In horse racing's year of resiliency in 2020 as its network of advance-deposit wagering outlets allowed customers to wager on the sport from home while horsemen and tracks found a way to continue to offer racing, a long-standing effort by the National Thoroughbred Racing Association proved an unsung hero.
One of the NTRA's key legislative efforts in recent years has been to educate financial institutions on racing's legal ability to conduct interstate pari-mutuel wagering in an effort to have those institutions approve credit card (and debit card) transactions to fund wagering accounts.
In 2018 the NTRA scored a major victory on this front when JPMorgan Chase & Co. began to recognize these transactions. With more than 80 million accounts, Chase is the largest card issuer in the United States. Chase approved the industry's merchant category code of 7802.
That success followed the NTRA having its Congressional allies meet with major credit card-issuing banks that had disallowed ADW transactions on their cards, stressing the importance of the ADW sector for racing and the economic significance of the equine industry. When Chase issued its decision, NTRA president and CEO Alex Waldrop acknowledged the efforts of Rep. Andy Barr (Republican, Kentucky).
Between Chase's approval and other card companies following in its path, the industry was well-positioned to have funding mechanisms in place as COVID-19 protocols forced racing to make its colossal shift to ADW in 2020.
As other sports and gambling shut down, racing picked up some new customers as the only game in town. For new players, having a secure transaction they trust is critical, making the effort to allow credit card funding especially important for racing. One can imagine new players having some nervousness about making that first deposit. Knowing their financial institution recognizes the transaction would provide some added sense of security.
Total pari-mutuel wagering on United States races in 2020 dropped less than 1%, despite a 23.5% decline in races because of dates lost to pandemic protocols. The ADW platforms, and having options that customers are comfortable with to fund those accounts, surely played a part in that success.
In its 2020 Legislative Annual Report released last month, the NTRA said it believes the credit card effort has, "had a significant and positive impact on overall U.S. pari-mutuel handle, particularly advance-deposit wagering."
This year the NTRA plans to continue its advocacy efforts on behalf of industry ADWs. It will seek a legislative solution in the form of updated language to clarify that the Wire Act of 1961 specifically applies to racketeering, not transactions made permissible by the Interstate Horseracing Act.
In its annual legislative report, the NTRA noted that its Legislative Action Campaign raises money through three programs: the 1/4% check-off program, the foal program, and the National Horseplayers Championship Tour.
In the check-off program, buyers and sellers at Keeneland, Fasig-Tipton, Ocala Breeders' Sales, California Thoroughbred Breeders Association, and Washington Thoroughbred Breeders and Owners Association pledge 0.25% of the price of their horses sold. Every $1,000 in a horse's sale price equates to $2.50 for the campaign.
The above is a recent Dollars and Sense column, which runs every other Tuesday in BloodHorse Daily. The next edition will appear July 6.
Some other recent editions follow.
Triple Crown Again Delivers for Racing
Score one for timing.
Racing fans enthusiastically supported a return of the Triple Crown races to their usual slot on the calendar, a slot that just so happened to coincide with the country's emergence from the COVID-19 pandemic, thanks to widespread vaccinations.
All-sources handle on two of the three events and race days, the Preakness Stakes (G1) and the Belmont Stakes Presented by NYRA Bets (G1), each enjoyed significant gains compared with 2019, the most recent year the races were conducted on their traditional dates. That was enough to help the three-race series gain just over 1% in wagering on the races and race days.
While a 1% gain might not sound like much, it is a particularly strong performance, considering that the host tracks limited attendance in 2021 after not permitting fans in 2020 due to the pandemic. While some fans were able to attend the races this year, the limits kept attendance well under the normal numbers enjoyed in 2019.
The one event that saw a decline compared with 2019, the Kentucky Derby, was most impacted, considering it draws the largest crowds. That said, the Derby held its own. The $233 million wagered on Derby Day 2021 is the second-highest total in history, trailing only 2019.
While the Triple Crown draws eyeballs to the sport every year, this year's events timed up well with a nation working to emerge from the pandemic. The success of the series also might signal a sport ready to take full advantage of the relative 2020 success it enjoyed during the pandemic when compared with other sports.
Last year the advance-deposit wagering platforms in place for racing allowed bettors to continue to wager on the sport. As just about the only game in town for several months, the sport picked up new interest.
Despite a 25% decline in race days in 2020 compared with 2021, last year's total wagering on the sport declined less than 1%.
This year's challenge is to see whether racing can continue that support from online bettors as other sports also return to normalcy.
Beyond that, as racing begins to welcome back fans, maybe some of those online fans will be interested in attending the sport's biggest events—eventually translating to increased on-track interest.
This year's Triple Crown suggests the sport is moving toward those goals.
Even better news: It appears that race fans are sticking around for the everyday events.
Despite the $10 million decline in wagering on the Derby Day card this year compared with 2019, wagering on all U.S. races in May 2021 was up 8.8% to about $1.42 billion when compared with May 2019. Through May this year, wagering was up nearly 13% to about $5.3 billion when compared with the first five months of 2019.
Fine Print, Changing World
One need only read the Churchill Downs Inc. annual report to understand the changing world for owners of outdoor properties like racetracks.
Publicly traded companies report their risk factors to analysts and investors. A 2020 update on these risk factors in the 2020 CDI annual report notes increased concern of severe weather associated with climate change as well as lessons from a difficult 2020.
"Since horse racing is conducted outdoors, unfavorable weather conditions, including extremely high and low temperatures, heavy rains, high winds, storms, tornadoes, and hurricanes, could cause events to be canceled and/or attendance to be lower, resulting in reduced wagering," the risk factor analysis reads. "Climate change could have an impact on longer-term natural weather trends. Extreme weather events that are linked to rising temperatures, changing global weather patterns, sea, land, and air temperatures, as well as sea levels, rain, and snow could result in increased occurrence and severity of adverse weather events. Our operations are subject to reduced patronage, disruptions, or complete cessation of operations due to weather conditions, natural disasters, and other casualties. The occurrence or threat of any such extraordinary event at our locations, particularly at Churchill Downs Racetrack and Kentucky Derby and Oaks week, could have a material negative effect on our business and results of operations."
These updates are in line with what I reported in the Dec. 12, 2020, issue of BloodHorse on the impact of climate change on racetracks, as hurricanes and severe weather have caused significant damage to a number of North American tracks in recent years.
CDI is all too familiar with the risks of severe weather. In 2004 the track owner completed a purchase of Fair Grounds Race Course & Slots, as well as its 11 off-track betting outlets. On Aug. 29, 2005, Hurricane Katrina caused significant damage to the track facility and the OTBs.
According to company filings, CDI paid a $500,000 deductible related to recoveries from damages. Based on CDI filings in 2007 and 2008, insurance recovery payments for both property damage and business interruptions for the Fair Grounds operations reached $41.5 million.
Fair Grounds wasn't the only CDI-owned track to sustain significant damage from a hurricane in 2005. Hurricane Wilma in the Miami area caused $4 million in damage to Calder Race Course. In annual reports that would follow soon after, CDI included a note for investors that insurance costs would be going up.
Other updates in the 2020 annual report risk analysis are all too familiar following the challenges of 2020.
"A major epidemic or pandemic, outbreak of a contagious equine disease, or the threat of such an event, could also adversely affect attendance and could impact the supply chain for our major construction projects resulting in higher costs and delays of the projects. The COVID-19 global pandemic resulted in the temporary suspension of operations of all of our wholly owned gaming properties, certain wholly owned racing operations, and the two casino properties related to our equity investments," the analysis reads. "Even though our properties have reopened, such properties continue to be subject to operational restrictions that may impact attendance."
In 2020, Churchill Downs saw first-hand the impact of protests. On Kentucky Derby day 2020, protests took place as marchers made their way in late afternoon from downtown to the Downs, where they were met with a heavy presence by the Louisville Metro Police Department.
The protests followed the March 13 death of Breonna Taylor in Louisville. Just days following heightened preparedness that shut down the country due to COVID-19, the city was rocked by Taylor's death during execution of a "no knock" warrant being served by LMPD.
Protests against the local police and local government continued for more than 100 days. Protests turned to rioting following the May 25 death of George Floyd in Minneapolis, and the city became one of the nation's flashpoints in the call for social justice.
"Riots, civil insurrection, or social unrest could adversely affect attendance," the analysis reads. "For example, during the second and third quarters of 2020, certain areas of Louisville, Ky., experienced sustained protests and civil unrest. Similar events in the future could adversely affect attendance at Churchill Downs Racetrack. While we are constantly evaluating our security precautions in an effort to ensure the safety of the public, no security measures can guarantee safety and there can be no assurances of avoiding potential liabilities."
While I covered many of these topics in the past year, I have to credit regular BloodHorse contributor Greg Hall for noticing the update in the CDI report and passing it along to me.
Sometimes the fine print tells a big story.
