Exchange Wagering to Debut in New Jersey May 10

EAST RUTHERFORD, New Jersey. – Officials of Betfair and Monmouth Park announced yesterday in a joint press conference at the Meadowlands that exchange wagering will begin May 10 in New Jersey. Betfair, popular in many parts of the rest of the world, will be accepting its first-ever U.S. customers when launching next month. New Jersey is the only state that has officially approved the form of wagering and only residents of the state will be allowed to wager.

“We've been actively engaged in trying to bring to our consumers new ways to be entertained,” said Dennis Drazin, the president of Darby Development, which manages Monmouth Park. “We've been a leader in sports betting, been a leader in many other areas, and we believe exchange wagering is huge for our future. We want the fan who wants to come in and have a different, fun experience. That's the goal here, to try to offer our consumers other opportunities besides the traditional pari-mutuel bet. This is entertainment.”

Betfair, which is the firm that created the concept of exchange wagering and remains the leader in the industry, has long sought a foothold in the U.S. market. The hope is that U.S. gamblers will gravitate to exchange wagering with the same enthusiasm that British punters have. In exchange wagering, bets are matched between players who want to bet on a horse and those who are willing to book or lay the bet at a certain price. Betfair takes a commission on winning wagers.

Leaders in the English racing industry have often complained that Betfair has cannibalized more traditional forms of betting while returning only a minute percentage of its revenues to the sport and purses. Elsewhere in the world, Betfair customers are charged a commission ranging from 2% to 5%. Realizing that the U.S. racing industry would never get behind exchange wagering unless it felt it was being fairly compensated, Betfair will pay tracks here commissions more in line with what ADWs, tracks and OTBs pay in simulcasting fees. In order to do that, Betfair will charge U.S. customers a 12% commission.

“I think we struck the right balance,” Betfair US CEO Kip Levin said of the 12% take and the need to compensate the tracks.

Monmouth does not open its 2016 meet until May 14, four days after the Betfair launch. However, New Jersey customers will be able to bet not only on Monmouth but any one of a number of U.S. tracks that Betfair has a contract with. The U.S. bets will be commingled with wagers made in the rest of the world.

Exchange customers will also be able to place bets “in running,” a concept pioneered by Betfair. During in-running wagering, betting does not close until the horses have crossed the wire, giving customers a chance to bet on horses that appear to be in a position to win or bet against horses that seem to be struggling.

“If you can play while a race is going on your attention is much more focused on what's going on during the race,” Drazin said. “With the typical player, you make a bet, it's over. If doing the in-play, there's excitement the whole way. I think people will be motivated to try this.”

Monmouth and Betfair are banking on the hope that exchange wagering will not cannibalize existing handle in any significant way and will also introduce a entirely new type of customer to horse racing. Studies done by Betfair show that the average of an ADW customer in New Jersey is 60, while the average age of a Betfair player is in his/her late 30's. Betfair also appeals to people who like to play the stock market, particularly those who enjoy arbitraging. Many Betfair customers aren't looking for the best horse, but inefficiencies in the odds and the market they can exploit by arbitraging.

The bottom line, Drazin, said is that Betfair should increase overall revenue for Monmouth.

“This will increase our ability to up the handle,” he said. “They'll have short fields in Europe with 1-5 shots and on Betfair those races are generating 30-plus million in handle on a race. As time goes on, I believe this is going to catch fire and our country is going to look at wagering in a new way. I think we can grow handle over all and there will be a younger generation that will be exposed to a wagering format that is more exciting.”

Exchange wagering has been legalized in California, as well. But efforts to get it off the ground there have stalled. Betfair officials are hoping that the experiment is so successful in New Jersey that other states that have racing will want to embrace the concept.

“We've been focused on New Jersey,” Levin said. “It is a great launch place. Because we operate the 4njbets.com ADW we can truly look at the data and get a precise feel for the impact on the business in New Jersey. I think we can then take this to rest of the industry. This is going to make for a great test case. We are hopeful we will get there in California shortly and that other states will take a look at what's happening here and want to be involved, as well.”