Parimutuel Wagering Grows Up, 1932

Jan 6th 2010 08:34 am | Tags: ,

I wanted to do a follow up this week on the post about parimutuel wagering from a few weeks ago. In that post, I quoted from a 1908 article published in the Daily Racing Form about parimutuels in Kentucky.  As commenter Cangamble mentioned, it wasn’t until the 1930s that parimutuel betting became the dominant form of wagering in this country. One of the main reasons for this being that American tracks were late adopters of the technology for operating an efficient system for processing and distributing parimutuel wagers.

Harry Strauss (left) and Johnny Johnson

A totalizator used for running an automated parimutuel system was installed at a New Zealand thoroughbred track in 1913 but it took 20 years for the technology to reach the U.S.   By the time Hialeah imported the first totalizator to the United States in 1932, a electrical engineer named Harry Strauss and his engineering colleague Johnny Johnson had invented a new system that improved upon everything that had come before it, including what was installed at Hialeah. More importantly, it vastly improved upon the manual methods for conducting parimutuel wagering that had become common in the United States.

In theory, parimutuel wagering is the most equitable system for gambling.  Before the 1930s, because tracks in the United States failed to adopt (or import) the latest technology, the reality fell well short of the potential.  This is how author John Schmidt described the state of wagering in the U.S. prior to 1930:

“Versions of parimutuel machines were introduced in the United States shortly before World War I, but they were manually operated and inadequate to handle the increasing popularity of horse racing that followed the war’s end. Tickets were dispensed by hand and bets were totaled by hand clickers known as ‘Iron Men’, a process which was inherently slow and which afforded no way of accurately following betting trends, particularly shifts created by heavy last-minute wagering…The system was also vulnerable to cheating on the part of the light-fingered mutuel clerks who worked near the finish line and were able to pocket a few winning tickets before an audit of sold and unsold tickets could be made. This practice reduced the payoff to holders of legitimate tickets purchased before the race began.”

An "old parimutuel system" in action. This type of system inspired Strauss to create his new totalizator.

In 1927, Harry Strauss started to develop a new system for processing parimutuel betting after experiencing the frustrations of wagering on horses at Havre de Grace.  Strauss said this to a reporter about his inspiration:

“I just tired of going to the races and having my day spoiled. I got to thinking what a great thing it would be to have an efficient system of betting so that you would always know the correct odds on your horse and not be disappointed by the payoffs. I was fast losing faith in the old parimutuel system because it was always and continually incorrect, and that agitated me greatly.”

By 1928, Strauss and his team developed a working model of a fully automated parimutuel system. Straus’s machine took bets and distributed tickets, tabulated handle, and quickly calculated and displayed approximate odds and winnings payouts.  It also made placing bets after the race had started (or finished) practically impossible — a significant step in building the trust of the betting public.   Its most prominent feature was the electronic tote board that displayed real-time (or near real-time) odds for horse players. This electronic odds board added new meaning to the notion of “watching the board” — an element of the track experience that is now taken for granted.

The electronic tote board at Pimlico

In 1930, Pimlico installed a partial version of Strauss’s system giving it the distinction of being one of the first (if not the first) track with the now familiar electronic odds and results board.  In 1933, Chicago’s Arlington Park  installed the first fully functional Strauss totalizator.

Strauss’s company merged with another company to form the American Totalizator Company in 1932.  Harry Strauss died in a plane crash in 1949 but his legacy lives on at tracks throughout the world.

The company Strauss established operates today as AmTote and is a wholly owned subsidiary of Magna (as of today anyway).

On the twenty-fifth anniversary of American Totalizator, the great Joe Hirsch wrote this in The Morning Telegraph:

“The tote did for racing what Babe Ruth did for baseball…Plagued by bookmakers, inaccuracies, dwindling attendance, and suspicious state legislatures, racing needed help badly, and the tote filled the bill.”

A fully automated tote system played a key role in the widespread legalization of the sport in the 1930s and the subsequent success of racing into the 1950s.  Is their a technological equivalent to the tote in the present day that might spur racing’s next renaissance?  Have we already had our moment in one of the innovations reviewed by the brains at the R2 Collective or does something bigger loom on the horizon?

SOURCES, NEWS, AND NOTES

Much of the material and all of the images for this post came from a book published in 1988 by John C. Schmidt called Win Place Show: A Biography of Harry Strauss, the Man Who Gave America the Tote.

For an extensive history of totalizator systems throughout the world, check out this site.

Thanks for reading and good luck!

Filed in American Totalizator Company,gambling,Harry,parimutuel wagering,thoroughbred racing history



4 Responses to “Parimutuel Wagering Grows Up, 1932”

  1. Helene Conway says:

    i thank you for educating me – a 4th generation racetracker, i learned everything about racing at a very early age and then later as an adult, never researched and rarely unpacked the reason for things including the name of the “tote” board….

  2. Cangamble says:

    Thanks for following up on my comment. I love horse racing history. And you obviously like researching it.
    I have a few ideas. When was the first exacta, triactor, superfecta, daily double, quinella.
    And an actual history of track takeout trends would be an eye opener I think.
    I believe New York was the last state to fully adapt to parimutuel betting btw.
    I am also curious as to how purses were funded before the track started taking a percentage of the betting. I believe they charged bookmakers a fee, they also made money on admission as well, but I’m not sure exactly how purses were funded.
    And what did betting look like before players got a ticket from the machines. Did they get an actual signed ticket from a bookie?

    Funny though, when reading this post, it seems we haven’t made many changes since 1932. And we still have problems with bets being made after the bell, and late odds drops:)

  3. steward says:

    Horse racing was nearly legislated out of existence between 1905 and 1910 because the bookie system was so corrupt. Read recaps in the NY Times of the era: they invariably were led by multiparagraph rants that made the racing correspondent sound like a crusader.

    Bookies were not only the betting medium but also stable owners and jockey controllers. Live horses were stiffed on an alarming rate, and others were drugged for the same motive.

    Parimutuel betting was a compromise that eventually presented its own problem: the increasing, probitive take that makes the sport uncompetitive in the modern gambling landscape. It should have been apparent in 1947 after it was, iirc, doubled in NY and returned less revenue than in the boom years prior. Like with the income tax, there is a point of diminishing returns that politicos ignore or can’t comprehend.

  4. Laying horses means backing them to lose – it sounds strange. Weird even. Until you see the kind of money that is made betting this way. GIMME MINE.