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Step Back, Satan

On occasion, HorseRaceInsider provides a forum for alternate views from various segments of the racing industry. Media, foreign and domestic, prominent industry leaders, and leading handicapping practioners will be afforded an opportunity to express themselves independently. The following are the thoughts of foreign journalist Dr. Carlo Zuccoli regarding the possible installment of exchange betting in this country. Opposing comments are not only welcome but encouraged

Vade retro Satana ("Go back, Satan" or "Step back, Satan") is a Medieval Catholic formula for exorcism, recorded in a 1415 manuscript found in the Benedictine Metten Abbey in Bavaria.

In current Catholic tradition, the formula is used to repel any possible evil thing or happening, as a "spoken amulet".

The phrase Vade retro Satana is also used as a witty or scholarly prose device, dissociated from its religious implications, to express strong rejection of an unacceptable (but possibly tempting) proposal, or dread of some looming menace.

Namely, in the sense of ‘do not tempt me’, ‘I will have nothing to do with that’."

Now that Monmouth Park 2011 race meeting has started all the horsemen in America can breathe deeply as no exchange, “the Devil,” has begun working in New Jersey yet.

The situation is rather bizarre: Betfair and its subsidiary American company TVG, have spent a lot of money promoting the exchanges, asking famous economists to produce various documents.

But they have missed the focus point and have been unable to create a working model for exchanges in the U.S. They very likely still haven’t a definitive plan. I have to say luckily for America.

A few weeks ago, the Governor of New Jersey has signed a deal with the new lessee of Monmouth Park, but nobody has said a single word about the exchanges, namely Betfair.

All the members of the American media, on April 25th 2011, seemed very excited about the arrival of the exchanges in the US, during a conference call for the presentation of a study produced by Mr. Eugene Christiansen, funding partner of Christiansen Capital Advisors, LLC: “Exchange Betting and the United States Thoroughbred Racing Industry.”

Mr. Christiansen was appointed by TVG to prepare the document (55 pages) and he started his presentation stating that in the UK, since the introduction of the exchanges (mainly Betfair), the prize money has gone up!

I tried hard to explain that, since the introduction of the exchanges, the English racing world is struggling and that the prize money has gone down and is going down dramatically for the simple reason that what the exchanges pay as a Levy is not enough.

Exchanges pay a 10 percent Gross Profit Tax on the commissions applied to the successful backer and layers, which can vary from 5% down to 2% depending on the amount of betting handle.

Compared to what the bookmakers pay for essentially the same service, the rate is ridiculously low.

The exchanges, of course, drain huge amounts of money from the bookmaking industry and the Levy is diminishing fast, as is the prize money.

A number of English trainers, owners, breeders, etc. has formed a group “The Horsemen’s Group” which is boycotting all the tracks whose races don’t meet certain “tariffs” [minimum prize money].

So far, the Horsemen’s Group is very successful, but nobody knows what will happen in the long term if the exchanges are not stopped.

As I have already explained, the exchanges need a big liquidity to work properly. If any tax will be applied, in any way, the liquidity will disappear very quickly and the exchanges will fail.

I don’t want to [reiterate] about the integrity of all the markets on which you can back or lay the outcome of an event, if you can determine that outcome.

American horsemen have been very lucky that the Devil hasn’t able to cross the ocean yet; he is still working on a model [that would work here].

Let’s hope that that road to America will be very long. Perhaps the monks in the Benedictine Metten Abbey will work for a just cause.

Written by Dr. Carlo Zuccoli | Comments (9)

Do you have a take on the state of the game, a favorite race horse, trainer or jockey? Share your ideas. Show the racing industry and media the folly of their ways. The HRI Readers Blog: "When you lose it, Use it." Submit your blog to HRI Webmaster.

Lo Strumento Del Diavolo

Welcome to HorseRaceInsider Guest Commentary. From time to time, you will read reactions from industry leaders, racing practitioners or, like today, commentary from European media members.

The state of New Jersey recently granted permission for the racing industry to conduct exchange wagering. Some leaders in the gaming industry believe that betting exchanges are the future, a means to reverse the game's fortunes. Others disagree. The take of Dr. Carlo Zuccoli follows:

“Do you remember the (Italian) television commercial in which George Clooney used to say, “No Martini, no party?”

Well, when it comes to betting, horse racing can say the same, and then more – “No betting, no show. No betting, no racing. No betting, no industry either.”

Every day, more or less, people all over the world write about betting and gaming, what we generally call gambling. And most of them write about betting on horse racing.

They write about takeout (concerning the tote system), about overround (concerning the bookmaking industry) and, recently, they talk about the wagering exchanges, very often without even knowing what this “instrument of the devil” is.

In addition to thinking about takeout, every North American racetrack that’s applying a takeout should consider the correct proportion between simple and exotic bets in order to create the maximum possible churn. Every track must satisfy the needs of the bettors as well as horsemen (prize money) and those of the State. This is a very complicated exercise: tracks that manage this “trick” properly succeed; those that don’t won’t succeed.

In England, for many years, a large portion of the funding for purses has been and continues to be generated by an entity called the Levy Board. The Levy collects money in the form of a gross profit tax (otherwise known as GPT) from the bookmaking industry. The bookmakers pay GPT at the rate of about 10 percent of their gross profits, if any, on a weekly base. The bookmakers pay another GP at a rate of 15%, in the same way, but this money goes to the English Government. All the profits which the Horserace Totalisator Board generates running the Tote all over the racecourse in the UK go back to racing; its subsidiary company, Totesport Ltd. works as a bookmaker and pay the GPT.

In addition, the betting exchanges contribute to the Levy, but they contribute at a much lower amount of money, despite their popularity, because they are taxed (GPT at a rate of 10%) only on the commission applied to the successful backers and layers. The commission goes from 5% (maximum) down to 2% (minimum) and the figures change according to the volume generated by the backers and by the layers who succeed (the bigger the turnover they generate the lower the commission applied). The lower GPT isn’t compensated by the greater value of the volume, and so the Levy suffers.
The big problem in the UK today is that the betting exchanges, are draining a huge amount of money from both the bookmaking industry and from the tote so the prize money is going down year by year dramatically. The racecourses are trying to make up for the money lost from the Levy contributions with sponsorships but they can’t bring enough in to offset the declines. The contribution that betting exchanges give to racing is peanuts, despite the volume of action they handle.

To work properly the exchanges need a lot of liquidity. Big liquidity results in overround very close to zero. It means commissions to the operators which is very small and means that the levy is very small too, compared to the one paid by the bookmaking industry. And it’s absolutely nonsense that the exchanges will attract young people to racing; the exchanges are populated mainly by big sharks who kill the sheep in every single market. At the same time the exchanges kill the integrity of every sport on which they open a market because for an insider the temptation of laying the outcome of an event is sometimes too high to be resisted, especially when the insider can determine that outcome.

It seems to me that nobody has understood that if the exchanges will work properly, regardless of who will run them (the tracks or a betting exchange) in the USA, they will drain huge amount of money from the tote, whose turnover will go down dramatically, and in the end kill the show.

Written by Dr. Carlo Zuccoli

Written by Dr. Carlo Zuccoli | Comments (3)

Do you have a take on the state of the game, a favorite race horse, trainer or jockey? Share your ideas. Show the racing industry and media the folly of their ways. The HRI Readers Blog: "When you lose it, Use it." Submit your blog to HRI Webmaster.

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