#473 - Girl Power

In The Gate


Welcome back to win the game. Para mutual betting is a term. You've likely heard quite a bit, but you might not know exactly how to define it. It's a French term meaning where money from all bets of a particular type like win play show daily double pick three, pick four CETERA are put into one big pool taxes and the houses Qatar taken off the top and the odds for each entrant in the race are. Determined by sharing the pool amongst all the winning bets. So you're wagering against all the other people betting on race as opposed to casino gaming where you're betting against the house because they're different types of gambling, they're governed by different rules. There are states that allow parimutuel wagering, but do not allow casino style gaming, and one of those states is Kentucky a rather important one to the thoroughbred business. One idea to try to get around that discrepancy is called historical horse racing. You play the game on a machine that looks and feels like a slot machine but the game is based on thousands of horse races that have actually taken place in the past at different tracks. The machine randomly select one for each game you bet on a numbered horse, but you don't know the name of the horse or any other race information. The payouts are based on Parimutuel wagering, not casino gaming, which is important because race track operators have felt that this would be an easier path to generating additional revenue to support the life product then would trying to get legalize casino gaming on the premises. Casino gaming would also likely mean a split of revenue with the Casino operator usually slanted in the casinos favor. Historical wagering started in Arkansas in two thousand at its height eight states allowed historical racing machines but slowly over the years a few state legislatures have reversed course on defining historical racing as para mutual. Last week. The Supreme Court of the State of Kentucky became the latest state than for thoroughbred racing the most important to strike down the classification of historical racing para mutual. The Pollack report pointed out recently that four tracks in the state have. Racing Kentucky downs whose meet just ended Keeneland Ellis Park and the Red Mile Harness track. Churchill. Downs does not have historical machines at the track, but they own a gaming parlor in Louisville called Derby City Gaming, which does have the machines on site. So the question is what this ruling and others like it previously in Idaho and Nebraska in the recent past mean for this method of drawing additional revenue. To support live thoroughbred racing to help us with some perspective on this, we welcome to win the Gate Evan. Davis Managing Director of the Sports Wagering Group at seventy-six Capital Sports Advisory Let's talk about Kentucky specifically I in February of two thousand, fourteen, the State Supreme Court ruled that historical horse racing could be legally authorized as para mutual. Now, the courts reverse that decision what has led to the reversal. Yes. So the the two thousand. Decision Out of the Kentucky Supreme Court. Said could is the operated operative word they're rated said that historical horse racing could be a legal form of Parimutuel wagering but that there were enough facts presented to it for me ultimately make that determination or for a low reports make that determination and so in two thousand fourteen essentially what the Kentucky Supreme Court did is we're mandated this back to the lower court so that discovery could be conducted on whether or not historical. Horse racing was in fact, the Legal Forum of mutual wagering in four years of discovery. Later, it got to a decision in the lower court. So correct me if I'm wrong setting up historical horse racing games attracts like Kentucky downs keeneland not only doesn't involve the need for licensed Casino Games, but it doesn't require a full blown casino gaming partner as opposed to setting up a full blown casino at a racetrack on my right. It certainly does not require a full-blown Casino partner although obviously there are gaming companies were manufacturing these machines from which the tractor then either leasing, purchasing them setting slot machines though can be i. mean it's a similar contests. Obviously, there are worse traffic across the country that had chosen to either chosen to require to be partners with casino gaming companies but that's not necessarily the case in terms of having to do it right leasing slot machine and putting it within your facility. Would it be that similar to what's being done now with the with the HR machines? So even if casino. Gaming then is allowed in Kentucky which will get to in a minute. What realistically is the difference in money that the track gets from historical racing machines versus a casino on site run by a third party Well the way that anyone profits and operating profits from para mutual betting is going to be slightly different than the way that an operator would profit from slot machine more traditional class three slot machines because parimutuel betting typically on the case with just quote Unquote Regular Horse Wagering, the operator can sort of build in a profit margin something similar is done with class three, four machine, but it. In in terms of the hold percentage that then built into the way that the random number generator works. But ultimately, at the end of the day, the house is going to shoot for specific profit margin on the actual gaming activity, and then the costs that are associated with operating that activity whether it's labor other forms of overhead including exponentially before you know leasing or purchasing the slots. But leasing or purchasing the slots is going to be less than having to pay whatever it costs for a third party to be on site, and you would think that most of the profit from the casino was going to stay with the casino and not go back to the race track right? Yeah I mean it depends on the nature of the agreement that a racetrack has with any gaming operator. A racetrack in one location might simply want somebody to help out with putting slot machines on the floor making sure that they are running according to the necessary operating standards handling the cash transactions that go with them and things like that on the other end of that spectrum, a horse racing operator might want a casino operator that come in and really make the place feel much more like a casino and whether that various forms of entertainment food and beverage offerings and things. Like that, I think a lot of it goes into what's the feel is that you're looking for who the folks are a day. You know the horse racing operator things are likely to come to visit the venue and what makes the most sense in terms of the cash outlay how you're apportioning those costs and the resulting prophets. There's not really a one-size-fits-all approach to that and I think the you know there are a variety of factors that go into a geography being a significant. Evan Davis Managing Director of the Sports Wagering Group at seventy-six capital sports advisory joining us here on the gate. How likely is it then in Kentucky and May Be Virginia? Where historical racing fuels purses colonial downs to legalize

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