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May-04-2007,
Why is Horse Racing Given Special Status?...By Hartley Henderson

The month of May is always exciting for racing fans. Four of the biggest events take place in their respective sports. Horse Racing has the Kentucky Derby and Preakness, NASCAR has the All Star weekend and IRL sees its biggest event, the Indianapolis 500, also known as The Great American Tradition. However, while Americans can legally place bets by internet or telephone on the Kentucky Derby and the Preakness, the same cannot be said for the Great American Tradition. The Interstate Horseracing Act (IHA) of 1978 (which was passed in an effort to allow off track wagering) was amended in 2000 to allow pari-mutuel betting between states via. the telephone or other electronic means such as the internet, mobile betting or any other new technologies that may come around. This immediately angered the Department of Justice who suggested that the wire act made those types of betting illegal on any sport, including horse racing, and the wire act superseded any other laws, including the IHA. Regardless, Congress pushed through their interpretation, to the disgust of the DOJ which continued to claim that the act violated the wire act, travel act and illegal gambling business act.

The question has to be asked: why is horse racing given special status? Why is it OK for Capital OTB to accept wagers from Americans in other states on the internet for horse racing, but it's not OK for Caesar's Palace to offer its product over the internet to bettors from other states? Perhaps it was best stated by Kevin De Gregory, the deputy assistant attorney general, when he said at a subcommittee on crime: "the Department does not understand why the pari-mutuel wagering industry should be allowed to accept bets from people in their homes, when other forms of gambling have been prohibited from doing so."

The comment is a fair one and needs to be addressed. When asking someone in the horse racing industry, he would argue that while it may be a bit of a double standard, it's warranted since it is, after all, horse racing. Those in the industry like to think of themselves as the more genteel sport where royalty own and bet on horses. They like to believe that it is a tradition that goes beyond other forms of sports betting; and that since horseracing employs so many people - from trainers to jockeys to betting clerks - that it must survive for the good of the economy. To a degree, he may be right in regards to its snobbishness - I mean "noble mannerisms". At the Kentucky Derby on May 5, the cameras will focus on women in gowns, carrying expensive purses and wearing hats that they will never wear anywhere else sipping on mint juleps. They will also focus on men in fancy suits or tuxedos, that clearly deserve the term "fine gentleman". The NASCAR all star race and Coca-Cola 600 will focus on fans in loud shirts of their favourite driver, yelling obscenities and drinking coolers full of beer. But those images doesn't change the fact that in America the pot bellied, loud mouthed NASCAR fan has the same rights as the noble horse owner. And the IHA is a double standard plane and simple.

Clearly the horse racing industry couldn't survive in any country, save for Dubai, without betting. The industry was designed with wagering in mind and it is doubtful many people would show up to watch a $10,000 claiming race unless they had a bet on it. But NASCAR does flourish without legal betting in almost every state. Ironically, horse racing developed its traditions in Britain and received the nickname the sport of kings because only nobility could participate in it. But in Britain, there is no differentiation between betting on sports. All bookmakers such as William Hill, Ladbrokes, etc. take bets on all sports and treat them equally. In fact, even the pari-mutuel tote in Britain offers betting on all sports. The same holds true in Australia and most other places that offer both sports and horse racing wagering. It is only in North America that horse racing is given the special status in terms of sports betting.

There is, however, another question that must be asked: Why has the DOJ been so hesitant to accept Congress' decision with regards to the 2000 IHA amendment? The answer seems evident. The DOJ realized that by setting up a special status for horse racing it could come back to bite them in the arse, and it has. In the trial against Jay Cohen, Jay's attorneys argued that WSEX was designed on a model similar to Capital OTB, and since Capital OTB is able to take bets across borders by telephone or internet on its sport why should the Antiguan company be treated differently? The argument seemed to go over fairly well with many jurors but was shot down by the judge who stated that it wasn't a legitimate argument and had to be ignored. But while the judge and some jurors found the argument to be an unfair comparison, the same can't be said for other observers. In the WTO case involving Antigua and the United States, the WTO argued in favour of Antigua for that exact reason that Jay's attorneys stated. While the government of the United States argued that online gambling was immoral, the WTO stated that their dispute didn't hold water because "the evidence regarding the suppliers demonstrates the existence of a flourishing interstate remote account wagering industry on horseracing in the United States operating in ostensible legality." In better words, the United States is talking out of both sides of its mouth.

The U.S. attorneys argued that Jay Cohen and his company were violating the wire act by taking bets from Americans and refuted the suggestion that his company was acting like Capital OTB because in their words "the wire act does not apply to pari-mutuel account wagering on horse racing." But when Antigua stated: 'fine, then open up the option for Antiguan books to take wagers on horse racing', the same attorneys stated they wouldn't do so because in their view there is no difference in sports betting, horse racing, poker or other forms of gambling. More importantly, it shows the blatant hypocrisy of the DOJ's position. For years the DOJ has tried to defend the wire act as the only official law that relates to betting by telephone or electronic means in the United States and have prosecuted numerous people in relation to that law. If they now accept that there are exceptions to the rule, then it opens up a Pandora's box. Why should horse racing be considered a more important form of gambling than poker, casinos or sports betting which are all legal in some form or another throughout the United States? Betting is betting, they even said so. If the DOJ now accepts that horse racing is "different" than other forms of gambling, then no doubt poker and casino groups along with some sports will come out with reasons why "they are different" also and demand to be exempted from the wire act.

Furthermore, horse racing's special status, i.e. the exemption from the UIGEA, has come back to haunt the current government in the passing of that law. In arguments leading up to the bill being voted on, Shelley Berkley, the democratic governor from Nevada made the obvious point "This legislation has a loophole big enough to drive a truck through that was designed solely to protect betting on horse racing and lotteries over the Internet. The fact that this bill was included in the GOP's "Values Agenda" proves it is nothing more than an election-year ploy to satisfy Republicans on the far right who want to outlaw adults from gambling in Nevada or anywhere else." So according to Berkley, the UIGEA exception makes the bill meaningless because the government is singling out one form of betting as "more important" than another. And unfortunately for the DOJ, it forces them to now argue that horse racing is different when bet online than other forms of gambling, which based on history is clearly not what they believe, nor are they anxious to support.

So why is Congress so adamant about giving horse racing this special exemption? For one thing, horse racing, unlike most other sports wants betting on its events. But more importantly, the horse racing industry has a huge lobby in Washington with deep pockets. It is well known that the horse racing lobby spent millions in getting the IHA passed in 1978 and the exemption in 2000. And it was further reported by The Guardian that the horse racing lobby spent a great deal of money and took considerable time to "educate" congressmen about horse racing. Furthermore, according to opensecrets.com, the NTRA made a $10,000 contribution to Robert Goodlatte's 2004 election campaign, which is significant since Goodlatte was one of the founders of the original prohibition bill and also was one of the first to give an exemption to horse racing. It is common knowledge that the horse racing industry has many close friends in Washington, most notably Mitch McConnell, Jim Hickey and Mike Oxley. And the Centre for Public Integrity, which monitors federal lobbying contributions, found out that YouBet contributed $1.4 million to horse racing lobby efforts between 1998 and 2004, the NTRA contributed $960,000 and Magna International, which owns various racecourses, contributed $480,000. This infuriated many in the poker lobby who could not get anywhere with its own lobby in Washington, resulting in Michael Bolcerek (the head of the Poker Player's Alliance) to announce "the horse racing industry is not afraid or ashamed of saying that they were able, for want of a better word, to buy their exemption from the new laws."

So with all that in mind, it seems clear that the horse racing exemption has been an albatross for the DOJ. The special status given the industry has made the justice department look hypocritical and has forced them to try and justify an exception to the wire act that it clearly doesn't believe in. As well, it appears that unless the IHA amendment of 2000 allowing remote betting on horseracing via the internet and telephone across state borders is repealed, the U.S. government could be in a no win situation with regards to the Antigua WTO case. So what does the NTRA think of moving back and taking away this remote gambling special status to allow the concerns to blow over? The answer seemed pretty clear when these 3 words were spoken by Greg Avioli, the NTRA's head of legislation, at a 2005 horse racing symposium when asked if the NTRA was willing to give up the exception which allowed internet wagering on horse racing: "over our dead body".

05-04-2007
Hartley Henderson
Majorwager.com
henderson@majorwager.com



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