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Wed, July 17

Racing's sure thing

The analogy still works today.

A century ago, horse racing found itself in the final turn with the finish line in sight. But would the industry fade into the pack or emerge as the winner?

Thanks to the legalization of parimutuel betting in several states - it debuted at the Kentucky Derby in 1908 - the negativity surrounding bookmaking faded into the background. That year, the number of tracks nationwide had plummeted to just 25.

Now, in an evolving American society that embraces convenience, online betting provides new challenges. And even though a comparison to those darks days in the early 20th century may be a stretch, the industry's computerization does raise important questions.

Online betting has now been around for about a dozen years.

"It was something that the racing industry was trying to use to expand their markets," says Randy Fozzard, racing operations manager at Yavapai Downs in Prescott Valley and former general manager at Turf Paradise in Phoenix. "Some states were kind of ahead of the game, they were proactive and got out and got their legislators to approve account wagering."

As a result, several companies in those states popped up to provide customers with an avenue to make online or phone wagers, also known as account wagering.

"They started taking wagers from states like Arizona where account wagering wasn't legal and not paying us anything," Fozzard said.

"New York was the state that really pioneered it," he added. "It ended up morphing where other people poached wagers out of Arizona ... they were just

stealing our customers."

Account wagering is currently illegal in Arizona and 17 other states along with the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Last fall, Arizona enacted a law that made taking account bets a felony. Fozzard said it was estimated that $30-$50 million wagered in Arizona in 2005-06 occurred through such illegal accounts.

"That was what we were told by all the permitees so we were able to support that piece of legislation," said Geoffrey E. Gonsher, Arizona Department of Racing director. "We are relying on permitees to let us know so we can take enforcement action."

Under the new law, anyone outside of a licensed racetrack or off-track betting site that accepts a wager from Arizona residents is guilty of a Class 6 felony, which could land the offender in prison. The statute prompted advance deposit wagering companies, or ADWs, to close accounts of customers living in this state.

"My sense is that it is working because we received confirmation from most of the account wagering firms that they would not receive wagers from Arizona residents," Gonsher said. "We don't have any statistics or data that would confirm that one way or the other but the fact that they said they will not accept bets is something."

Fozzard refers to illegal betting operators as "poachers" that take money that should be going to Arizona tracks. For example, Turf Paradise and Yavapai Downs must provide barns and land, pay taxes and give half of the money that is generated to horsemen in the form of purses.

"You pay all these expenses and pay half of what we make (to horsemen) and these people that take the wagers didn't have anything to do," Fozzard said. "They didn't have to have all that land, they didn't pay all that purse money. We pay a very high price to be able to accept wagers in Arizona. They pay no price.

"That's where the poaching comes from ... that's where the real conflict comes from."

Not to be confused with the illegal activity, Yavapai Downs has contracts with scores of ADWs that allow bettors in legal states to wager on races at the Prescott Valley track.

"That's a big part of our handle, it's been a growth part of our handle," Fozzard said. "That's the good thing. The bad thing is people in Arizona not betting through our tracks."

In all, Fozzard estimates that about 25 percent of wagers on Turf Paradise and Yavapai Downs races originate through out-of-state online and phone accounts.

Online wagering differs from off-track betting, commonly known as OTBs. In simple terms, OTBs are an extension of the track itself. Tracks like Yavapai Downs open and operate the sites. Local OTBs are currently operating at Matt's Saloon in Prescott and Antelope Lanes in Prescott Valley.

So, can online wagering have a positive influence on the future of horse racing? Although there are questions, the answer appears to be yes.

"I see it growing. I think it's a good thing. Horse racing needs every new opportunity it can find," said Fozzard, who added that he would like to see legalization of phone accounts. "We get a new competitor every day through lotteries, new casinos and things. Anything we can do to compete is good."

Those involved realize that like any other business,

serving customers of horse racing is the bottom line.

Providing an avenue to make it easier for them is always on the minds of track operators and horsemen. Many potential bettors are likely to be attracted to the notion of sitting at home, downloading racing forms and playing over the Intenet.

But in that same vein, such activities keep more and more people away from the racetrack itself and that can be interpreted as unhealthy.

As individual states and the country as a whole faces these issues, one solid fact appears clear: Cyberspace is here to stay ... and it will likely play a role in the future of horse racing.

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