Thoughts on Pari-Mutuel Wagering, 1908

Dec 14th 2009 10:04 pm | Tags: ,

A few months back I read a book called You Bet by writer Colin Cameron about the history of the popular online betting exchange Betfair. The book traces British-based Betfair’s emergence from a small internet start up to a massive online wagering platform. One of the most interesting aspects of the book is how attitudes toward gambling differ between the United States and Great Britain.  In reading You Bet you realize that only in a place where alternatives to pari-mutuel wagering exist can a creative idea like peer-to-peer betting grow. The book got me thinking about how the current system of wagering became so entrenched in the U.S.

Gambling on horse racing in America has evolved in the last 30 years with the initiation of exotic and intra-race betting but pari-mutuel wagering has been the basis of all legal betting in this country for nearly 80 years.  Instances of  pari-mutuel wagering in the U.S. can be found as early as the 1870s but bookmaking came to dominate wagering at most tracks by the 1880s. Around the turn of the century, when reformers shut down racing in many states by outlawing bookmaking, it was pari-mutuel wagering that became the only legal alternative. The continuation of racing in an anchor state like Kentucky was the direct result of the adoption of the mutuel system (Kentucky officially outlawed bookmaking in 1906).

When the mutuals arrived at tracks in Kentucky, much debate arose over what it meant for racing. The Daily Racing Form published an article summarizing the opinions about the mutuel system when they arrived at Latonia Race Track in 1908. Here are some highlights from the article that offers opinions on an aspect of the game that has become so ingrained in American racing that we take it for granted:

”The fact that the Latonia Jockey Club has decided to continue the parimutuel system of betting in accordance with the expressed desire of the [Kentucky] State Racing Commission has not in any manner lessened the opposition to the [pari-mutuel] machines by the bookmakers and professional betting men…

“…The public is gradually becoming impressed with the fact that the average of odds returned through the machines is better than formerly, when the books were in operation. This at once puts a quietus on the contention that the more you bet the more you cut your own price and that you never know what price yon are going to get. Of course, it requires considerable figuring up of the totals registered by the machines to form any approximate idea as to just about what any certain horse will pay. In fact, it is practically impossible to do so and this will continue to be an undesirable feature of the mutuels until some satisfactory totalizator is put in operation…

[NOTE: The first automatic totalizator system was installed in 1913 at a track in Auckland, New Zealand]

“…That the absence of the bookmakers, their employees, and the big players is felt in many ways cannot be denied. It is equally true that the sport under the present plan lacks much of the noise, bustle, hurrah and excitement that it formerly possessed. Formerly, when a man went racing, his interest was largely held in the betting ring…

“…The sporting people about town the cafes, restaurants, theaters, etc. complain that the absence of the bookmakers and big players affects their business as undoubtedly it does. In truth with the absence of the genuine sporting element both the race tracks and the town sporting resorts have taken on a decidedly somber and quiet tone. They are almost as placid and decorous as a church wardens meeting…”

“…Accustomed to years of speculation with the slates, the majority of racegoers would no doubt prefer to continue to bet in the old familiar way. But it appears to be pretty clearly evident, after two months experience with the machines here and at Louisville, that the public will very shortly become so accustomed to the mutuels that they will bet as freely in the machines as they would in the books. If the mutuels will practically eliminate the former unsavory talk of fraud that was broadcast and that often developed into scandals that aroused the most violent action on the part of reformers, and again in a measure restore the sport of kings to its old time estate, when it was a gentleman’s game, it will have accomplished much.” (Read the full article here)

The shift towards the current system for legal wagering in the U.S. started in the first 10 years of the 20th century. Few could argue now or then of the equity of the mutuel system. Unfortunately, the system has become an albatross for horse players as political and business interests have inflated their piece of the wagering pool. When Kentucky initiated the mutuel system after 1906, the takeout stood at 5% — a figure that seems quaint today. As wagering evolves in places where peer-to-peer wagering and bookmaking is permissible, the U.S. remains tied to a system that is conceptually brilliant but has become rigid and stultifying by the political forces that insist on sucking it dry.

NOTES, SOURCES, AND OBSERVATIONS

“Changes in American Betting Ways”, Daily Racing Form, March 6, 1908

“Pari-Mutuel Betting Explained”, Daily Racing Form, May 9, 1908

“Pari-Mutuel vs. Bookmaking Odds”, Daily Racing Form, June 26 1908

As you can see, the re-design of the site is done. You might notice that I am carrying advertising for the first time. All ad revenue generated from the site will be donated to the Daily Racing Form Preservation Project. More to come on this in a future post.

Happy to be back doing history again after much hair-pulling in re-doing the site. I hope to have another post before the end of the year. Looking forward to 2010 and another great year of racing!  Thanks for your patience during the site upgrade.

I have been enjoying the new blog Zipse at the Track. The author’s most recent article is on Alysheba. Check it out!

THANKS FOR READING AND GOOD LUCK!

Filed in thoroughbred racing history



9 Responses to “Thoughts on Pari-Mutuel Wagering, 1908”

  1. Cangamble says:

    Great post. I have an idea for you, how about the history of takeout rises. I believe there was a disruption when it came to parimutuel betting in the USA, and it didn’t become universal until the 1930’s (I could be wrong), and in the 30’s I think the takeout was around 10%….but the topic needs more research:)

  2. The parimutuel system is indeed an albatross and alternative forms of wagering that works in Europe should be implemented in the U.S. That means the option of wagering with fixed odds on-track. Attendance would surely increase as a result. Customers should get what we pay for at that moment in time.

    Today the fans continue to get cheated with the parimutuel system that is rigged against the them through computerized wagering algorithms employed by high rollers at wagering shops. This has been an unhealthy development in recent years. The 4/1 shot should pay $10.00 as advertised. Not $8.20 after it wins.

    I look forward to more coverage about the rise of BetFair and how racing has risen in Europe during the time U.S. racing continues to plummet in popularity.

    BTW: congratulations on your seamless transition to a new web host. 😉

  3. Kevin,

    Thank you for the kind words on Zipse at the Track, it is truly a labor of love. I am also a big fan of Colin’s Ghost. Keep up the great work…I’ll be reading!

    Brian

  4. Thanks for mentioning the book. Hope the reference indicates that you found the text stimulating.

    Best

    Colin Cameron

  5. Steve M. says:

    Thanks, this was an informative read. Plus, I’ve been meaning to get a hold of Mr Cameron’s book and this was a good reminder.

    As an add’l footnote note to your notation about the first totalisator; the first automatic totalisator system in the U.S. was installed at Hialeah race track Miami in 1932.

  6. Pete says:

    Always a great read.

  7. RG says:

    “Sullivan also bet the favourite Lamborgindi, which had no chance of making ground on the leader, on Betfair.” 13 year suspension.
    There used to be a comedian who had a joke about a bettor who goes to the window and says $100 on the 4. Teller asks, to win? The bettor replys what I should bet to lose? So now you can bet to lose on Betfair. Not exactly what the racing game needs. I’ll stick withe pari’s.
    RG

  8. RG says:

    My comment should have read “Sullivan also LAID the favourite..” Sorry.

    RG

  9. […] in 1908 pari-mutuel betting (beautifully highlighted by Kevin at Colin’s Ghost ) came to Kentucky. This ushered in a whole new way to bet. The betting of the crowd dictated the […]