By T. D. Thornton
The New Jersey State Racing Commission issued its first horse racing exchange wagering license on Nov. 18, but horseplayers won't be able to match bets on the exchange until March at the earliest, according to published reports.
In addition, the first-ever licensed betting exchange in the United States will be limited to New Jersey resident–at least initially. And it is unclear, which, if any, simulcast signals form other Thoroughbred and Standardbred tracks will be available on the betting menu.
Sports betting is not currently part of legal exchange wagering in New Jersey.
According to CalvinAyre.com, a gambling news website, the application was requested by the “New Jersey Sports and Exposition Authority (NJSEA) for the issuance of a[n] exchange services agent license to Betfair US an exchange management agent license to Darby Development.”
The London-based Betfair operates the world's largest betting exchange. Darby Development operates Monmouth Park on behalf of the NJSEA. Betfair US consists of two operations: Television Games Network, an online broadcasting and advance-deposit wagering company based in California, and Betfair Casino, an online casino site in New Jersey.
“This is likely to appeal to a younger demographic and to arbitrage traders, Wall Streeters–a lot of it is done by computers, on iPads,” Dennis Drazin of Darby Development told NorthJersey.com. “We're not looking to cannibalize the existing [pari-mutuel] market–we want to expand it.”
Tuesday afternoon phone messages and emailed requests for comment to Betfair and the New Jersey State Racing Commission were not returned in time for deadline for this story. Drazin, when reached by TDN, said it was his preference to allow Betfair to field any detailed questions about the subject.
Exchange wagering has been legal for several years in both New Jersey and California, but no licenses to operate had previously been issued.
Negotiations in California have been bogged down over concerns that exchange betting might harm the existing pari-mutuel model and quibbling over what percentage of the handle will be returned to the industry in a form of takeout. (Exchanges typically return 95 percent of money bet to players, compared to the 80 percent return commonly offered by U.S. pari-mutuels).
CalvinAyre.com reported that Betfair US has “spent $10m in an unsuccessful bid to get industry stakeholders in California to get over their fear of exchange wagering.”
Betfair opened for business in Europe in 2000 and is widely considered the global kingpin among scores of other worldwide exchange wagering sites. Its interface allows anonymous users to set their own odds or bid on odds offered by other players on everything from horse races to sporting events to elections to beauty pageants. If you can conceive of a liquid market for betting on something, it probably exists somewhere on Betfair.
Online betting exchanges eliminate the role of middlemen like bookmakers or pari-mutuel systems that pool bets and establish odds after a takeout reduction. Instead of wagering on take-it-or-leave-it odds set by the house or the fluctuations of the pari-mutuel system, gamblers are free to choose among many different price points, striking bets for as little as one dollar up to hundreds of thousands.
Exchanges are also unique in that you can lay odds on a betting entrant to lose a race or sporting event. Critics complain that betting to lose is an open invitation for corruption.
But most major betting exchanges, including Betfair, police their own markets and share detailed records with law enforcement authorities if corruption is suspected (when placing bets, customers are unidentified to one another, but their account information and IP addresses are known to the exchange operators).
Exchanges also offer the ability for “in-running” wagering, which means the ability to make bets while a race is in progress.
The U.S. Department of Justice has not issued an opinion on the legality of exchange wagering, which is why the New Jersey exchange will initially be limited only to in-state residents.
Some foreign-based exchanges accepted accounts from U.S.-based customers in the early part of the 2000s, but that practice was halted in 2006, when Congress passed the Unlawful Internet Gambling Enforcement Act that required banks and credit-card companies to block transactions with online gambling sites.
According to Daily Racing Form, the New Jersey exchange license is subject to a pair of early December veto periods granted to both New Jersey Gov. Chris Christie and the New Jersey attorney general.
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