Gambling in America - Pari-mutuel Wagering

Pari-mutuel wagering combines wagers into a common pool. Sports in which pari-mutuel wagering takes place are horse racing, greyhound racing, and jai alai. Winners are paid according to odds calculated with reference to the amounts bet on each contestant. In 2002 parimutuel wagering represented about 6% of the gaming industry. From 1974 to 2000 the overall trends in parimutuel wagering included an increase in horse racing and decreases in greyhound racing and jai alai.

Horse Racing

The largest sector in pari-mutuel wagering is horse racing. Horse racing has a long history in America. The

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first American horse race took place in New York in the late 1660s. Several larger tracks, such as Churchill Downs, in Louisville, Kentucky, have been in operation since the 1800s.

Many Americans enjoy going to the racetrack for entertainment, some to enjoy the beautiful animals, and many more to gamble. Horse racing is a popular spectator sport, although it has declined significantly in popularity relative to other forms of gambling.

Even though the amount wagered on racing grew between 1974 and 2000, when the figures were adjusted for inflation, there was a noticeable decline. Although there are approximately 150 racetracks in America, most betting takes place off-site. Satellite broadcasting makes it possible to simultaneously broadcast races between racetracks or at off-track betting sites where there are no races. In addition, at-home pari-mutuel betting is now possible via the Internet, and several companies provide twenty-four-hour racing channels. There are also Internet simulcasts. Whereas in 1991 more than half of horse-racing wagers were made at the track, by 2003 just 15% of the $15.1 billion in bets handled were placed live, and less than 20% of the one thousand wagering sites nationwide were racetracks themselves, according to the National Thoroughbred Racing Association (NTRA).

The types of wagers placed have changed over time. Before the 1970s the "straight" wager (betting on a horse to either win, place, or show—finish first, second, or third) dominated, but in 2003 only a third of the parimutuel "handle" (the total amount wagered) came from this type of bet. So-called "exotic" bets made up the other two-thirds of wagers. These consisted of either intrarace exotics (Trifecta, Superfecta, Exacta—in which the exact order of winning horses must be selected), which made up 58%, or inter-race exotics (Daily Double, Pick Three, Pick Six, and the like—in which winners of multiple races must be chosen), which made up 9%.

Account wagering was also possible in nine states. Patrons were permitted to set up accounts at racetracks and, in eight of those states, could phone in their bets from anywhere. Pari-mutuel wagering on horse races was legal in forty-three states and generated about $4 billion in gross revenue in 2002, according to Christiansen Capital Advisors LLC.

There are three major forms of horse racing: Thoroughbred, harness, and quarter-horse. In the United States, Thoroughbred was, by far, the most popular, followed by harness and then quarter-horse racing. For example, in 2000 nearly half (4,032) of the 8,475 live races run in California were Thoroughbred, while in Florida, more than half the races were Thoroughbred.

According to the NTRA, interest among Americans in the sport has been growing, with the horse-racing fan base rising from 31.2% in 1999 to 35.6% in 2003. This was attributed in part to the success of the film Seabiscuit, which told the story of a legendary racehorse. In the month after the film's release, betting at American racetracks increased by 5.5%.

Greyhound Racing—the Sport of Queens

Once a favorite pastime of Queen Elizabeth I of England, dog racing became known as the "Sport of Queens." Originally, a hare would be released and a pair of greyhounds set in pursuit. In the early 1900s a mechanical lure replaced the hare, eliminating the killing of the rabbit.

The first American greyhound racetrack with a mechanical hare opened in Emeryville, California, in 1919. In 2004 fewer than fifty tracks were operating in fifteen states, more than a third of which were located in Florida. Most other states had between one and three each.

A typical greyhound racing program featured thirteen races, each with eight dogs. Races were run on 5/16, 3/8, 7/16, and 9/16 mile courses. A typical race on a 5/16-mile course lasted thirty-one seconds, and the dogs reached speeds of up to forty-five miles per hour. Like horse tracks, dog tracks have turned to simulcasting and off-track betting.

The animal rights movement has protested the sport, claiming the dogs are mistreated and that many are killed by breeders who keep only the fastest ones from a litter. Although the claims have led many track owners to improve conditions, animal rights activists have persuaded some legislators to ban racing or rescind existing permits. The declining financial condition of many tracks is, however, the primary reason that so many have closed.

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Jai Alai

Jai alai is a fast-paced game in which the players, using a large curved basket strapped to their arms, whip a small ball made of goatskin against the three walls and floor of a huge playing court (fronton). Jai alai was invented in the seventeenth century in the Basque regions of Spain and France. Although the game is popular in Latin America, its popularity has been declining in the United States. In 2004 it was legal in only three states: Florida, Rhode Island, and Connecticut.

By 2004 Connecticut and Rhode Island no longer had any jai alai frontons. Florida once had ten, but by 2004 only five remained. The future of the sport in the United States was uncertain. Lotteries and cruises (many of which offered casino gambling) had taken considerable business away from the frontons. Most jai alai frontons offered simulcasting of horse races, which gave gamblers an additional wagering opportunity. Because of their deteriorating financial condition, in 2004 legislation was introduced in Florida that would allow frontons to reduce their playing schedules from a hundred days to forty while continuing to keep their intertrack wagering licenses.

Problems for Pari-Mutuels

Because of the increased availability of other forms of gambling, pari-mutuels were facing hard times. Off-track betting and simulcasting had helped, but many owners of racetracks and frontons said more was needed for them to stay competitive. Track owners wanted to install video poker machines and other electronic gambling devices (EGDs) as an additional source of revenue. As of 2004 Delaware, Rhode Island, Iowa, Louisiana, New Mexico, and West Virginia permitted EGDs at racetracks. This was a highly controversial issue: According to the National Coalition against Legalized Gambling, attempts to legalize EGDs at racetracks were defeated in twelve states between 1995 and 2003.