Exchange wagering—a fixed-odds variant of pari-mutuel betting—is making its U.S. debut today. Monmouth Park, a racetrack in New Jersey, has begun offering on-site and online exchange wagering in cooperation with Betfair US. Beyond its own races, Monmouth Park has agreements for simulcast exchange wagering on ten racetracks around the country, with plans to expand the number of tracks offered as interest grows.
New Jersey legalized exchange wagering in January 2011, but the state’s racing commission did not issue the first license until November 2015.
Proponents of exchange wagering are banking on its appeal to younger people, who are notoriously uninterested in traditional gambling and horse racing in particular. Exchange wagering uses “Wall Street-style” wagers, a faster pace, and internet platform, which is believed to appeal to the coveted millennial demographic.
As a harbinger of American success, Betfair points to overall growth in gambling since introducing exchange wagering in the United Kingdom. However, skeptics have cautioned that an increase in wagering does not necessarily correspond to increased revenue for the racing industry. Exchange wagering delivers a lower commission rate to the hosting racetrack than traditional wagering. If exchange wagering were to cannibalize traditional wagering, as some worry, the racing industry would see an overall revenue decrease, even as the number of wagers increased.
Beyond the profits, racing industry experts are concerned that exchange wagering could impact the integrity of the sport. Exchange wagering allows betting on a horse to lose. Could this encourage race fixing?
California legalized exchange wagering even before New Jersey, in 2010, but has yet to issue a license. In fact, Betfair invested $10 million to secure a California license, but failed. If exchange wagering is successful in New Jersey, it may encourage California regulators to approve a license in time for the 2016 Breeders’ Cup.
Off the country’s coasts, Iowa is also interested. In December 2015, the Iowa Racing and Gaming Commission presented a report to the Iowa General Assembly on the status of exchange wagering in the United States and around the world. While the report stopped short of advising legalization of exchange wagering, it encouraged lawmakers to monitor the implementation in New Jersey and California.
The gambling and horse racing industries have been searching for the hot thing that will draw uninterested millennials through the doors. Will exchange wagering be it?
From the perspective of this millennial: I don’t think so. Exchange wagering does tap into the millennial preference for online entertainment. The wagering can be done either at the park or online (with a mobile friendly website). However, new wagering styles alone will not create a new generation of horse racing enthusiasts. Maybe excitement over big events, like the current Triple Crown season, could bring young people to the racetracks and give exchange wagering a better shot. Until then, hoping for too much is a long shot.