The Week in Review –
Last month, when parties on both sides of a pending class-action lawsuit over computer-assisted wagering (CAW) argued in federal court over allegations that the nation's biggest racetracks have conspired with “insider” high-volume bettors to rig pari-mutuel pools at the expense of small-scale horseplayers, the defendants in the case-the New York Racing Association (NYRA), The Stronach Group (TSG), Churchill Downs, Inc. (CDI), Racing and Gaming Services (RGS), AmTote International, United Tote, and Elite Turf Club-wrote letters to the judge purporting that plaintiff Ryan Dickey was using “hyperbole” and “rhetoric” to generate “headline-grabbing” attention designed to mislabel “common, lawful practices” as part of a “smear” campaign.
Dickey, a Colorado resident who stated in his complaint that, as a casual bettor, he had wagered about $100 weekly for several decades before quitting horseplaying nearly two years ago over frustrations with alleged “manipulation of the betting pools,” fired back with his own correspondence.
The paragraph that stood out in Dickey's Dec. 29 court filing was an assertion that the harms of CAW were “beyond dispute,” and that he and other class-action members would be able to prove those claims if the judge compelled the bet-takers and wager-processors to release archived pari-mutuel records via the process of discovery, which is the formal pretrial process by which each party obtains information and evidence from the other side.
“[H]ere, where totalizers maintain meticulous, auditor-ready records, there is no question that Plaintiff can not only conceptualize their injuries but quantify them with precision,” Dickey's legal team wrote to the judge.
This case is still a long way from being certified as a class-action suit that would open it up to a theoretically limitless number of similarly aggrieved horseplayers who, like Dickey, feel bamboozled by being on the wrong side of the CAW equation.
And the lawsuit's contentions that CAW play amounts to a “scheme” that runs afoul of the Racketeer Influenced and Corrupt Organizations Act (RICO) will likely be difficult to prove, if that aspect of the case even survives the defendants' numerous pending motions for dismissal.
But even if Dickey doesn't end up winning those broad aspects of his overall case, just getting the tracks to reveal the inner workings of how they negotiate and implement CAW contracts, backed by day-to-day pari-mutuel settlement and CAW records, could end up being considered a significant victory for low-volume horseplayers in the form of making the tracks pull back the curtain on opaque, industry-wide wagering practices.
Increasingly, “minnow” bettors are leaving the marketplace because of perceptions that privileged high-rollers are getting a predatory edge by buying their way in to the use of sophisticated technologies that allow them to precisely read pari-mutuel markets and place a dizzying array of batched bets across many pools in the final seconds before a race goes off.
In addition, these “whales” are offered attractive effective takeout rates and volume-based rebates that are unavailable to the average horseplayer.
The defendants, too, seem keenly aware that the process of discovery could be harmful to their reputations and financial bottom lines.
On Friday, just before the start of the long federal holiday weekend, all of the defendants, via two separate filings in United States District Court (Eastern District of New York), asked the judge to keep any discovery from going forward until the court resolves all of the forthcoming motions to dismiss the case.
“The scope of Plaintiff's purported class is breathtaking,” stated the Jan. 16 joint motion made by NYRA, TSG, RGS, AmTote and Elite.
“The broad variety of activities implicated by Plaintiff's Complaint-horseracing, track operations, betting platforms, CAW bets, non-CAW bets, regulations and regulators from all 50 states-and the sprawling alleged conspiracy ensure that discovery will be immense,” the motion stated.
“Discovery will be particularly burdensome on Defendants-riddled with trade secret and proprietary information requiring significant protections,” the motion stated.
“Permitting discovery to proceed in this matter before resolution of all Defendants' forthcoming motions to dismiss will unfairly prejudice Defendants by requiring Defendants to search for, collect, and produce documents, data, and information with respect to a boundless, nationwide class,” the motion stated.
“Moreover, Plaintiff's purported class can only be defined through access to Defendants' records, which will require burdensome and expedited discovery in order to identify class members,” the motion stated.
“Such an effort is not prudent here, where Plaintiff is unlikely to succeed on his claims,” the motion stated.
“This Court should exercise its discretion and refuse to permit Plaintiff to engage in voluminous, nationwide discovery prior to resolution of Defendants' forthcoming motions to dismiss, which, if successful, will obviate the need for any discovery in this matter,” the motion stated.
Ironically, right around the same time on Friday that attorneys for NYRA joined the legal teams of the other defendants in pleading to the court that “trade secret” documentation about CAW shouldn't be allowed to see the light of day, David O'Rourke, NYRA's chief executive officer and president, was explaining during a meeting of the New York State Franchise Oversight Board (FOB) how NYRA is trying to help the retail player by leveling the CAW playing field.
O'Rourke detailed to the FOB (which is the governor-appointed committee that represents the interests of New York State in the real estate at Belmont, Aqueduct and Saratoga) many of the same CAW-curbing points he first revealed Dec. 9 at the Global Symposium on Racing in Tucson, Arizona.
Those efforts, which have yet to be implemented but will represent the most aggressive steps yet taken by any track operator in America to manage CAW play, include limiting all NYRA bettors to a maximum of six wagers per second within one minute to post in all pools, plus an eventual rollout of raw odds data so that (if they have the tools to decipher it) every player, large and small, can see the same information that right now only CAW players have access to.
O'Rourke acknowledged NYRA initially planned to have these CAW limitations in place this month, but that the implementation of the new protocols might be slightly delayed.
“We're calling them guardrails. But it really is throughput,” O'Rourke said Jan. 16. “And there's some industry plumbing that needs to be effectuated for that. And right now, [the projected rollout is] last week of January, first week of February. We'll get a definitive timeline from Elite on that, and then we'll alert everyone.
“CAW play is nothing new,” O'Rourke explained. “It's basically people using computer algorithms to wager on bets. And pari-mutuel is a very interesting and old form of wagering [in] that the odds aren't definitive until every bet's taken and the pools are closed.
“As we've seen in a lot of different factors in life, as compute [power] increases, intelligence increases. And unfortunately, for pari-mutuel wagering, volatility increases right at the end [of betting cycles]. And what it was really doing, was, kind of, reducing the quality of the product in the perception of the retail player, for lack of a better way of putting it,” O'Rourke told the FOB.
“So our real objective is to reduce volatility, to smooth that out. What we're doing is putting in volume caps essentially when the clock hits one minute to post. And that's technically two minutes to [the race going] off. Usually it's a little bit longer, though,” O'Rourke said.
“CAW has been traditionally classified in simulcast agreements as six bets per second, anything above that. So we've decided to leverage that, throttle down all play-everyone-once the clock hits one minute to post,” O'Rourke said.
“The reason that we focused on the six-second rule was that's pretty much [standard] contractual [language] in most [simulcast] contracts across the industry. Not globally, but the majority of the larger ones,” O'Rourke said. “So we feel good that everyone's going to comply with that, because it's been in the rules for quite a long time.”
As for the stigma of odds changing after a race goes off, O'Rourke acknowledge it's been problematic, but that NYRA has attempted to address the issue since first limiting CAW play in selected pools back in 2021.
“To put it simply, it's annoying,” O'Rourke said. “A little over four years ago, we actually curbed it in the win pool. And then we had several other pools that we introduced, like the late pick five. [And] what we were doing [was] effectively stopping the odds from changing once the gates are opened.
“But that's a little bit of window dressing when you really get down to it,” O'Rourke said.
“Really, when you get down to it, it's about the volatility in those last couple of cycles. So now we're really getting to the core of the problem,” O'Rourke said.
“We're working with the [Thoroughbred Racing Protective Bureau], which is the industry watchdog for wagering, to create a volatility metric. It's really how much are these odds moving in the last two minutes. And that's going to become our gauge, and what we're going to attempt to reduce,” O'Rourke said.
“I anticipate this is going to evolve as we go through,” O'Rourke predicted, adding later that, “we're going to have to keep massaging how we're approaching it.”
As far as dealing with the problem of CAW bettors being able to access more intricate details of odds data than what retail customers can see, O'Rourke said there is one master feed coming out of the tote embedded with all that information, “and what we're essentially going to do, in at least one place, if not multiple, is just make that odds feed available to the public.
“I think it actually has potential, really, to feed into new-generation way of looking at pari-mutuel betting,” O'Rourke said.
“So as part of this, our strategy is to make more information available, more tools available. Develop tools ourselves, in effect, using AI, or machine learning, to help the retail player, and change the way the product looks and feels to somebody coming into the track,” O'Rourke said.
“This wagering product has not changed in generations. I think there's a big opportunity for a way to kind of look at how we produce and offer our gambling content,” O'Rourke said.
“I think this is the beginning of a very interesting journey for the sport. Sometimes it takes an inflection point, and I think the inflection point was definitely met this [past] year in terms of the feedback that we were getting from our core retail players,” O'Rourke said.
“This is something you have to do. And we're taking steps. That's why we're trying to work our way into this,” O'Rourke said.
“But I don't think there's really any way not to do this if pari-mutuel betting is going to evolve and compete on today's landscape,” O'Rourke said.
The post Trying to Stifle CAW ‘Trade Secrets’ in Court while at the Same Time Rolling Out Help for Small-Scale Horseplayers appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.
