Oaklawn Opens Gate to Online Gambling

by Mark Friedman  on Monday, Jun. 2, 2014 12:00 am  

Oaklawn Park’s betting website might have been slow getting out of the gate, but the track hopes to gain ground on its out-of-state competitors.

In late December, Oaklawn launched OaklawnAnywhere.com, which allows Arkansas residents to place bets on Oaklawn races as well as races at other U.S. and international tracks from their computers, tablets or smartphones. Arkansans can be anywhere in the world when they place their bets.

“We’re very happy with the response over the first five months,” said Bobby Geiger, director of gaming and wagering for the thoroughbred horse racing track at Hot Springs.

For 2014’s 53-day racing season, the website generated $9.1 million in wagers, according to the Arkansas State Racing Commission.

Geiger told Arkansas Business last week that Oaklawn wanted to launch its own betting website about 10 years ago, but the state Legislature denied its request. For the past decade, Oaklawn Park had to sit on the sidelines as Arkansans bet on Oaklawn’s races and other simulcast horse races through national websites.

When Arkansans place their bets with the national websites “the state realizes zero and the horsemen [at Oaklawn] realize zero,” he said.

He estimated that the national websites have grown to generate about $30 million annually from Arkansas horse race bettors.

“This past legislative session, we made the ask once again,” Geiger said. And this time, it was overwhelmingly approved.

The legislation also allows Southland Park greyhound track at West Memphis to offer online betting for greyhound races. But Southland said it’s not planning to join the parade.

“It’s difficult to make a profit” with the online betting, Troy Keeping, regional general manager at Southland, said last week. “The numbers, especially from a greyhound racing standpoint, don’t make sense for us.”

Not everyone is happy that the racetracks were allowed to offer online wagering. The Family Council, a conservative organization headquartered in Little Rock, opposed the legislation.

“The convenience of it being on a smartphone, for people who already have a gambling problem, I believe it does compound that,” said Jerry Cox, president of the Family Council. “It’s just like giving a person with any other addiction an easy way to feed that addiction. It just creates more problems.”

In addition, Cox said, the website is one of the largest expansions of gambling in Arkansas’ history.

But Ron Oliver, director of the State Racing Commission, said Oaklawn is not offering anything that Arkansans couldn’t already do through other websites. “There were a lot of people doing it,” Oliver said. “The difference is the state gets part of the money here.”

Jeff Platt, president of the Horseplayers Association of North America of Keswick, Virginia, said offering online horse racing will help the sport and the tracks that offer the online wagering. He said that some days it might not be convenient for people to travel to the track and bet. “People have jobs and lives,” Platt said. “Yet if you can bet remotely, you can stay very interested in it.”

It will also support the local racetrack, he said. Oaklawn’s Geiger said that Oaklawn evenly splits the revenue generated by its online betting site with the horsemen.

Changes to the Law

In 2000, an amendment to the federal Interstate Horseracing Act allowed online wagering if it’s legal in the state where the online horse racing takes place, said Joseph Kelly, a professor of business law at State University of New York at Buffalo and co-editor of Gaming Law Review & Economics.

“Now, for the longest time, the Justice Department did not permit interstate online horse racing,” Kelly said. “Nobody agreed with the Justice Department.”

But, he said, the Unlawful Internet Gambling Enforcement Act that was passed in 2006 “seems to be a specific exemption for online horse racing.”

Geiger, with Oaklawn, said that in the past decade the law didn’t make it clear whether Oaklawn could even start a betting website. He said there wasn’t anything on the books that precluded Oaklawn from offering online wagering, “nor was there anything on the books that allowed it.”

But Geiger said Oaklawn wasn’t going to make a move unless it received an OK from the Legislature. “That’s just how we operate,” he said.

Meanwhile, firms such as XpressBet.com, a company related to the Stronach Group of Canada, and others allowed Arkansans to bet on simulcast racing and horse races at Oaklawn, Geiger said. “There was no teeth in the law that prevented out-of-state providers from coming in and signing up Arkansans,” he said.

Geiger said he noticed that instead of driving to Oaklawn to place their bets on the Kentucky Derby, Arkansans started signing up with these out-of-state providers to gamble.

The state of Arkansas receives 1 percent of the amount wagered on the simulcast races when the bets are made on the grounds of Oaklawn. But if Arkansans were betting through websites set up by out-of-state firms, the state of Arkansas missed out on that tax money.

Kelly, the SUNY professor, said that if states don’t legalize online betting for horse racing, gamblers will just find an online site from some other state — or even offshore. And that jurisdiction will receive the tax revenue, he said.

The tax argument was one reason state Sen. Bill Sample, R-Hot Springs, sponsored the bill to allow Oaklawn to offer online betting. “For years you could bet, but all that tax money was going to Kentucky,” Sample said.

Sample told Arkansas Business last week that there wasn’t much discussion on the legislation when it was introduced in 2013. The bill passed the Arkansas House of Representatives 84-0 and in the Senate, 35-0.

A Small Part of the Take

Geiger said that after Oaklawn received legislative approval, it started looking for a partner to launch the website because creating one from scratch would be too costly, though he declined to specify the cost. “It was going to be way more than it was going to bring back to the bottom line,” Geiger said.

Oaklawn eventually partnered with TwinSpires.com, a subsidiary of Churchill Downs of Louisville, Kentucky.

Because it was already 10 years behind the other betting websites, “Oaklawn couldn’t come into the market with a product that was inferior,” Geiger said. “It had to be as good as the national brands.”

He said that the website has all the tools to verify that someone is an Arkansas resident and is older than 18 before the account is created.

Online betting, however, remains a small portion of Oaklawn’s overall business, even though there are numerous races on some days from 7 a.m. until 9:30 p.m. For the 53-day live racing season this year, which extended from mid-January to mid-April, Oaklawn’s website generated $9.1 million in wagers. The state of Arkansas collects 1 percent of that revenue and the revenue generated by the other races at Oaklawn.

Oaklawn’s live simulcast wagers during that same period generated $9.5 million, which was down 16.4 percent from the same period in 2013, according to the Arkansas State Racing Commission. (2013’s live racing season was a day longer at 54 days.) In 2014, $37.4 million was wagered on live racing, down 7.4 percent from the live racing season a year ago.

The $9.1 million in online wagering in 2014 live racing season more than offset the $5.1 million decline in wagers from the simulcast and live racing.

The electronic games of skill side of Oaklawn, however, saw its numbers rise. Between January and April, $463.6 million was wagered, up 21.8 percent from the same period a year ago.

Getting the Word Out

Geiger said that to attract more players to the site, Oaklawn will continue to spread the word about OaklawnAnywhere.com and tout its benefits to the state and horsemen. He said that there are no plans to expand the website so that gamblers who live outside of Arkansas could use it.

“The core of our mission was to give Arkansans a choice of a hometown provider as opposed to someone from out of state,” Geiger said. “We never thought we would compete with the national sites anyway. That was never our intention.”



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