It's Kentucky Derby Week And The Racing Industry Is Getting Well-Deserved Mainstream Backlash For Allowing CAW Syndicates To Break The Game For Everyday Bettors
Horse racing - as an industry - kind of deserves this.
It's Kentucky Derby week. The focus should be on the slice of Americana that remains the Fastest Two Minutes in Sports. Mainstream media should be talking about the great stories of this year's Derby and Kentucky Oaks. And breaking down how we can make some money in it, since, at the end of the day, it's a betting sport.
Instead, the biggest story of the week, roughly 80 hours out from Kentucky Derby 152, is how the racing industry has allowed Computer Assisted Wagering (CAW) groups to negatively impact the sport for most of the regular fans who wager their hard-earned money on it.
Dan Wolken wrote this lengthy piece about this issue for Yahoo on Tuesday.
It has almost 1.5M views on X.com, thanks in part to Dave's repost.
But Dave's not the only horseplayer reposting it, and for good reason. Wolken is using his mainstream platform at Yahoo to point out just how unlevel the playing field has become between the retail players (that's what the industry calls us) and these computer groups.
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These CAW groups place thousands of bets at the last second before a horse race; that's the kind of betting access you and I don't have. These bets change the odds, but you might not see it until after the race starts. Unlike sports betting, where the odds are fixed, horse odds and payouts change constantly with each bet. On top of that, racetracks give these CAW groups much bigger rebates on their bets than they give you and me. It's been going on for years, and very little has been done to make things fairer for the average player.
Andy Lyons. Getty Images.Quite simply, these CAW groups have made the sport better for racetracks that need their money - and they have made it worse for nearly everyone else.
The entire column is worth a read. As someone who has discussed this issue here and elsewhere for three years, I wanted to highlight four very important points from Dan's piece.
“I bet about one-third as much as I would on what I would call a prime bet for me because I just don’t know where the odds are going to shift,” said Rhodes College economics professor Marshall Gramm, a Thoroughbred owner and avid bettor who has finished as high as ninth place in the National Horseplayers Championship. “The [syndicates] are smart. Part of my process now as a horseplayer is to watch the market. I spend as much time watching the market as I do handicapping the horses. I want to know whether the horse I’m considering, how the market [views] that horse. Is it taking money? Do the [syndicates] like the horse? Do they not like the horse? Because they’re really good. They’re very sharp.”
Marshall Gramm is a very smart man, much smarter than me. He's a sharp handicapper, horse owner, and economics professor. He's said here and elsewhere that he's cut his prime bets by around 66%, thanks to the CAWs. Again, this is the smartest guy in the room, betting 1/3 as much as he used to because of the CAWs. That's pretty telling.
So not only are tracks taking CAW money, in many ways their business depends on it as sports gambling accessibility has expanded in the U.S. and horse racing’s share of total dollars wagered has decreased. Equibase, the industry’s official data collection arm, reported in January that national overall handle fell to $11.03 billion for last year — a 57% decline from its 2003 peak when adjusted for inflation.
That’s why many racetracks have chosen to court the CAW dollars by offering partial rebates on the takeout for their bets, reducing the number of bets they need to win to turn a profit. While not an unusual arrangement — tracks have made similar deals with their biggest bettors for decades — it becomes a mathematical game-changer when CAWs are able to inject so much volume into the pari-mutuel pools after everyone else has bet a race.
Because players like us are betting less, racetracks are in a spot where they NEED these CAW groups to keep betting large volumes of money. To make sure they do, they offer these players rebates - much bigger rebates than they offer us. So these groups can bet MORE, knowing they'll be getting a better rebate than the public. This just adds to their advantage.
In February of this year, NYRA announced an expansion of those guardrails to include a cut-off time at 1 minute, 59 seconds for other bets like exactas and trifectas. O’Rourke does not view that as a final solution but rather as another evolutionary step as AI modeling and other algorithmic technology continues to impact the industry.
At the moment, though, New York is a bit of a lone wolf in aggressively addressing some of these concerns.
It stands out like a sore thumb that New York is the only major circuit that has tried to do really, well, anything about this. California joined New York in cutting out the CAWs in the win pool with a few minutes to post, slowing down the big late odds changes you see in racing. And there are a handful of bets across the country marketed as CAW-free. But it's limited.
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Players have been BEGGING a premier track like Keeneland to make changes, but nothing has happened. The result was another spring meet of odds drops after the races had started. I love Keeneland, but it took the air out of a great meet. At smaller tracks, you see the CAWs in action every day without fail. It sucks.
“The sharpest players in the room have become a bigger percentage of overall handle,” said Pat Cummings, executive director of the National Thoroughbred Alliance. “As the market has changed, as more people are into modeling, as fewer of the rank-and-file horse players are betting, we have seen an increase in the number of late odds movements or a complete crashing of prices and it’s almost impossible for the general public — whether you’re playing on a computer, a mobile phone or standing at a window at the racetrack — to react to it.
Once we get to CAWs vs CAWs in the pools, it's all over. The sport needs to realize this before it pushes all of us retail players away.
LEANDRO LOZADA. Getty Images.Hopefully, a mainstream media story like this is a wake-up call for industry leaders and executives. They should be open to any and all fixes.
- Cut off all CAW play 2-3 minutes before the race.
- Lower their rebates. Or, if you want to rebate them, make them bet early in the betting window, say anytime before 15 minutes till the race. In sports betting, you have "market makers," right? The people who bet first and sort of set the odds for everyone? Let the CAWs do that if they want rebates.
- Improve rebates for the retail player
- Make all information more open and freely accessible so players can use technology to improve their own play.
These are a few very basic ideas. I'd suggest banning them altogether, but it seems unrealistic. Maybe someday.
Personally, I bet much less on Keeneland and other tracks that freely let the CAWs roam in the wagering pools. My response has been to bet where the CAWs can bet less, which has led to a HUGE drop in my play over the last few years. Until it's fixed, I can't see going back. Big race days, Saratoga, and tournaments are my biggest focus.
In the meantime, there are plenty of things you can do, but no one seems to want to do any of them. They're way more concerned about the CAWs and need them to keep betting, giving the rest of us the middle finger in the process.
Racing is accustomed to getting great press every year around the Oaks and Derby. I love that Dan Wolken took the time to explain to the mainstream audience that the sport is trying very hard to allinate it's biggest fans by catering to big computer groups. I plan to continue talking about this here on the Barstool Blog. If enough of us keep speaking up, maybe this year’s Derby becomes the moment the industry finally listens.
I plan to enjoy the Oaks. And the Derby. I'll make my bets and root for the horses. And continue to fight for the sport we actually love.
