During the last quarter-century of the twentieth century, participation in horserace-betting activities stagnated. Indeed, on-track betting declined considerably, although the decline was offset by a comparable increase in intertrack and offtrack betting. New York’s state authorization of offtrack betting facilities run by a public corporation beginning in 1970 both threatened the viability of on-track wagering and at the same time offered somewhat of a solution to the impending revenue decline. By the mid-1970s there were 100 offtrack betting parlors in New York City alone. New York saw the parlors as a source of public revenue as well as a means to discourage patronage of illegal bookies.
Prior to 1970, only Nevada had offtrack betting activity. Now many other states were examining the New York experience with thoughts of duplicating it. Initially there were no formal provisions requiring that offtrack facilities share revenues with tracks, nor were there mechanisms for requiring that wagers be pooled. Rather, all such arrangements were ad hoc. The tracks across the country perceived major problems, and they turned to Congress for development of uniform policies to answer their concerns. Even though offtrack betting operations agreed that they were adding to the race-betting activity and were sharing some revenues, the tracks felt that their share was not sufficient to offset losses because bettors were coming to tracks in fewer and fewer numbers. A compromise measure was hammered out in Congress, resulting in the passage of the Interstate Horseracing Act of 1978.
The Interstate Horseracing Act recognizes that there are several interests involved in offtrack betting. There are horse owners who essentially realize economic gains through purses when their horses win races. There is the track, basically a private entrepreneurial venture; there is also the host racing state and its racing commission. There is the operation (public in New York but private in other places) that runs the offtrack betting parlor. And there is the state regulatory commission that oversees the offtrack betting activity. Of course, there are always the players – the bettors.
The act stipulated that the tracks and associations of horse owners would meet and agree on how they would split income from fees charged to the offtrack betting operations. The state racing commission would have to ratify the agreement. As with on-track betting revenues, it would be expected that portions of the offtrack betting wagers would go to the state as a tax, to the track owners, and to horse owners through purses. The three parties would then negotiate with the offtrack betting operators for a fee that essentially would be a portion of the money wagered on races (the “take-out”).
The take-out portion going to the track, the owners, and the host state would be less than the amount taken from the track bettors, as it also had to be shared with the offtrack betting facility and the offtrack betting state. The Interstate Horseracing Act requires that the overall take-out percentage from the offtrack betting activity be the same take-out rates as charged to on-track bettors. This protects the tracks from price competition.
The act also stipulated that the offtrack betting facility cannot conduct operations without the permission of any track within sixty miles of the facility, or if there are no such tracks, then the nearest track in an adjacent state. The act did not address the subject of simulcasting race pictures between the tracks and the offtrack betting facilities.
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