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Will Congress Kill Horse Racing?

Over a hundred years ago, America’s railroad industry was offered the opportunity to participate in the commercial development of a new invention -- the internal combustion engine. Railroad executives turned down the idea of using the device for transportation, creating a "horse-less carriage," not because they thought it would not work, but because they thought it would! The train operators declared that they were in the railroad business, not the transportation business.

And so they remained, until they all went bankrupt.

The Internet has the potential to create, and to destroy, businesses on a scale not seen since the invention of the automobile.

Until this year, the thoroughbred racing industry was following tracks laid down by the defunct railroads.

In January 1993, I was the keynote speaker at a conference of the leaders of California’s thoroughbred horse racing industry. My message was that everyone connected with pari-mutuel wagering had to recognize that they were in the gambling business, or they would be wiped out by the coming onslaught of Indian and state lottery gaming machines.

I was told, in no uncertain terms, that thoroughbred race tracks were in the thoroughbred horse racing business and were not concerned about competition from gambling operations.

Two months later, I addressed the annual convention of the Harness Tracks of America. Same message, but completely different response: Standardbred breeders and track executives not only agreed that their business was more than merely raising trotters, they told me of plans to work with state lotteries and to lobby for slot machines.

Why were standardbred horse-men and -women willing to accept that they were in the gambling business? Harness racing had been hit so hard by the legalization of casinos and state lotteries that the industry had to change to survive.

By 1998, virtually all of racing had finally gotten the message.

It probably was not that tracks continued to close all over the country, but rather that a handful were saved by the introduction of slot machines.

That gambling is an essential part of racing is a radical idea to traditionalists. Of course, it was easier to believe that people went to the track solely to see horses run when there was no other form of legal betting within 2,000 miles. Today, legal gambling is not only down the block, it may be in the racing enthusiast’s own home.

Telephone wagering on horse races is unquestionably legal in half-a-dozen states, so long as the bettor is calling from within that same state. State laws either explicitly allow, or at least do not prohibit, phone bets in Connecticut, Kentucky, Nevada, New York, Oregon and Pennsylvania.

The situation is more iffy in three other states:

The Ohio Racing Board promulgated regulations and Beulah Park was taking phone bets until the state Attorney General ruled in 1995 that the Legislature had limited wagering to tracks and satellite facilities.

In the November 1996 elections, New Jersey voters approved giving the Legislature power to approve phone bets, which it will undoubtedly do.

The Maryland Legislature passed a law allowing phone bets ten years ago. But home wagering became a political controversy, so regulations were never issued. Laurel Park and Pimlico, which will never get slots under recently re-elected Gov. Parris N. Glendening, are lobbying hard for phone betting regulations.

Those Maryland tracks clearly understand what business they are in. They are not pushing for phone betting to attract callers from within the state. In fact, they are not really interested in telephone wagers from outside the state.

They want the Internet.

The potential is tremendous and big players see it. United Video Satellite Group, an affiliate of Tele-Communications Inc., the No. 2 U.S. cable company, paid $30 million for ODS Technologies. United Video’s other recent purchase was TV Guide for $2 billion. United Video is putting up at least $75 million to back ODS’s Television Games Network, in the hopes of launching a 24-hour-a-day racing & wagering cable and satellite TV network.

The Racing Network, a partnership including U.S. tracks, the Ontario Jockey Club, and the multi-national Ladbroke, expects to be able to take bets from the U.S. and Canada on its satellite network.

YouBet! Inc. is already on-line, with live racing and wagering, through its contracts with Philadelphia Park and other tracks. YouBet! is technically not on the Internet -- it has its own closed-loop computer network -- though home users will hardly notice the difference.

Operators think Sen. Jon Kyl’s Internet Gambling Prohibition Act will exempt pari-mutuel wagering in states which allow telephone wagering. But, Kyl is no friend of pari-mutuel betting. Congress will grandfather-in phone bet states, but without active lobbying by tracks, it will outlaw all interstate wagers.

If that happens, racing will join railroads as a good idea whose time has passed.