Transcription
Uh, this was a story in the first week of the year from our old Bell Bill Finley at the TDN. Uh, it's called "Why Racing is Losing One of Its Best Customers." Uh, and it's about this guy, Mike Maloney. Uh, who's written a book, "Betting With an Edge." He's, uh, he's from Kentucky, and he's played the races professionally, making a really good living for almost 50 years. Uh, has bet, has he's bet almost, he's bet as much as $14 million in a single year. And he says, uh, "When it comes to betting horses, I'm closing in on 50 years, and I've done very well. Racing has been very good to me." What must that be like?
Um, but the story goes on to talk about how he's, he's drastically cut back his handle. Um, and he's like, barely at a million dollars now, and will probably cut back even further. And one of the reasons, one of the, the main reason that he's doing that is because of the influence of CAW Wagers, the computer assisted wagering players, which I've mentioned several times on this show.
Um, here's what he said in Bill's story: "As the CAWs became a bigger percentage of the betting pools, my edge dissipated over time because they're very good, and they're doing the same thing I'm trying to do, but they're just doing it better. Over time, if you're going to approach betting on horses as a business, you're going to have to adjust your business model every year. For me, the biggest adjustment has been to bet less. A lot of marginal bets that used to be profitable gradually became less profitable and then got close to break even. At that point, they had to be eliminated."
That leads the decrease in handle. And this, you know, the story of CAW wagering is not, you know, part, yes, partly it's that they're, they've built algorithms that are very sharp and are able to analyze the the the odds down to the last second. Um, and find inefficiencies in the market. But the other part of it is that they don't even need to make a profit. Between, so basically what happens is the CAWs and these, the the wagering houses that take their action are a lot of them owned by the Stronach Group, by NYRA, by Churchill Downs. Major, major conflict of interest. CAW groups pay the track a host fee, so they're able to bet on their product. And then the tracks, in turn, give them a rebate to the point where they do not even need to make a profit. They just need to make more, they need to make, uh, lose less than the difference between the host fee and the rebates. And that, to me, is a complete bastardization of of what horse player, horse playing on the horse playing horses is supposed to be like. It's supposed to be about making a profit. It's not supposed to be, well, I have this deal worked out with the tracks where I just can't lose above a certain amount and then I'll be good.
And, you know, it, they, they just have such advantages. Like, I, I read this story where, uh, Scott Darudy, who's like one of the guys who works, um, for like Elite Turf Club or one of these other places that has the CAW Wagers, was like, "Well, if you just ban the CAWs, like they're very determined to bet their money. Like, they'll be at the track like putting really, they're going to be at the track betting 3,000 tickets with five seconds to post." I find that very hard to believe that that would be feasible if not for the model that they have. And I just, the industry is in such, is such a a tough spot here because they're chasing away the smaller betters. They're becoming a bigger and bigger percentage of the pools. And first of all, that that kind of, you know, neutralizes their advantage. Like, they need enough minnows in order to survive as the whales. Um, but the industry is in a spot where with declining handle, they cannot afford to ban these groups outright. Like NYRA has done a good job in certain pools of limiting them, like, uh, either banning them or cutting them off with a couple minutes to post. I think that's probably the best you can do. Um, but this is like, this is a major, major problem that I don't, you know, we should have Pat Cummings on to talk about this. I think he'd be a good guy, um, to try to figure out where we go from here because it's just, it's, and, and the, the thing that pisses me off the most is the relationships between the CAW groups and NYRA and Churchill Downs and Stronach Group because they are basically crowding, working together to crowd the smaller players out of the market. And, you know, Mike Maloney, $14 million to $1 million annual handle, you get enough like really successful horse players to do that, and you're in a big, big, big soup there, right? And, you know, that's not even factoring in the smaller betters who might go from like $300K to zero a year in handle. And I, I just, like, I think it's gross. Like, if they can find their own way to make money better than I can with, you know, with the same exact, you know, availability of odds, then that's fine. I can respect that. But like this, this weird incestuous relationship between them and the owners of the tracks to where they don't even have to make a profit on the actual wagers to be able to siphon off all of this handle from the smaller betters, it grosses me out. And I think that there should be more people talking about it, frankly.
Well, and Joe, it also, it greatly impacts not only all the things you mentioned, but the actual odds themselves to the point where if I'm a, if I'm a $2 better, and I'm looking at the odds and I'm saying, "Gee, that horse has value." Um, and all of a sudden, I, I plunk my $20 to win on the horse. And, and then when the gate opens, you know, it's, the odds are half of what it was. Um, it, it disincentivizes me to go ahead and and wager. And, and I'm going to read you one, one text chain that that I was with you, Samantha Perry, when she was on last week. I liked the horse that was in our race, actually. And I said, "Sam, how is the 825 to one off the layoff and dirt got checked in that race? A huge opportunity in my opinion." Okay, the horse was 25 to one when I wrote that, with two minutes to post. They were, they were almost behind the gate at that point. Um, the horse wins. You know what he paid? He went off 11 to one, paid $30. So, you know, you sit there and you say, "I finally found value because I, I never bet. I finally found value. I finally found value. Woohoo, woohoo! I'm going to, you know, I'm going to win a lot of money." And, and all of a sudden, it's, it's half of what you thought it was going to be. Um, you know, in the two minutes from, you know, from that moment. So what is a small better supposed to do? I mean, you basically can't wait any longer. You can't sit there and say on your phone or or in line, "I'm gonna wait. I'm gonna wait. I'm gonna wait until all the horses are in the gate," because it almost doesn't matter because that huge, you know, wave of of of influx money comes, comes in, um, in those last couple of minutes and changes the entire scenery of the odds. And it always seems, I know this isn't the case, but correct me if I'm wrong, it always seems like that it's the winner that has the odds dropped tremendously, um, not that it was predestined or anything like that. That's, I'm not saying that the races are fixed, but it always seems like the smart money goes to the horse that ends up finishing first, uh, you know, overall in in the race. And it happens more times than not, which frustrates the hell out of me as well as a, as a quote unquote small better. It drives you crazy. And I've said this before, but it's just, this is the only game where you can cash a winning bet and feel like you lost. Ex, like it happens, happens in gigantic pools too. Like last year, I remember when Shea Pierre won the Maker's Mark Mile at Keeneland, I bet him loading into the gate at 23 to one, and he won it nine to one. And this is like, I was disgusted. I was disgusted. Yeah.
Like, and, and, you know, I just want to read one more quote and then, then we can move on, um, from, uh, from Mike Maloney in the story. He says, "I'm not so much concerned about me. Things are winding down for me. I've spoken to lots of national groups at conferences, um, and I've been trying to alert them to the things we've been talking about. Ten years ago, one of the things I would say is that during my lifetime, I've been an annuity for racing. I've spent my entire life betting horses and betting very seriously. My point is, a guy like me is an annuity for racing. An everyday player is an annuity for racing. I'm 68 years old, and when I decide to hang my red pen and my Racing Form up, who's coming in behind me? They haven't laid the groundwork to bring anyone new in. With young analytically minded people, you give them very little reason to choose racing over other forms of gambling. When I go to the racetrack, I look around and try to find a 25-year-old or a 30-year-old everyday horse player that's going to be there, and the racetrack is their love and their passion. They've become betters. You won't see many of them. And that's no, never has that been more true than now when you're directly competing with sports wagering where you have fixed odds, you have a set price that you know you're going to get whether or not you win or lose. This is an unacceptable like situation in terms of bringing in new people to replace the Mike Malone of the world. You got to have someone introduce you to it, and you gotta like, because and there will only be a few instances where someone bets a horse that's unfamiliar with racing, someone bets a horse at 8 to 1, and a horse wins at 5 to 2, where they say, "This, like, why would I do this?" Like, I, there's a million casinos and sports betting opportunities that, and poker, and all this stuff that I could be putting my money towards if I want to gamble. This is not sustainable."
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