Will Legalized Sports Betting Benefit The Kentucky Derby?

Horse-racing enthusiasts are heading into one of the year’s most popular weekends. The 144th running of the Kentucky Derby is May 4-5.

While horse racing might be alive and well in Kentucky, that is not necessarily the case across the country.

In 2003, wagers on horse races equaled $15.2 billion in the United States. By 2014, that number dropped to $10.5 billion.

Take Michigan for example. Last month one of the two remaining horse race tracks, Hazel Park Raceway ceased operations just one month before opening day.

A few weeks later, Northville Downs, the sole remaining track announced its intent to sell its track and adjacent land to a housing developer. Northville Downs will remain open through the 2020 season and intends to reopen on another site. Whether that happens or not depends on the state of the horse racing industry.

Can sports betting reverse declining horse racing revenues?

The Supreme Court is expected to announce its decision in a case that addresses the federal ban on sports betting outside of Nevada, Delaware, Oregon, and Montana.

Experts predict an opinion to come in favor of overturning the ban. Then it will most likely fall on the states to regulate sports betting within its borders.

Sports leagues such as the NFL, NBA, and Major League Baseball are preparing for the potential decision. They are busy lobbying states to include an integrity fee in their legislation. Even the PGA, has taken a stand in support of sports betting.

What about horse racing, though – will it benefit from the legalization and regulation of sports betting?

Alex Waldrop, the president of the National Thoroughbred Racing Association, says yes.

“We’ve seen some growth that’s occurred by partnering with casino gaming across the country. Frankly, the sports bettor probably has more affinity for horse racing than a casino patron, who is possibly only interested in slot machines. Gambling on other sports is not unlike gambling on horse racing, because we’re talking about athletic contests. So there’s perhaps the potential for more crossover between horse racing and sports betting. We’ll wait and see.”

Racetracks believe sports betting can save the market

Monmouth Park Racetrack, a staple on the New Jersey Shore for over 139 years is readying its property for sports betting ahead of the U.S. Supreme Court decision.

“New Jersey has created a chance for racetracks and casinos to be involved in sports betting,” Monmouth Park attorney Dennis Drazin said. “I believe that the Supreme Court will rule in our favor, so the racetracks obviously will benefit. We’ll get people to come back to the racetrack — people that will stay because there will probably be in-play wagering also so that people will be engaged.”

London-based sports book, William Hill that currently operates in Nevada, invested in a sports bar at Monmouth Park. The capacity of the bar taps out at 300 people. Monmouth Park is planning an expansion into the grandstand that will increase its size to accommodate up to 7,500 people.

We think the demand is gonna be that big,” Drazin said. “We would anticipate being ready to go within two weeks of the date the Supreme Court rules.”

Casinos weigh-in on how sports betting will impact horse racing

“I can only project that if sports gaming is expanded across the country, some of these new jurisdictions will be at racetracks,” Jay Kornegay, vice president of the Las Vegas Hotel & Casino SuperBook said. “I can only see that as a positive for these racetracks, as we know a lot of them are struggling right now.”

It’s not all positive, though, there is some uncertainty out there.

Chris Andrews, director of the South Point Sportsbook in Las Vegas, thinks sports betting may actually hurt the industry.

“I was at the Golden Nugget for about a year and a half, and we had a race and sportsbook together. And as a lot of guys were just kinda sitting around watching the games or waiting for them to start, they would play some horses — that’s kind of the mentality of a gambler. [Legalization] may take some of the handle out of guys that are putting money in the horse book, who might convert that over to the sportsbook. But I think that remains to be seen.”

The good news is horse racing is faring better around the world in markets with sports betting. Declining markets saw a reversal in the trend when sports betting began.

“If you look at other markets where [horse] racing is growing — and I think Australia is probably the best example — horse racing in Australia 10 years ago was in a multiyear decline,” Kip Levin, the CEO of Paddy Power Betfair US & TVG said. “When online sports betting started to take off, you saw a shift.”

Paddy Power Betfair operate the popular TVG mobile app. According to officials from the company, horse racing is the second-most popular wager in Europe, behind soccer.

The key to leveraging sports betting is through mobile apps

Sports betting alone might not be enough to bring large amounts of bettors to the tracks. Inevitably, there will be an increase, but the most significant gains stand to come through online and mobile wagering.

“Right now, specifically online, we’re focused on racing fans or educating customers to become racing fans, said David O’Rourke, New York Racing Association vice president and chief revenue officer.

O’Rourke says its a struggle to encourage someone to sign up for an account when they are not a horse racing enthusiast. If sports betting were legal, though, it would be easier.

NYRA is preparing for the day when they can add other sports to their apps.

“We definitely feel positive in the sense that these products are complementary,” said O’Rourke. “Right now we handle wagers on horse racing as a sporting event. There’s likely betting on other sports going on that’s not in a regulated format, and we feel that if [legal] sports betting were expanded to include these other sports, it would give us the opportunity to cross-sell.”

Will legalized sports betting benefit the Kentucky Derby?

Whether you believe legalized sports betting will help or hinder the horse racing industry is all supposition at this time.

There are a lot of issues that still need to be resolved:

• How will the Supreme Court rule?
• Will states immediately introduce sports betting regulations?
• Will race tracks evolve their product offerings?

The only thing we know for sure is that mid-summer will begin to provide some answers. That is when the current U.S. Supreme Court session ends. A decision on the legislation is due before then.

The Kentucky Derby is one race that isn’t in jeopardy of going extinct – at least for the foreseeable future. It did see a drop off in attendance last year, but wagering still broke records.

Big horse races, like the Derby, capture attention across the nation. If even a portion of that attention translates to a wager, The Kentucky Derby will continue to break revenue records.

This weekend, as fans marvel at the perfectly manicured grounds, take in the over-the-top derby hats, and pick their favorite horse, remember the Kentucky Derby may look a little different next year.

Pending a positive opinion from the Supreme Court, next year those fans may have some skin in the game making “The Greatest Two Minutes in Sports” even greater.

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