My view has always been that most states with racinos, and perhaps all, will sooner or later eliminate subsidies to horse-racing purses and breeding funds. While a strong factual argument can be made in a number of states that racinos are essential to significant equine agricultural and agribusiness enterprises, which would be eviscerated by decoupling casino business from horse racing, a more persuasive emotional case can be made on the opposite side.
Even though the United States is purportedly a free-market economy, one can easily find plenty of examples of government subsidies and crony capitalism (rather than entrepreneurial capitalism). For example, agricultural price supports, Ethanol, electric cars, and wind and solar energy development. Nonetheless, horse racing subsidies are more vulnerable for a couple of reasons.
First, though erroneous, the image often associated with horse racing is of wealthy folks pursuing a hobby when, in fact, horse racing is a cottage industry in which the preponderance of participants are not close to being affluent and many live hand to mouth.
Second, state governments are perennially strapped for cash and hedonistic activities like gambling are easy marks. Emotion will win out over logic almost every time in the forum of public opinion. Education and Medicaid should not be deprived, elected officials say, to support rich farmers.
The future of a horse racing industry without the largesse of gaming subsidies is not a pretty picture. For some time now, it has been evident that horse racing’s growing dependence on gaming can’t last and the former will sink or swim with pari-mutuel wagering.
Yet the vast majority of racetracks have refused to experiment and innovate with pari-mutuel wagering in order to make it competitive. Why? One plausible explanation is that racinos have a vested interest in decoupling gaming from horse racing and the fastest way to do so is to make the pari-mutuel product as unappealing as possible.
This is why I’ve repeatedly said that the bloodstock side of the horse-racing enterprise should launch or purchase an advance deposit wagering company, possibly via a coop, to do the necessary experimentation. But the window of opportunity is closing fast, as Florida and West Virginia have already taken preliminary steps to decouple horse racing from gaming, or to allow racetracks to eliminate horse racing and maintain gaming. Eventually, they are likely to succeed.
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