Colorado has broken from the gate to adapt fixed-odds horse racing in the not-too-distant future.
It was given the green light during the Colorado Limited Gaming Control Commission’s monthly meeting in March.
Changes are most certainly coming soon for horse betting in Colorado.
In the meantime, Centennial State racing officials are monitoring developments in New Jersey. That state is currently thundering through the homestretch, ready to cross the finish line and become the first U.S. state to actually put fixed-odds wagering into play.
The May 7 opening day at Monmouth Park in Oceanport, N.J., is the approximate starting date. But there is no firmly-etched deadline.
It will happen when final administrative paperwork is cleared up.
Still, the initial outline has been set for the international system’s U.S. debut.
Explaining fixed-odds wagering
When fixed-odds wagering goes live, bettors will be able to make win, place and show bets at established odds perhaps a couple of days in advance.
This will enable gamblers to lock in prices well before the race.
It also removes the risk from the parimutuel style wagering in which odds can change right up until post time.
Here’s why that matters:
Under current parimutuel betting regulations, a player makes a $100 wager at 2-1 odds five minutes before post time.
However, just before the gates open, some big late money comes in on the same horse. As a result, the odds drop to even.
That initial bettor has just seen a potential win of $200 shrink to $100 in the blink of an eye, losing $100 in potential profit.
Because of this dynamic, there are an untold number of large bets that don’t get made.
But the fixed-odds system will encourage the big gamblers to play. It also will bring horse racing in line with other sports, which lock in odds at the time of the initial wager.
Fixed odds betting essentially becomes its own area of horse race betting.
A gambler can, for instance, make several different wagers on a race in advance via the fixed-odds method. And he or she can also wager an entirely different set of bets in the parimutuel pools just before the race.
Racing officials expect massive new revenue. Especially if fixed-odds wagering precedes highly-wagered events like the Kentucky Derby, Preakness Stakes, Belmont Stakes and the Breeders Cup.
Fixed-odds wagering, though, will not be offered in the exotics like exacta, trifecta or superfecta wagering at the start.
Gradual growth expected
The innovation is dynamic, but the process will grow slowly. It will begin at live race tracks and is expected to gradually reach the entire online gambling market over the next five years.
“We see a time when there will be 100,000 different races that can be sent out on a regular basis,” Dennis Drazin, the head of Monmouth Park operator Darby Development, recently told PlayColorado. “During the pandemic a couple of years ago, people couldn’t bet on much and when they were desperate for betting content, they switched to horse racing.
“Five years down the road, there will be 20 times the number of eyes on horse racing as there is now. It will be on every device you now use for overall sports betting.”
That means any avenue in which the wide array of Colorado’s online sportsbooks can be accessed. And that, of course, is in addition to the innovative new way to wager local race tracks themselves will be offering.
Keys to the structure
In order for the deal to work in New Jersey, several parts of the fixed-odds betting equation had to be satisfied.
First, the distribution of new money into the racing revenue pot must be divided between horsemen (jockeys, trainers, etc.) and the race track operator.
That requires a mutual agreement.
“Sometimes negotiations between all the parties can get complicated in terms of coming to an amicable agreement.” Drazin said. “Being that there is added money involved, you figure surely that all sides can come together, but they do have to work that out.
“In our case, as an operator, I wanted to be generous with the horsemen. We made sure the horsemen receive half the money. This helps in maintaining higher purses, which keep the quality of racing up.”
Both sides get a piece of the new revenue pool.
But that’s one part of the equation in New Jersey.
The other involves a deep-pocketed partner willing to take on the risk of a bank.
In the Garden State, that’s BetMakers Technology. The Australia-based technology giant is a major force.
First, according to Drazin, it makes horsemen and the track whole in the possible event of “cannibalization.”
That means ensuring fixed-odds wagering pools do not take money away from the parimutuel handle.
Assuming the bookmaking role
BetMakers also acts as the sportsbook, setting odds and taking risks by accepting the action of big players.
This shields any individual track from being exposed to high-rolling gamblers able to hit them with six-figure individual wagers.
Tracks already have this insurance on the parimutuel side with fluctuating real-time odds.
On the fixed-odds side, BetMakers believes it has a method to make this work.
The company obtains fixed-odds operating rights at a given track — in this case Monmouth Park — to provide a streamlined single feed to wagering operators through its Global Racing Network.
BetMakers charges the bookmakers a fee to offer customers the tracks it provides content for.
Thus, for BetMakers, its 15-year data and distribution deal with Monmouth Park creates an extended time period in which to sign up clients (as it did in annexing PointsBet last year).
Operators who want to take Monmouth Park’s signal for races which feature fixed-odds wagering must enter into an agreement with BetMakers to gain the product.
In turn, BetMakers provides the bookmakers with the algorithmic tools they need to manage a horse-racing book.
They also have an odds-making component and can thus set whatever odds they like.
Colorado parties certainly will be watching as they will follow suit with similar processes and negotiations.
Focusing on the big picture
The name of the game for BetMakers is to sign multi-year agreements with numerous tracks and gain the right to provide the signal for fixed-odds wagering to numerous receiving tracks.
When all the deals are set, BetMakers hopes to distribute hundreds of thousands of races to operators around the country.
This not only boosts its profit as a content provider but provides resources to handle the betting action.
BetMakers prepared for the American fixed-odds market by investing several million dollars into the process. That includes the 2021 acquisition of Sportech.
That deal gave Betmakers Sportech’s Global Tote business, which provides parimutuel technology and services to horse-race betting operators around the world.
This was a big tool in its vision of fixed-odds wagering.
For Bet Makers, deals like the one at Monmouth Park make sense because they represent a penetration of the lucrative American market.
Dallas Baker, the head of international operations for BetMakers, notes that Australian bettors wagered more than $30 billion in recent years on horse racing. And that’s from a population of 25 million people.
In comparison, the United States, which has more than 300 million people, wagered $12 billion on the ponies last year.
In short, the American market is a gold mine, waiting to be tapped.
And this is only the beginning.
By approving fixed-odds wagering, Colorado has set itself up to be the next beneficiary.
In the meantime, though, the Centennial State can observe how the New Jersey model plays out.
Then it can determine what structure it wants its own fixed-odds wagering system to take.