The California horse racing industry has a stake in this November’s election.
Two California sports betting initiatives will be voted upon by the Golden State electorate. One of them, which allows in-person sports betting at sites owned or operated by Native American tribes, has carved out room for sportsbooks at racetracks and satellite locations.
Well, sort of. The proposal allows for those at Santa Anita Park, Del Mar, Los Alamitos and Golden Gate Fields. Conspicuously absent from that list are tracks operated by the California Authority of Racing Fairs (CARF).
The fair circuit runs summer and fall meets at several sites across Northern California. Just because CARF isn’t included in the sports betting proposal, though, doesn’t mean the California horse racing organization is prepared to sit on the sidelines.
In an exclusive interview with PlayCA, CARF Executive Director Larry Swartzlander outlined what the future could hold for California horse racing and sports betting.
California sports betting and horse racing
Swartzlander was dismissive about the possible revenue in-person sports betting could generate.
“If the tribal initiative passes, Santa Anita can build a sportsbook,” he said. “Who just closed down their sports wagering? Churchill Downs. It doesn’t work at a single, brick-and-mortar facility. Eighty-five to 90% of wagers are on the internet. You’re not going to make any money.”
Swartzlander added much of the effort to include the four tracks in the bill came from the Thoroughbred Owners of California (TOC). This isn’t surprising, as former TOC President and CEO Greg Avioli was bullish on sports betting.
In 2018, he told The Daily Racing Form sports betting could provide “significant reason to come to our facilities.” In 2021, he sat down with the Thoroughbred Daily News and seemed to signal his approval for online sports betting:
“We believe the future that will occur by the end of this year, you’re going to start to see these merged wallets, where the sports books will be offering wagering on horse racing to their sports book customers. And the market in California, estimated for sports wagering, is at least a $3-billion market annually. The number of customers, you’re probably looking at, at least three million.
So, if you follow the math, you’re going to have a 10-times opportunity for customers who have never really been presented with racing to have racing on a sports betting website that they’re going to every day or every week. Therein lies the opportunity to expand our customer base by 10 times by the launch and expansion of sports wagering.”
The bill proposed by the tribes, of course, bans online sports wagering. It also includes a 10% tax rate and no license fees.
Avioli resigned his position earlier this year. Bill Nader, a prominent figure in racing both in the United States and Hong Kong, has been announced as his replacement. He’ll join the organization in October.
Fantasy sports partnerships and innovations
There is, of course, a second initiative up for a vote. This one, backed by DraftKings and FanDuel, would allow online sports betting in California.
The initial license fee presents a barrier to entry, Swartzlander said, but he added such a landscape wouldn’t necessarily exclude CARF from getting involved.
“I have talked directly to DraftKings,” he noted. “They would still be interested in partnering with the fairs after a bill passes.”
Part of that interest stems from a company called Calypso Challenge, a fantasy sports pilot program Swartzlander has helped helm. Calypso allows bettors to pick athletes from various sports in competitions judged by fantasy sports points. Payoffs exist for wagers also found in horse racing, such as win, place, show, and exacta bets.
“It’s based on the tote system,” Swartzlander said. “If you go into a facility, use a machine, and search for a racetrack, you’d select Calypso. Up would come a ‘race,’ but instead of horses, you’d see quarterbacks, halfbacks, or golfers. DraftKings found that very interesting.”
Swartzlander added he’d entered a partnership with an investment group in Southern California that has installed Calypso at seven locations. The ultimate goal, he said, is to leverage funds from Calypso to subsidize purses and improve satellite locations.
“If we get these satellites turned into seven-day-a-week sports bars, with fantasy sports and horse racing, it’s a much better environment. People will go, and it’ll be a big boost for the industry.”
What to watch for in California
It’s anyone’s guess what sports betting in California could look like when the dust settles on Election Day. However, Swartzlander thinks at least one other large state shows his industry should not be in jeopardy.
“Every state manages it differently, but I think New Jersey has the best model,” he said. “What we’ve seen in New Jersey is that sports betting doesn’t hurt horse racing. I get asked that question all the time.”
He added that, should both competing measures pass, he expects considerable legal machinations before Californians can place a bet.
“I think immediately you’ll have lawsuits,” he said. “Then you’ve got the card rooms. Part of the tribal initiative is that they want to kill the card rooms.”
In short: Expect a marathon, not a sprint, even if something passes later this year.
