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75 Years of Pari-Mutuel Wagering in New York

By Bennett Liebman

2015 should mark a significant year in New York horse racing. It is the 350th anniversary of horse racing in America, which originated in what is now Garden City. It is the 40th anniversary of the death of the champion filly Ruffian in a match race. The first commercial harness tracks started in New York 75 years ago.

Most importantly, April 15, 2015 marked the 75th anniversary of pari-mutuel wagering in the state of New York. Pari-mutuel wagering started on Monday April 15, 1940, the first day of the thoroughbred racing season at Jamaica Race Track in Queens County.

In November of 1939, the people of the state of New York had passed a constitutional referendum to authorize pari-mutuel wagering on horses. While such wagering had been successful in other states, nobody was certain how it would work in New York, which had utilized on-track bookmaking as the source of its wagering handle for many decades. The situation was further complicated by the fact that the laws to implement pari-mutuel wagering were passed only two weeks before the season was to begin.

The weather on April 15, 1940 was not promising. It was "dismal biting weather." There was a record low in New York City of 30 degrees. Water lines broke at the track. A baseball exhibition game between the New York Giants and West Point was called in the eighth inning due to cold weather.

Jamaica's betting menu for opening day was also not particularly exciting. There were seven races - all sprints - with a total of 44 betting interests. The only wagering was win, place and show, since the racing authorities in New York had determined that the daily double was "a device to lure women and those who could not afford to bet."

So how did this work out at Jamaica on April 15, 1940? Things could hardly have gone better for racing. Jamaica had a record crowd of 22,474 who bet $821,000. The New York Times proclaimed it "racing's red letter day." Track executive Alfred Gwynne Vanderbilt said that the fans were "absolutely crazy about pari-mutuel betting." Racing journalist Joe Palmer reported that "Jamaica's opening day was the biggest from a betting standpoint that a race track has every enjoyed."

The only negative on racing that day came from New York City Mayor Fiorello La Guardia. La Guardia, in a speech given two miles away from the track, said: "Race track function is retrogression . . . I don't think gambling will be successful in a progressive enlightened state like New York."

Opening day in 1940 ushered in a year of superlatives for New York racing. Thoroughbred racing attendance increased by 33%. Pari-mutuels were "amazingly successful" according to the Associated Press. The trade magazine, the Blood-Horse, found that the 1940 season was the "most successful in the history of New York."

It is hard to envision how far racing has fallen from grace in the last 75 years. In 1940, there were 29 weeks of thoroughbred racing and four small harness meets. There were approximately 225 racing programs. There was no turf racing, no Sunday racing, seven races a day, and only win, place and show wagering. In 2013 dollars, New Yorkers bet $1.75 billion in 1940.

Contrast that to racing in 2013, the last year for which we have full statistics. There were 1,327 live programs in New York. There are OTB's, year round racing, turf racing, Sunday racing, more races on each program, all possible permutations of wagering types, basically unlimited out-of-state racing and simulcasting, live TV, live Internet feeds, and account wagering including phone and Internet wagering. The net result was handle of $1.51 billion. The 1940 New York handle was 15.4% higher than the handle for 2013.

On April 15, 2015, the total world-wide handle on the nine races (three on the turf) run at Aqueduct on a day where the weather was nearly perfect (no rain and high of 72) was $3.860 million. The on-track handle was $608,000. In 2015 dollars, the handle on April 15, 1940 - which was entirely on-track, was $13.94 million. The on track handle on April 15, 2015 was less than 5% of what it was on the same date in 1940.

The presence of video lottery terminals (VLT's) at racetracks has not added to any interest in racing at the State's harness tracks. All New York State harness tracks have VLT's, and in the 10 years since 2003 (the last year without VLT's), the harness track facility handle is down 48.6% in inflation adjusted dollars. The handle on live racing at the harness tracks is similarly down 48.7%.

New York State now receives considerable revenue from VLT's, with the estimates coming in at approximately $900 million per year. Yet this number is actually significantly less than the excess of $1 billion in revenue that horse racing produced in real dollars for New York in 1969. New York State has not benefited from the decline of horse racing.

For more than 50 years, La Guardia's idea that racing would not be successful in New York was hogwash. Pari-mutuel racing could hardly have been stronger. In 2015, however, La Guardia now looks right. It no longer is successful. Racing is a puny fraction of what it was 75 years ago.

The numbers are not just bad. They are frightening. It is a sport where a Triple Crown winner like American Pharoah barely helps. This is a sport where minor changes - such as uniformity in rules and laws - won't do the trick. Uniformity would not hurt, but it's myopic to focus on it. The whole framework of the sport needs to be thoroughly rethought. While we have been rearranging the deck chairs on the sport's Titanic, the public has lost interest in horse racing. We have been bickering about trivia as the sport falls apart.

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