Pay us what we have won Andrew Cuomo.
01/09/2014 12:34PM
Steven Crist: A penny won should be a penny received
About 30 years ago, a particularly loony New York State
assemblyman introduced a bill that would have required a minimum payoff
of $4 on every $2 bet at New York racetracks.
The idea, which would have bankrupted racing, was roundly and rightly ridiculed, the bill expired without action, and in almost every jurisdiction, the minimum payoff remains $2.10 for $2.
The nutty proposal did raise a legitimate pari-mutuel issue that has remained largely unaddressed to this day: Why should there be any guaranteed, artificial minimum payoff in the pari-mutuel system, and why are payoffs still rounded down in 10-cent or 20-cent increments instead of being paid off accurately to the penny?
Stock markets made the change to decimal pricing years ago, and racing can no longer hide behind the outdated excuse that these payoffs would slow mutuel lines to a crawl as tellers counted out pennies. An increasing number of bets today are made through advance-deposit wagering accounts or through vouchers at self-service machines.
Breakage, the practice of rounding down (always down) payoffs to supposedly more-convenient dime increments, is, in fact, nothing but institutionalized theft from customers, with their rightful earnings directed to a slush fund usually split between the state and the track.
Defenders of the practice, a group limited to beneficiaries of these slush funds, claim it is a matter so trifling that bettors don’t know or care about it, but breakage adds up and can, in fact, be more onerous than the highest of current takeout rates.
A horse who should pay $2.39 for $2 instead has that payout rounded down to $2.20, a breakage tax of almost 50 percent on top of the 15 percent to 20 percent house takeout that has already been applied.
Such a horse will pay $2.30 rather than $2.20 in New York, where a saner breakage scheme instituted in 1994 rounds to the nearest dime rather than 20-cent increment on payoffs under $10. (The trade-off is that Empire State payoffs break to 50 cents on $2 payoffs over $50 and to $1 on payoffs over $500, which minimizes breakage’s effect by flattening the percentage impact.)
This is an improvement, but even $2.30 instead of $2.20 on what should be a $2.39 payoff is still an unwarranted 24 percent profits surtax on the proper payoff.
Paying off the correct $2.39 quickly becomes significant: It’s a return of $23.90 instead of $22 on a $20 bet, or $239 instead of $220 on a $200 bet, and that is a whopping difference on a percentage basis, one that could even stimulate renewed interest in racing’s declining win, place, and show pools.
It amounts to a much more attractive investment opportunity and a takeout reduction that will ultimately benefit the track by putting more money back into circulation, where it will be churned repeatedly.
Going to penny payoffs would mean the end of the “bridge-jumping” era, as a minimum payoff of $2.01 instead of $2.10 would make show bets on supposedly sure things unattractive. You would have to be right 200 times out of 201, instead of the current 20 times out of 21, just to break even.
It’s an era worth ending. There is absolutely no logic to having an artificial, guaranteed minimum, which, in fact, violates the whole point of the pari-mutuel system and the neutrality of the stakeholder.
Some players may lament the absence of the occasional opportunity to play against a bridge-jumped horse, but they will do far better in the long run by getting the payoffs they deserve on every race.
The first state that switches to penny breakage will reap a huge bounty of goodwill and loyalty from its customers. Imagine betting a race tomorrow and getting across-the-board payoffs of $9.78, $4.31, and $2.79 instead of $9.60, $4.20, and $2.60.
In addition to immediately returning more money to bettors to be reinvested multiple times, it would become a widely reported news item across the general as well as racing and financial media, make the industry look like it cares about fairness to its overtaxed customers, and just might get some people thinking about whether there’s money to be made betting on horses.
Just because it makes too much sense doesn’t mean it’s not worth a try.
The idea, which would have bankrupted racing, was roundly and rightly ridiculed, the bill expired without action, and in almost every jurisdiction, the minimum payoff remains $2.10 for $2.
The nutty proposal did raise a legitimate pari-mutuel issue that has remained largely unaddressed to this day: Why should there be any guaranteed, artificial minimum payoff in the pari-mutuel system, and why are payoffs still rounded down in 10-cent or 20-cent increments instead of being paid off accurately to the penny?
Stock markets made the change to decimal pricing years ago, and racing can no longer hide behind the outdated excuse that these payoffs would slow mutuel lines to a crawl as tellers counted out pennies. An increasing number of bets today are made through advance-deposit wagering accounts or through vouchers at self-service machines.
Breakage, the practice of rounding down (always down) payoffs to supposedly more-convenient dime increments, is, in fact, nothing but institutionalized theft from customers, with their rightful earnings directed to a slush fund usually split between the state and the track.
Defenders of the practice, a group limited to beneficiaries of these slush funds, claim it is a matter so trifling that bettors don’t know or care about it, but breakage adds up and can, in fact, be more onerous than the highest of current takeout rates.
A horse who should pay $2.39 for $2 instead has that payout rounded down to $2.20, a breakage tax of almost 50 percent on top of the 15 percent to 20 percent house takeout that has already been applied.
Such a horse will pay $2.30 rather than $2.20 in New York, where a saner breakage scheme instituted in 1994 rounds to the nearest dime rather than 20-cent increment on payoffs under $10. (The trade-off is that Empire State payoffs break to 50 cents on $2 payoffs over $50 and to $1 on payoffs over $500, which minimizes breakage’s effect by flattening the percentage impact.)
This is an improvement, but even $2.30 instead of $2.20 on what should be a $2.39 payoff is still an unwarranted 24 percent profits surtax on the proper payoff.
Paying off the correct $2.39 quickly becomes significant: It’s a return of $23.90 instead of $22 on a $20 bet, or $239 instead of $220 on a $200 bet, and that is a whopping difference on a percentage basis, one that could even stimulate renewed interest in racing’s declining win, place, and show pools.
It amounts to a much more attractive investment opportunity and a takeout reduction that will ultimately benefit the track by putting more money back into circulation, where it will be churned repeatedly.
Going to penny payoffs would mean the end of the “bridge-jumping” era, as a minimum payoff of $2.01 instead of $2.10 would make show bets on supposedly sure things unattractive. You would have to be right 200 times out of 201, instead of the current 20 times out of 21, just to break even.
It’s an era worth ending. There is absolutely no logic to having an artificial, guaranteed minimum, which, in fact, violates the whole point of the pari-mutuel system and the neutrality of the stakeholder.
Some players may lament the absence of the occasional opportunity to play against a bridge-jumped horse, but they will do far better in the long run by getting the payoffs they deserve on every race.
The first state that switches to penny breakage will reap a huge bounty of goodwill and loyalty from its customers. Imagine betting a race tomorrow and getting across-the-board payoffs of $9.78, $4.31, and $2.79 instead of $9.60, $4.20, and $2.60.
In addition to immediately returning more money to bettors to be reinvested multiple times, it would become a widely reported news item across the general as well as racing and financial media, make the industry look like it cares about fairness to its overtaxed customers, and just might get some people thinking about whether there’s money to be made betting on horses.
Just because it makes too much sense doesn’t mean it’s not worth a try.
Gaming Commission, New York State
Agency Web Site: http://www.gaming.ny.gov/
Mission
The New York State Gaming Commission regulates all aspects of gaming and gambling activity in the state, including horse racing and pari-mutuel wagering, Class III Indian Gaming, commercial casino gaming, the state lottery (including video lottery terminals) and charitable gaming. The New York State Gaming Commission was formally created via Chapter 60 of the Laws of 2012 as part of the 2012-13 Enacted State Budget. The measure merged the New York State Racing and Wagering Board with the New York State Division of Lottery into a single state agency. The law also consolidated the administration of the New York Thoroughbred Breeding & Development Fund and the Agriculture & New York State Horse Breeding Development Fund into the Office of Racing Promotion and Development under the umbrella of the Gaming Commission. The New York State Gaming Commission became effective February 1, 2013.The New York State Gaming Commission's mission is to ensure that all lawful gaming and horse racing activity conducted in this State is of the highest integrity, credibility and quality. Operating in the most efficient and transparent manner, the Commission conducts the New York Lottery and serves the best interests of the public by providing responsive and effective State gaming regulation. The Commission strives to ensure that all stakeholders in the gaming and horse racing industries, including the consumers who wager on activities regulated or operated by the Commission, are treated in an equitable and responsible manner and to promote the health and safety of horses and all participants in racing. By consolidating various regulatory functions into one oversight body with broad powers, the Commission seeks to ensure fair and strict regulation of all gaming activity while reducing costs and regulatory burdens to the gaming industry. The Commission aspires to provide the regulatory structure necessary for New York gaming activity to operate effectively in a global, evolving and increasingly competitive marketplace, to generate revenue for aid to education and for the support of government, and to contribute to overall economic development and job creation in New York.
Budget Highlights
The Executive Budget recommends $114.6 million All Funds for the Commission, an increase of 8.4 million (7.9 percent) in All Funds from the amount appropriated in 2013-14. The increase is due to the implementation of the Upstate New York Gaming Economic Development Act enacted in Chapters 174 and 175 of the Laws of 2013.The Executive Budget recommends a workforce of 430 FTEs for the Commission, an increase of 10 FTEs from the 2013-14 budget necessary to start implementing the Upstate New York Gaming Economic Development Act.
Major budget actions include:
- Increase the racing regulatory fee on thoroughbred, harness, off-track pari-mutuel betting and simulcast racing from 0.5 percent to 0.6 percent of handle.
- Collection of market origin fees from out-of-state advance deposit wagering entities on all wagers accepted from NY residents and applying the fees as credits against the racing regulatory fee paid by in-state tracks and off-track betting locations.
- New appropriation funding for the administrative costs of the Commercial Gaming program, authorized by the Upstate New York Gaming Economic Development Act and approved by New Yorkers through the voter referendum on November 5, 2013.
| Category | Available 2013-14 |
Appropriations Recommended 2014-15 |
Change From 2013-14 |
Reappropriations Recommended 2014-15 |
|---|---|---|---|---|
| State Operations | 106,211,700 | 114,595,100 | 8,383,400 | 0 |
| Total | 106,211,700 | 114,595,100 | 8,383,400 | 0 |
| Program | 2013-14 Estimated FTEs 03/31/14 |
2014-15 Estimated FTEs 03/31/15 |
FTE Change |
|---|---|---|---|
| Charitable Gaming Program | |||
| Special Revenue Funds - Other | 16 | 16 | 0 |
| Lottery Administration | |||
| Special Revenue Funds - Other | 264 | 264 | 0 |
| Gaming Program | |||
| Special Revenue Funds - Other | 109 | 119 | 10 |
| Horse Racing Pari-Mutuel Wagering | |||
| Special Revenue Funds - Other | 31 | 31 | 0 |
| Total | 420 | 430 | 10 |
Note: Most recent estimates as of 01/20/2014
Click for additional detailed appropriation tables^ Top
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