2003
Year	Number of litters born (NGA)	Estimated number born	Dogs individually to race (NGA)	Farm puppies culled before racing	Estimated greyhonds adoptedb	Estimated dogs retained for breeding	Racing dogs killed	Total killed (farm puppies and racing dogs)
Notes:
Litters: As reported by the National Greyhound Association (NGA), the U.S. registry organization.
Total born: Derived by multiplying the total number of litters by an average of 6.52 pups per litter (this is the conservative average that industry sources report).
Individuals registered to race: As reported by the NGA in the Greyhound Review, the official industry publication. Each owner must pay an additional fee to the NGA to have a greyhound individually registered.
Culled: This column shows the total number of dogs who disappear annually between birth and individual registration by 18 months of age. Very few greyhound puppies or young dogs are ever delivered to greyhound rescue groups.
aTo arrive at an estimated eighteen-year total of greyhounds killed, one must also subtract the number of dogs still in the racing system (approximately 40,000), the number of puppies/youngsters currently at farms (approximately 28,500) and the breeding stock required to produce thousands of litters a year (about 500 males and 3,000 females).
bA liberal estimate of figures from those in the adoption community.
cOrganized, large scale adoption efforts did not take place until the mid-1990s. During the late 1980s it is estimated that only a few hundred dogs made it into adoptive homes nationwide. For over 50 years all greyhounds were routinely destroyed.
SOURCE: Adapted from "U.S. Racing Greyhound Breeding Statistics and Analysis of the Annual Numbers of Dogs Killed from 1986–2003," in Know the Facts about Greyhound Racing, Greyhound Protection League, October 13, 2004, http://www.greyhounds.org/gpl/contents/PDFs/fact_sheet_advocate_vers.pdf (accessed October 13, 2004)
2003	5,171	33,714	26,277	7,437	14,500	1,800	9,977	17,414
2002	5,205	33,936	27,142	6,794	14,000	1,800	13,142	19,936
2001	5,015	32,698	26,797	5,901	13,000	1,800	11,997	17,898
2000	5,234	34,126	26,464	7,662	13,000	2,000	11,464	19,126
1999	5,266	34,334	27,059	7,275	13,000	2,000	12,059	19,334
1998	5,034	32,822	26,036	6,786	13,000	2,000	11,036	17,822
1997	5,192	33,852	28,025	5,827	12,500	2,000	13,525	19,352
1996	5,438	35,456	28,877	6,579	12,000	2,000	13,977	21,456
1995	5,749	37,483	31,688	5,795	10,000	2,100	19,588	25,383
1994	6,232	40,633	34,746	5,887	8,500	2,200	24,046	29,933
1993	6,805	44,369	39,139	5,230	6,000	2,500	30,639	35,869
1992	7,690	50,139	38,023	12,116	3,000	2,500	32,523	44,639
1991	8,049	52,479	38,430	14,049	1,000	3,500	33,930	47,979
1990	9,473	61,764	38,615	23,149	650	3,200	34,765	57,914
1989	7,690	50,139	38,443	11,696	450c	3,000	34,993	46,689
1988	7,979	52,023	37,784	14,239	300	2,750	34,734	48,973
1987	7,638	49,800	33,021	16,779	200	2,500	30,321	47,100
1986	6,688	43,606	30,219	13,387	75	2,000	28,144	41,531
Totala	115,548	753,373	576,785	176,588	135,175	41,650	400,860	578,348

in Florida tested positive for cocaine following their races during fiscal year 2003 (Alan Snel, "Drugs Taint Integrity of Greyhound Races," May 3, 2004). In total, the newspaper found that 119 greyhounds had tested positive for cocaine since 2001. Owners of greyhounds testing positive were forced to forfeit their winnings. However, there was no recourse for bettors who had wagered on greyhounds that might have won if the positive-testing dogs had been disqualified. Drug test results are not obtained until several weeks after a race has run. Rapid-screening tests that could provide results at the race track are considered too expensive by the greyhound racing industry.

The newspaper article questioned why state officials did not investigate how the drugs got into the dogs' systems. The president of the National Greyhound Association suggested that the cause could be trace amounts of cocaine on the hands of trainers or other people touching the dogs. State officials denied that trainers were purposely drugging greyhounds to influence race outcomes.

CONCERNS ABOUT GREYHOUND WELFARE. The National Coalition against Legalized Gambling claims that there were more than seventy-five well-documented cases of cruelty and abuse in the greyhound industry during the 1990s involving thousands of dogs that were shot, starved, abandoned, or sold to research laboratories. The HSUS reports that up to 20,000 adult greyhounds are destroyed each year because they are too slow. The organization claims that the racing industry severely overbreeds greyhounds in the hopes of producing winners, leading to the destruction of thousands of unwanted puppies each year. The HSUS also says that a racing greyhound's career is typically over at the age of four years, well below its average lifespan of twelve years, meaning that thousands of adult dogs are also destroyed each year when they are no longer useful.

The Greyhound Protection League (www.greyhounds.org) compiles statistics on what it says are the number of greyhounds bred, adopted, and killed each year. (See Table 8.5. Note that these are not exact figures—many are compiled by estimate.) The league claims that more than half a million greyhound puppies and adult dogs were killed by the industry from 1986 to 2001. During the same time period about 107,000 greyhounds were adopted.

In May 2002 a sixty-eight-year-old Alabama man named Robert Leroy Rhodes was arrested and charged with felony animal cruelty after the remains of two- to three were found on his property in Baldwin County, Alabama. The man, who worked as a security guard at the Pensacola Greyhound Park in neighboring Florida, claimed that the track paid him $10 apiece to shoot the dogs and dispose of their carcasses on his eighteen-acre farm. He admitted to performing the service for forty years at the request of race dog owners. Authorities report that autopsies indicate some of the dogs were not killed instantly and therefore suffered before they died. It is a felony in Alabama to torture an animal. Racetrack officials denied involvement in the case and fired Rhodes along with several other security guards and a kennel operator.

Alabama authorities eventually charged four greyhound owners and trainers under the state's animal cruelty law based on statements from Rhodes and Clarence Ray Patterson, a kennel owner at the Pensacola Greyhound Track. At an April 2004 hearing the Baldwin County sheriff testified that Rhodes, who died in 2003, had admitted killing two- to three thousand greyhounds that were too sick or old to race. Florida investigators testified that Florida kennel owners and trainers paid Rhodes to shoot unwanted greyhounds, because it was cheaper than having the animals humanely euthanized by a veterinarian. The defendants' lawyers asked for the case to be dropped because the key witnesses could not be cross-examined. Rhodes had died, and Patterson could not be located by authorities. The judge had not yet ruled on that motion when Patterson was found.

In June 2004 the Mobile Register reported that Patterson had been located in an Alabama jail where he had been incarcerated since March 2004 on unrelated charges (Brendan Kirby, "Key Figure in Greyhound Case in Custody," June 30, 2004). Prosecutors in the animal cruelty case said that locating Patterson should help their case against the other defendants.

Jai Alai

Jai alai is a court game similar to handball in which players bounce a ball against the wall and catch it using a long curved basket called a cesta, which is strapped to the wrist. The term jai alai (pronounced hi-uh-lie) comes from the Spanish Basque phrase for "merry festival." The first permanent jai alai arena (called a fronton) was built in Florida in 1924.

The game's scoring system has been adjusted over the years to make it more attractive to gamblers. Typical games include eight players with only two players competing for a point at one time. The game continues until one player obtains seven points. Win, place, and show positions are winning bets, just as in horse racing.

Jai alai peaked in popularity during the early 1980s, when more than $600 million was wagered on the sport. By 1996 the total handle was down to around $240 million.

In 2004 pari-mutuel gambling on jai alai was conducted in only two states: Florida at five frontons and Rhode Island at one fronton. (See Table 8.2.) Although formerly also conducted in Connecticut, the last jai alai fronton in that state closed in 2002.

Paid attendance in Florida was 377,105 in fiscal year 2002–03, and the handle was $102 million. Attendance was down by 21%, and handle was down by 8% from the year before. The state received just over $600,000 from the jai alai industry.

The Future of Pari-Mutuel Gambling

DECREASING POPULARITY AND DECREASING INCOME. Pari-mutuel gambling is decreasing in popularity as it faces more and more competition from other gambling options, particularly casinos. The horse-racing industry, which comprises the bulk of the pari-mutuel business, experienced a 40% decline in attendance during the 1990s. Even though the handle increased over this time period, the increase is not statistically significant. The total pari-mutuel handle in 2000 was $18 billion; in 1987, it was $17 billion. Although this seems like an increase, it is actually a decrease when the effects of inflation are considered—the 1987 figure of $17 billion is equivalent to $26 billion in 2000 dollars. It has become increasingly difficult for racetracks to attract a large enough betting pool to afford to run races.

Statistics available from the Florida Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering, are presented in its 72nd Annual Report (December 2003). Pari-mutuel attendance steadily decreased from fourteen million in 1990–91 to 2.7 million in 2002–03.

ATTEMPTS TO ATTRACT MORE AND DIFFERENT GAMBLERS. Gambling industry analysts say that there is a relatively small hard-core group of horse-racing attendees, most of whom are older people. The horse-racing industry is trying to attract a larger and younger fan base (twenty-five to forty-five years old) with more disposable income. Some racetracks have tried to become entertainment venues by offering food courts, malls, and music concerts. Although these gimmicks attract visitors, those visitors do not necessarily gamble. Devoted race fans complain that such promotions are too distracting and draw attention away from the racing.

Increasingly, pari-mutuel facilities are offering other gambling choices to patrons. Seven states allowed slot machines and/or video lottery terminals at their racetracks during 2004: Delaware, Iowa, Louisiana, New Mexico, New York, Rhode Island, and West Virginia. The addition of video gaming devices has saved some racetracks. The Dover Downs racetrack in Delaware increased its revenue from $14 million to $141 million following the addition of slot machines in 1994. The number of slot machines at racetracks is expected to triple during the first decade of the twenty-first century.

Most of Florida's racetracks and jai alai frontons have card rooms in which gamblers wager on card games, mainly poker. According to the 72nd Annual Report of the Florida Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering, the state's card room gross revenue was $2.8 million in fiscal year 2002–03. The card rooms contributed more than $363,000 to state revenues in the form of taxes and fees.