By: William G. Gotimer, Jr.
Recently, the New York Racing Association announced that there would be no Pick 4 guarantee on a particular Belmont race card that was short on entries to begin with and then further reduced by multiple scratches when the races were moved off the turf due to inclement weather. The “guaranteed pool” promotion is a relatively new marketing measure meant to assure bettors that a particular bet will have a sufficiently large pool to provide true value as a betting proposition. It is a confidence boosting proposal that seeks to attract bettors to an otherwise uncertain pool. What it also does is place the racetracks capital at risk as the track is required to make up the shortfall if the guaranteed betting handle is not met. It is one of the few instances where a racetrack can lose money by providing a certain betting proposition to its customers.
Of course, this is not completely new and is at least tangentially related to that curiosity of pari-mutuel law – the minus pool.
A minus pool occurs where there are so many winners that the racetrack handling the bet cannot take its share of the handle or takeout and pay the required winnings owed to the winning bettors. Simply put – there are not enough losers in a particular pool and the racetrack must fund the difference from its general coffers. This anomaly comes about from the pari-mutuel law in each jurisdiction that requires a minimum payout on any bet – which is generally five cents on the dollar and in a small number of jurisdiction ten cents on the dollar. This equates to a minimum payout on the traditional $2 bet of $2.10 or $2.20.
There are, in fact, a surprisingly large number of instances where bettors find the prospect of such 5% returns on a proposition so attractive that their large bets cause minus pools that cause a racetrack to pay them partially from its own pocket. While this is most notable in the “Show” pools, it can and does occur in both the Win and Place pools at times. (This author is unaware of anytime a minus pool has occurred in an exotic wagering pool but it may have occurred and certainly can occur under the right circumstance.)
Not surprisingly, the racetracks are loathe to accept these unplanned for losses and chafe at the requirement to actually place their money at risk. Their business is taking bets, not making them. This leads to racetracks sometimes cancelling a wagering pool altogether and not taking the type of bet where a minus pool is expected. Setting aside the idea (and reality) that accepting bets in a minus pool may actually benefit the racetracks in the long run, the prospect of taking a hit at the windows causes racetrack management to handicap the outcome of a particular race and for obvious reasons this is ALWAYS a bad idea as it cuts against the required impartiality a racetrack must exhibit to the outcome of the races it conducts.
Cancelling a wager also has the undesirable side effect of angering bettors and even those not inclined to wager in the pool accuse racetrack management of being “chicken” or anti-gambler. Even taking the minus pool wager is no bargain for racetrack management in that it attracts ‘bridge jumpers’, a term for bettors who wager so much seeking the minimum return that a loss would cause the bettor to contemplate suicide. For a business that has spent the better part of eight decades trying to shed its reputation as a sinful vice – any mention of gambling and personal devastation in the same sentence is undesirable.
In this article, I now propose a solution:
I am mindful that this solution will require legislative changes and may take time to implement but I can identify no other negatives to the proposed approach and believe racetracks and regulators alike would be in favor of it.
Discussion
To begin, we must acknowledge that the minimum required payout discussed above has become an anachronism that was borne out of technological limitations that existed in the 1930s and 1940s when pari-mutuel wagering was first introduced in the United States. It was a far different world where pari-mutuel machines dispensed tickets that acted as “bearer paper” evidencing a particular bet. The tickets, made of cardboard, acted like receipts and were honored by the bet taker if the bet was successful, they acted like confetti or litter if the bet did not. There was little identifying information on the ticket other than the machine number from which it emanated. This anonymity was actually a departure from prior practice where bookmakers did in fact identify their customers and were well aware of each bet made.
Because of the existing technological limitations, the system required strict rules and greatly reduced the flexibility from what bookmakers afforded their customers. Bookmakers did, and still do, offer an array of betting options that were not available under the technological capability of the 1930s. While I won’t go into the details in this article (please ask if you want to know) the bets offered by bookmakers prior to the introduction of pari-mutuel wagering included “parlays”, “if” bets and “reverses”. Each was well understood by both bookmaker and bettor and each served a purpose. While the pari-mutuel system itself was in fact a mathematical wonder of the time – calculating and recalculating multiple pools every thirty seconds – it simply could not provide this flexibility since computing power was limited. The point here is that technological limitation, not sound theory, lead to some of the rules still in place today and that includes the minimum payout rules that lead to the minus pool quandary.
Solution
Today’s technology permits an almost limitless ability to calculate and recalculate each and every possible outcome and therein lies the solution to the minus pool issue. Pari-mutuel regulations should permit the racetracks and other bet takers to issue a “provisional bet” or an “if” bet in prior parlance, based on a race where a minus pool is expected or actually occurring. The bet would be accepted and valid only upon the ascertainment of a certain betting handle that would support both the minimum payout and the takeout required by law. The ticket itself would state “wager only valid and in place provided at least $XXXXX wagered into this pool, otherwise bet becomes null and void and fully refundable”. The proviso on the ticket or receipt is self-explanatory. This is only a matter of mathematics and the pool required for each wager could be simultaneously calculated as the bets were taken. Whether the bet was valid could be easily verified after the race by seeing whether the required total pool was reached.
Impact
While there could be variations where on-track wagers or small wagers would be given priority, the concept of establishing a “waiting list’ for bets that could cause a minus pool is valid and helps the sport in a number of ways.
- It eliminates minus pools and all that goes with it;
- It reduces the incentive to make outlandish bets at short odds which does not help the sport reputationally; and
- It permits the racetracks to maximize handle by offering the full array of wagering options without risk.
The negatives I can identify are mostly in the uncertainty to the bettor of whether or not the wager is ‘live” while the race is being run, but in this instance, disclosure cures all. The bet being provisionally taken could be identified at issue and the bettor given the option to pass. Similarly, pool totals are made public, updated continually both on track and off and easily verifiable after the fact. A cancelled bet would simply be the electronic equivalent of being “shut out” a concept with which every bettor is familiar.
The effort to implement this is minimal. I am not a computer programmer but more complicated algorithms are used each and every day for such mundane things as ordering a cab, ordering a meal and the direction of advertising towards consumers. The programming changes to the pari-mutuel systems would no doubt be easy to develop and implement in comparison. Implementing this proposal would eliminate a troublesome re-occurring nuisance that benefits no one and in an industry that generally finds each new approach contentious might actually find universal acceptance.
