Friday, August 17, 2012
Rooting for Bennett Liebman and New York Racing
August 16, 2012--As the process of finding “new” NYRA Board appointees continues outside the hearing and view of the media, the resulting information vacuum has so far spurred more negative speculation than positive expectation. Indeed the prolonged silence from long-standing, transparency-in-New-York-racing advocate, Bennett Liebman, leaves the impression he is being held incommunicado.
With nearly a quarter-century’s experience dealing with racing’s administrative, political, legal, and ethical issues - documented through extensive public communication of his positions on those issues – Liebman is certainly the best-known (and arguably most-qualified) advisor on racing that New York Gov. Andrew Cuomo could have chosen. Not many merit a favorable endorsement, such as Paul Moran’s “Appointing Liebman a good start” (http://espn.go.com/blog/new-york/horse-racing/tag/_/name/bennett-liebman
Perhaps by reviewing some of Liebman’s archived opinions, we can anticipate the characteristics of new NYRA board members and what their objectives might be. Prior to becoming Cuomo’s Deputy Secretary for Gaming and Racing, Liebman himself served on the NYRA Board as an appointee of Gov. David Paterson.
Liebman’s lone vote against pay raises for NYRA executives proved prophetic. It may have also reflected his thoughts from a February, 2006 article, “NYRA Trustees and the Duty of Loyalty: The Koala in the Board Room,” (http://www.governmentlaw.org/files/nyra_trustee_loyalty.pdf
), in which he wrote, “The concept that board members owe a duty of loyalty to the New York Racing Association ought to be an issue for every one concerned with New York racing. …
The NYRA Board’s federal monitor – working with the State Comptroller and the NYRA board itself – should be establishing specific guidelines and standards … Board member understanding of their duties at NYRA can only help create a more transparent, better-governed NYRA, which should be in the best interest of the sport of horse racing in New York State.”
In his September, 2007 “Prepared Remarks to the New York State Senate Committee on Racing Gaming and Wagering” (http://www.governmentlaw.org/files/LarkinPresentation.pdf
), Liebman confirmed his credentials as a champion of racing’s customers’ interests.
“What we want in a franchise holder is what is best for the fans of horse racing.
"That means the best quality racing at the best price, at the best facilities, and with an assurance of fairness in the racing.… it’s the one sport where the fans through their wagering dollars are true participants in the game. If we aren’t working for the fans of racing in government, we’re not working at all.”
Fewer of Liebman’s quotes appeared in other writers’ articles during his tenure on the NYRA board, but his perspective as a racing fan was expressed more frequently in his own blog for the N.Y. Times. Among the issues he covered in “Reasons for the Decline of Horse Racing” (http://therail.blogs.nytimes.com/2010/06/06/reasons-for-the-decline-of-horse-racing/
“…Takeout Issues. Again, maybe this didn’t matter when racing was the only game in town, but how with a 20 percent overall takeout does it compete with slots (a 5 to 10 percent takeout), and many table games (skill games such as blackjack and poker) which give you an even better chance at winning. When you hear from the major rebate shops, that without the rebate, even their most skilled players almost never beat the takeout, you wonder why you play the game.”
My personal concerns with Liebman’s stated positions involve the issue of rebates, In his November, 2003 piece, “What Do We Do About Rebates?” (http://www.governmentlaw.org/files/rebate.pdf
) and later in his March, 2004 presentation, “Rebates and Takeout: Can Racing Satisfy Its Biggest Customers and Still Survive?” (http://www.harnesstracks.com/2004_annual_meeting/Rebates_And_Takeout.htm
), Liebman supported the practice of selective rebating based on wagering volume despite recognizing its opposition. The remaining quotes preserve the full context of Mr. Liebman’s remarks. His concept of “player equality” struck me as somewhat Orwellian.
In the earlier piece, Liebman wrote, “…Who wouldn’t want to get more bang from their gambling buck? Who wouldn’t want a 50% discount off the retail price of a bet? …
“If takeout at an average American [track] is 20%, the rebaters are likely to give between 5% and 12% back to their major bettors. …
“Proponents believe that it has the capacity to significantly increase handle in horse racing. Bettors who win or who lose far less are likely to increase the size and frequency of their bets. …
“Opponents of rebates believe that it creates a two-tier system in racing where only the $2 bettors pay more. They believe it ends the mutuality in the pari-mutuel system. …
"So the idea should be to devise a system of rebates that maximizes the benefits of the rebates while minimizing their downside. We want a system that encourages innovation, increases handle, contributes to the overall benefit of the industry, and treats all players equally. … To assure equal treatment of bettors, the determination of the size of rebates should be determined only by objective factors.”
In the later article, Liebman argued, “…Rebates are here to stay. Let’s make sure they work for the entire industry. Here are the five goals that a coherent, rational rebate system ought to fulfill:
: Let’s develop a system where everybody knows where the rebates are. Let’s make sure that the rebates are open and available to all eligible customers. Let’s fully disclose the extent of the rebates to enable tracks and horsemen to make intelligent use of their simulcast decision-making status under the Interstate Horse Racing Act, and Let’s disclose the rebates to the customers so they know which rebate service or which track they should be betting at.
: let’s begin by recognizing that the free market has come to horse racing. Maury and Dave and others have just taken their business to Wal-Mart instead of Woolworth’s. They are buying their Calvin Klein jeans at Sam’s Club, not from the CK store. Under these circumstances, governments setting the takeout rates need to react so that racetracks don’t just turn into Woolworth. Fairness to bettors, who are also taxpayers, requires lower takeout rates. We have established a system where horse racing is largely uncompetitive with casino gambling. As casino gambling spreads throughout urban and eastern America, racing will need to lower takeout rates. They have to realize that a fair parimutuel system is one that does not gouge its customers.
overall legalization of rebates allows racetracks to be flexible. As I have said before, the market is now in control of racing. If racetracks want to be in the rebate game, there is no longer any reason for them not to be. It is absurd to see casinos and racinos offering rebates to their casino customers through player reward cards while being unable to offer rebates to their racing customers. Let’s s at least get our tracks in the game.
: and I have not heard anyone discuss this. The reason for our parimutuel system is mutuality. All bettors are supposed to be treated equally. This has legitimized and distinguished our system of wagering from the old bookmaking system where bettors were not treated equally. In fact, there is an element of unfairness in offering rebates to a select few. My suggestion is to realize that mutuality does not require arithmetical, exact treatment. All it requires is that all people are eligible to have the opportunity to receive rebates. Make it the Discover card for racing--bet $100, get back two percent, bet $1000, get back five. Everyone can’t participate. Their level of participation determines the reward. What is wrong with that?
One thing that might be wrong is the criteria for a rebate. Now if I am running a track, and I can do anything I want to with a rebate, I am giving them to horsemen and owners. That will keep them racing as many horses as possible at my track. I am giving rebates to friends and contributors to the governor and leaders. Unfortunately, that is not what we want. That would be wrong. The criteria for rebates should be limited to the amount of wagering, the types of bets, and the tracks on which the player is betting. Again, the point of a responsible rebate system should be to preserve mutuality. Every bettor ought to be potentially eligible for the same rewards.
this open mutuel system lets us see what is going on. We can tell if someone is sending their wagers through different hubs. We can track bets. We know what is happening. A rebate system with these elements can give players more confidence in the system and can help regulators track suspicious wagers more efficiently.”
The reader may recognize some “Doublespeak” in the preceding quote as defined by George Orwell in his novel, “1984.” If not, then perhaps the relevance to paraphrasing Orwell in another of his novels, “Animal Farm,” - All bettors are created equal, but some bettors are more equal than others - is more obvious.
TOMORROW: Rebates v Takeout, Leveling the Playing Field
Written by Indulto
Monday, August 06, 2012
On the Backside or Frontside, Racing’s a Numbers Game
In an era where horses struggle to compete at classic distances, the 9-furlong Haskell offered three-year-olds the best first post-Triple Crown opportunity for a Grade 1 win and a million dollar purse.
You’d think trainers would be lining up at the entry box but this year’s renewal, won by Paynter, attracted only 6 starters; hardly a vertical exotic player’s dream and a surprising disappointment to the leadership of the horseman-operated Monmouth meet struggling to stay solvent.
The Grade 2 Jim Dandy at Saratoga, run the same weekend, historically has cannibalized the Haskell field. But now that NYRA also cards the ungraded Curlin at the same distance as the two graded stakes, fields shorter on quality and entrants is virtually guaranteed.
One thing seems certain; without slots revenue to fuel purses--a situation to which NYRA could revert—all tracks will have to alter their strategy for funding marquee events.
In a breakthrough if not breathtaking announcement, Churchill Downs introduced a change to the eligibility criteria for its Kentucky Derby. No longer would earnings determine which horses entered the Derby starting gate. Rather, performances in fewer qualifying events regardless of purse size will determine eligibility.
Stronger fields are the expected result for an event in which field size is now never less than excessive. No other race enjoys such urgency of participation among horsemen. It remains to be seen how the purses of the impacted preps will be affected in the future.
However, it’s the relevance of the established system for grading stakes races that is the real victim of CDI’s ground-shaking edict. Indeed the current process is a controversial, subjective one where the quality of competition in actual races is not as important as subsequent performances in fields that may have been diluted by injury and non-cooperative scheduling.
Although perhaps suitable for juveniles, current grading is a better tool for breeding than handicapping--or for qualifying performances for either race eligibility or Eclipse awards.
I can’t argue with those who feel there are too many graded events for the good of the game, especially in the light of steep declines in recent foal crops. If there were a National Horse Racing Commission (NHRC), it could trim the fat from stakes schedules more equitably and eliminate divisional conflicts.
Absent that, the answer may be to ensure that horses are rewarded with purses and graded-based rankings that more accurately reflect what actually happened on the track, and which horses showed up to compete.
We could start by reducing the purses of all graded stakes to the minimum for its current grade and then increment it by an amount assigned to the highest [and/or latest?] graded-stakes Win-Place-Show performances of each entrant.
Now, suppose any stakes race for older horses could receive an automatic upgrade effective when the starting gate opened for a full field of graded-stakes winners with a specified minimum number of winners at levels above the original grading for the race?
Further suppose that any graded stakes race would similarly receive an automatic downgrade if no graded stakes winner at the original level or above were in the field?
With some adjustment, such a system could maintain itself without questionable choices by a committee of breeders. If the horses won’t go to the mountain to compete, let the mountain come to where they will compete and when.
Where is it written that excess leads to success, anyway? Graded stakes aren’t the only races suffering from small field sizes, but motivations differ between connections of horses seen to still have a future and those whose horses only have a present: One could argue that the likelihood of increasing field size by increasing purse size is inversely proportional to the value of the horses involved.
There is increasing evidence suggesting excess leads to even more excess. The industry is awaiting results of a study of breakdowns in low-level claiming races whose purses were elevated by slot subsidies to nearly 5 times their claiming price. The fear is that such reward relative to risk reduces inhibitions to run horses of questionable soundness.
That spotlight on subsidies to horsemen should be shared by subsidies to horseplayers through rebates on wagers placed predominantly on non-stakes races, if only due to their overwhelming numbers: Non-stakes handle is dependent upon racing’s core customers, i.e., the dedicated, the determined, and the deep pocketed; whereas stakes races attract media attention and recreational handle as well.
Excessive takeout, excessive purses, and excessive margins awarded to off-track bet-takers have combined to destroy what was once a symbiotic relationship between horsemen, track operators, and horseplayers. By failing to maintain the delicate but workable balance between takeout, handle and purses, racing’s “leadership” has already lost several generations of customers.
Excessive direct takeout rates enable off-track bet-takers to play Robin Hood in reverse, i.e., rob the “poor” to give to the “rich.” The practice of rebating players selectively based on their wagering volume (and/or state of residence) is based on the premise that a smaller piece of a larger pie is more profitable to the bet-taker. Few foresaw that the pie would eventually shrink because players either fell off the tilted playing field or were turned off by it; never to return or be replaced.
If direct takeout were equally lower for all bettors, more money would be returned to all winners in the form of higher pari-mutuel payoffs. What’s happening instead is that some players are being rebated an amount reflecting a portion of the high direct takeout on their wagers which is “returned” whether the bet itself wins or loses.
The benefits to those recipients are at least five-fold: 1) the effective takeout rate is lower on their wagers, 2) the effective return on straight wager investment is higher, 3) more exotic wager combinations can be purchased for the same actual outlay, 4) there is always something left to churn the next time and 5) a marginally unprofitable player might be turned into a profitable one.
The practice is defended --by its beneficiaries as well as its enablers -- as discounts on volume purchases to their best customers and with claims that the overwhelming majority of players are not profitable anyway.
A friend of mine sees the categories of winners and losers as being in a state of flux--containing most players at one time or another. Such statistics are somewhat dubious. When it’s “winning time,”, whether the game is slots, sports, craps, cards, or Thoroughbred racing, one wants the full benefit of ending up a winner.
Written by Indulto
Wednesday, July 25, 2012
What We Have Here Is an Opportunity to Communicate
An on-line petition
is being circulated requesting the U.S. Senate to establish a National Horse Racing Commission (NHRC).
The driving force behind this effort is Sean Kerr, who is listed as the Interim Executive Director, Bladerunners
: National Horse Racing Commission Movement.
The following passage appears in the petition:
"The purpose of establishing NHRC is to protect all those that are involved in this sport. That includes owners and trainers. Many trainers come under scrutiny for violations, where in another state it may not be so. This causes confusion among ranks and damage to their reputations and livelihood. This contradiction within the system causes failure for viability and protection. This must change.
With a NHRC in place all jurisdictions will fall under the same rules; it will level the playing field. We believe that fairness in business and all transactions has the utmost value to bring the sport of horse racing into a modern model of sportsmanship and clean competition...”
My concern here is the possibility that racing's customers are once again being left out of the equation. A friend of mine closer to the situation has assured me that "level playing field" and "fairness in ... all transactions" is intended to encompass wagering as well as racing, but as my mother always told me: "Be sure to get it in writing."
The Senators and the witnesses attending the recent hearing on "Medication and Performance Enhancing Drugs in Horse Racing" may actually support the concept of uniform rules of racing and wagering with harsh penalties for violators that are enforced consistently, but there is little uniformity of opinion as to what those rules and penalties should be.
Banning race day medication has become an issue as contentious as Obamacare. "Put the horse first" may be the rallying cry of reformers, but "make the horse finish first" is the cheater's mantra.
Like some of the owners and trainers in control of racing now, there are some horseplayers who are also vested in the status quo. For them, "No news is good news" and the best change is none at all. It's the little guys among owners, trainers, and players -- forced to compete on playing fields tilted toward deep pockets -- that need to be organized to collectively influence a correction through strength in numbers. The petition authors may not appreciate how much all have in common.
While some racing participants seek Federal intervention, in New York State the Governor has decided to intervene in the operation of the New York Racing Association based on takeout "irregularities" that involved overcharging takeout and underpaying winning bettors by a total of $8.5 M over a 15-month period. So far no petitions have appeared in NYRA's defense, even though their loudest critics were those in charge of oversight bodies charged with preventing such fiascos.
If the wayward Hayward was the monkey that spoke no evil (but keyed it), then the ornery Sabini and the angry Megna were the state-appointed sapiens who neither saw nor heard any: The former claimed it was simply an oversight, but the others demonstrated spectacularly that they didn't provide any.
Indeed, this joint commission to control the criminally clueless - if not the crooked and corrupt -- were caught napping on the job.
Consider: Was the situation scandalous? Yes. Did it involve betting? Yes. Did winning bettors lose money they should not have? Yes, but the practice of rebating high-volume bettors at the expense of players without such subsidies has the same effect (and more than 1% worth); a fact ignored by racing regulators and operators for the benefit of the perpetrators.
Enabling professional gamblers to "Beat the System" while destroying the game is the real
I tried to find the member of the news media who first tied that term to the thwarted takeout termination uncovered finally, if not snappily, by DiNapoli. Googling '"betting scandal" NYRA' proved inconclusive, but it did reveal the term's most frequent repeater, "reporter" Adam Sichko of "The Busness Review" at bizjournals.com.
This prolific columnist's audience appears widened by references and links in "The Capital Business Blog," "World News, Inc.," "buzzbox.com," "Sports Betting Review," and others. After reading his related columns in chronological order, the uncharitable among us might equate his unquestioning and unchallenging articles on the State's takeover of NYRA to administration press releases.
Whatever his agenda, Mr. Sichko's coverage appears to have played a significant role in promoting the public's acceptance of the Administration's actions against the association.
Regarding new NYRA board appointments, only the "NY Post
" seems to have a source within the administration. Frederic Dicker reported that the existing board and executives will continue until the end of the Saratoga meet.
"The source said Cuomo's office has been flooded with experienced racing hands interested in being appointed to the board. State Operations Director Howard Glaser is coordinating the appointment process," and that "the governor's office has heard from about 200 experienced racing executives interested in that post."
Also, according to the source, "We're getting interest from people around the country, and the selection won't be limited to New Yorkers."
"These are people interested in becoming part of the New York family, and it may make sense for us to have expertise from people from other states."
"The hope is to bring entirely new blood onto the board, people who perhaps know more about horse racing outside New York rather than the current group that's been very insular."
"There are some former executives from Churchill Downs [in Kentucky], as well as other prominent racing venues."
One can only hope the above reflects the Governor's intent to work cooperatively with other jurisdictions to develop model rules with best practices from all venues for conducting racing and wagering in New York; one that other states would also be willing to adopt in lieu of Federal intervention.
If Mr. Kerr were to read this, perhaps his organization could persuade Congress to mandate the formation of an NHRC board as a rotating representative body from racing states to facilitate joint action toward uniformity with funding from those states.
Like the UN Security Council, there could be permanent members; CA, FL, LA, KY, and NY, as well as multiple rotating member tiers completing [as an example] a nine-member board, with three members from AK, DE, IL, MD, NJ, and PA, and one from AZ, IN, MA, MN, MS, NM, OH, OR, TX, VA, WA, WV, etc. All states would be kept in the loop for input and ratification.
When the model is proven workable, the Federal government could then use the IHRIA to mandate its implementation in all states with enforcement by a commissioner who would serve at the pleasure of the NHRC board.
Once the Federal government is willing to act, it should also make it legal for adult residents of any state to wager on-line -- at least in the privacy of one's home -- on races at any racetrack at a direct and
effective takeout rate which is the same for all pari-mutuel pool participants
Written by Indulto