THE PERPLEXING SITUATION IN THE LONE STAR STATE (PART II)

Strengthening horse racing in Texas needs to be an issue of economic development for the state.  Why so?  The horse breeding and racing industry consists of numerous small businesses that employ people–in particular Hispanic minorities who have relatively high unemployment rates–pay taxes, and buy goods and services from other firms, especially other agribusinesses.

Currently, two state-imposed negatives for horse racing in Texas are the bans on wagering via the Internet/telephone (known as advanced deposit wagering or ADW) and pari-mutuel wagering on historical races.

The prohibition on ADW is ill-advised, mainly for two reasons:

First, the ban is outdated and largely unenforceable because of what information and communications technologies can deliver.  For example, a Texas resident can call a friend in a state where ADW is permitted and have the friend place wagers.  Or the Texan might open an ADW account at the friend’s address.  The Texas resident can also find an offshore sports book ready to take his or her putatively illegal wager with no risk of being prosecuted.

The Texas bar on ADW has the unintended consequence of encouraging Texans to find ways around it and this costs Texas horse owners and breeders money for purses and the state of Texas misses out on collecting taxes on pari-mutuel bets.

Moreover, the reality is that Texans can and do legally use the Internet to day-trade stocks, bonds, commodities, and options.  This speculative behavior is somehow acceptable but recreational betting, via phone or Internet, on horse races is not.  Similarly, the amount of money that Texans bet legally (via Las Vegas) and illegally (mainly offshore) on Texas’ two NFL, three NBA, and numerous college teams is likely much greater than the amount they wager on horse racing.

Second, the ADW restriction does not treat all Texans in an even-handed manner.  If a person is physically unable to travel to a Texas racetrack, where pari-mutuel wagering is permitted, or lives in a remote part of the state, he or she does not have the same opportunity to wager as an able-bodied person living proximate to a racetrack.  A person residing in Dallas, for example, can conveniently go to Lone Star Park, while his or her elderly and shut-in grandfather is deprived of the enjoyment of wagering remotely (or at least he cannot do so legally).  Many horse-racing fans prefer to wager without having to actually go to a racetrack, and not letting them do so is paternalistic and as incoherent as would be permitting Texas customers to buy in a Wal-Mart brick-and-mortar store but not from its website.

The controversy over betting on historical races is also inexplicable.  Why is it even an issue?  The legality of pari-mutuel wagering in Texas is not in dispute, only whether the wagering is past, present, or future.  The approved wagering modus operandi is pari-mutuel and that is what matters, not the tense.  Courts in a number of other states have come to this logical conclusion.

The misguided Texas policies on ADW and historical races yield no winners.  On the contrary, the losers encompass:  Texans who are denied consumer choice of a legal activity (pari-mutuel wagering on racehorses); small business people and their employees in the racing industry who are stifled in their pursuit of a legitimate livelihood; vendors to racing businesses; and the people of Texas who forgo tax revenue.

Texas is an acclaimed  leader in free-market applied economics, except it seems in the case of the horse racing and breeding enterprise.  Placing artificial restrictions on horse racing over misplaced concerns by a small but vocal segment of Texans about “expanded gambling” is like shutting down the state’s cattle business because it offends some vegetarians.

Copyright © 2015 Horse Racing Business

Comments

  1. Thanks for the analysis, Bill. We horse folks in Texas need all the help we can get convincing the powers that be to be for racing and breeding instead of putting up roadblocks. A few of the legislators are in a power play with the racing commission, even though they are mostly political allies on most issues. The Texas horse industry has not done a good job of lobbying.

  2. A Texan can play fantasy sports online but can’t be on horses online. Pretty soon Texans will forget about horse racing altogether. I also don’t believe that many Texans will use friends in other states to bet online because of tax reasons (withholding etc) and I also don’t think it is very easy to fudge addresses these days so pretty much all Texans can’t bet horses online.
    Perhaps Churchill Downs should have fought for the consumer instead of themselves when they went to court over the issue. For one thing, a horseplayer in other states have a choice to go to a simulcast, live venue or online. Online offers the ability to cancel tickets in case there is a late scratch or a horse is acting up at the gate a lot quicker than the other two options if that is of importance to the bettor. The ban therefore gives Texans an unfair advantage.

  3. Axel,
    I live in a state (not Texas) that doesn’t permit Internet betting… and I bet abroad. Not supposed to be allowed but is easy to do. Friends of mine play poker online for real money. Anyone in Texas with a little searching can get around the law.

  4. The legislators putting up the road blocks haven’t taken the time to understand what historical racing actually is. They instead enjoy preaching about morality, when the reality is that the historical racing machines are a true extension of Pari-Mutuel Wagering (which, as mentioned, is already legal). When I read that anti-historical racing legislators argue that they consider them to be slots and an expansion of gaming it dumbfounded me. I must wonder, do they not take the time to learn about other things before taking drastic measures like cutting all funding for the racing commission. And for the record, the Texas Racing Commission has the power to rule in all matters regarding Pari-Mutuel Wagering, which is what Historical Racing is.

  5. The state senator who is threatening the racing commission is power hungry and wants the commissioners to be properly humble. Normally she is a nice woman whose political views are pro-business. She evidently has it in for racing and doesn’t care about how many people she puts out of work. I find it strange that some of the Texans who are big in horse racing are donors to the Republicans and yet get shafted.

  6. When the need of power by one stands in the way of many.Its time to getbrid of that one.
    The Need of the Many outweigh the new of the Few.

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