August 17, 2012--Bennett Liebman, Governor Andrew Cuomo's consultant on all things gaming, equates gambling on races to purchasing consumer items and regards rebates as “free-enterprise ingenuity.” What he didn’t consider, perhaps, is that racing’s customers aren’t simply consumers, they’re competitors.

Unlike fixed-odds events in casino games and sports betting whose customers “play against the house,” racing’s customers themselves determine what the payoff for winners will be. Thus the “free market” is already built-in to racing and it is being tampered with to make it likelier that bettors with the biggest bankrolls will be profitable.

The “ingenuity” that spawned rebating is the same as that which divined off-shore bank accounts, tax shelters, skimming, and other vehicles to divert funds away from their intended destinations.

Even if the ethics involved weren’t suspect, the capacity of rebating to support money laundering, book-making, and excess Advance Deposit Wagering profits (at host track expense), should be a sufficient deterrent.

The rebate “problem” is a takeout problem. Rebates are possible only when direct takeout rates are too high. If rates weren’t excessive, there would be no “wriggle-room” to subsidize a favored few while fleecing the rest.

Not all venues want to keep the playing field tilted against recreational bettors, but they are reluctant to lower takeout rates; afraid of a precipitous drop in revenue if the rates decrease doesn’t immediately fuel a handle increase. They also fear the formerly-rebated will reduce their play without their virtually insurmountable advantage.

Although I was unsuccessful in accessing any examples, perhaps Mr. Liebman subsequently explored alternatives to selective rebating of individuals that could be considered more equitable approaches for ALL bettors/customers. I can suggest at least three and, hopefully, this article will inspire more.

I’ll use the term “Qualifying Pari-mutuel Pool” (QPP) to represent any pool in which an equitable adjustment to payoffs will be authorized once defined levels of handle are reached:

(1) Paying rebates at an equal rate to all participants of any QPP regardless of an individual’s wager size
(2) Paying bonuses at an equal rate to all winners in a QPP
(3) Dynamically lowering equal direct takeout for all participants in every QPP
(4) Others to be determined

Multiple objectives are involved:

(a) Restore a level playing field on which competitors of all bankroll sizes have an equal opportunity to come out ahead given sufficient skills, information, and good fortune.
(b) Increase long-term handle at levels capable of supporting purses, operations, and capital improvements as well as generate revenue for appropriate taxing entities.
(c) Minimize short-term cost of adjustments to existing process
(d) Increase popularity of racing and attendance through greater opportunity and transparency

What is required is a commitment to continually experiment with takeout strategies to find the “optimal” level of direct takeout in support of (b) for each wager-type/race-condition combination at each race meeting. As the relationship among wagering competitors changes so should the distribution of wagers. Depending on the priorities established, some combination of (1) through (4) may be appropriate.

One approach to experimenting, while attempting to minimize negative initial impact, would be to first concentrate on pools where whales actually participate. The TRPB should already know that by now. Handle thresholds for each member of the QPP subset could be established to automatically adjust takeout rates once handle reaches the next defined level.

Of course, bet cancelation policies would be a factor, but - as the rebaters have already demonstrated – where there’s a will there’s a way. We just need guys in white hats establishing the criteria, ensuring they are legitimately met.

It’s my understanding that rebated players were not affected by the 1% overcharge to NYRA customers that the Administration deemed a “scandal” justifying its intervention. That 1% is dwarfed by the 5% minimum rebate that the average player is effectively also overcharged; making rebates racing’s real takeout scandal.

If the state is going to run racing in New York, then there is no justification whatsoever for its providing an “edge” to a tiny subset of its customers comprised predominantly of professional gamblers that is not extended to the overwhelming majority of recreational bettors that includes New York residents, voters, and taxpayers.

Level the playing field, Mr. Liebman, for horseplayers as well as for horsemen.

It should be clear to anyone who has actually sampled the wealth of Liebman’s work available on the Internet, that the man has carefully considered, clearly articulated, and occasionally debated a preponderance of the issues that need to be addressed by the NYRA Board and executives.

The optimist in me believes that at least some needed reform will result from the Cuomo-Liebman connection. On the other hand, there is no guarantee that the Governor will agree with his advisor’s recommendations and priorities, or that he has the political will to overcome established opposition to some of them.

The Governor, the Senate, and the Assembly should not make their chosen board appointments a “fait accompli” without feedback from concerned parties outside the government, politics, and “Old” NYRA – all of which Liebman himself has been a part. The sooner the Administration resumes open communication with the media regarding the takeover of NYRA, the more likely it is that the entire racing community will benefit from the Governor’s act.