The Alternative Scene: Part Two – ADW, Card Rooms, etc.

The question of what forms of alternative wagering fall under the restrictions of Proposal 04-1 continues to plague Michigan racing as it looks to expand its product. Tizzy's Prospector is led to the Pinnacle winner's circle with Alex Estrada aboard.

The question of what forms of alternative wagering fall under the restrictions of Proposal 04-1 continues to plague Michigan racing as it looks to expand its product. Tizzy's Prospector is led to the Pinnacle winner's circle with Alex Estrada aboard.

Though slot machines got the winner’s share of my recent poll, they are by no means the only method racetracks are trying to expand their product.

Many tracks are taking their game online with advance deposit wagering, while others are expanding on the casino concept with card rooms or instant racing machines.

Though all three (and throw slots in there, too) are completely different ways to get action, Michigan appears to be stonewalled in terms of implementing any of them by Proposal 04-1.

The brilliantly written (by tribal/casino interests) proposal requires any interest outside of the tribal and Detroit-based casinos to pass local and statewide referendums before getting the go-ahead to install video lottery terminals. Though it was sold to the public in the 2004 election as a way for them to control gambling in the state, the ballot issue instead gave the casinos free reign to expand while handcuffing their competition – the racetracks.

But, like Mark McGwire, I’m not here to talk about the past. What I am here to talk about is how the proposal’s vague language affects the present and future of racing in Michigan. 

Because of the ballot’s less than specific wording, it could, and has, been argued that any of the aforementioned forms of alternative wagering fall under Prop 1’s umbrella. The amount of money and labor required to get such an issue on two ballots has hindered efforts to get any kind of expanded gaming off the ground in Michigan. 

Obviously, this takes millions of hypothetical dollars out of the pockets of the Michigan racing industry. However, according to Michigan HBPA Executive Director Gary Tinkle, it is holding back tens of millions of actual dollars as well.

In an email exchange with Tinkle, he said over $50 million was wagered by Michigan residents through ADW services in 2008 despite their illegality in this state. While some online wagering services allow users to play Pinnacle or Hazel Park, Michiganders are not legally allowed to bet on races in their home state (or anywhere else, for that matter) unless it is at the track itself or by simulcast. Tinkle said because these wagers are not  legally recognized, Michigan’s tracks, the state, and the horsemen do not get a cut from the monies wagered as they would from a simulcast bet.

The situation is further complicated by the actual location of the wagers. Though the person placing an online wager may reside in Michigan, the hub in which the bets are actually placed is in a state where online wagering is allowed (I keep hearing about this hub in Oregon. Must do good business). This brings about the dilemma of where the bet actually originated.

Is the stay-at-home Michigan handicapper in the wrong if he plays a race out-of-state and his money never has to enter his own state limits? Apparently yes, but there are so many gray areas to Michigan’s ADW laws that the definition of what is and isn’t kosher might depend on who you ask. Either way, things would be much less complicated (and I would be more likely to actually know what I was talking about) if Michigan were just allowed to legalize ADW already.

Another alternative wagering option that has found its way into some racetracks are card rooms. With the World Series of Poker and movies like “21” bringing card games into mainstream consciousness, tracks like Canterbury Park in Minnesota are capitalizing on the popularity.

Though Proposal 1 explicitly outlaws “table games” at the racetracks, Great Lakes Downs played host to poker games for two or three years before it shut its doors in 2007. The defunct Muskegon track apparently found a loophole by hosting charity poker games with the proceeds going to some worthy cause instead of the purse pools. To my knowledge, the only money the track got out of the deal was a fee for renting the space – a far cry from the money brought in from established card rooms.

The one flaw that hurts the viability of card rooms is it’s the only alternative wagering option that can be done just as well without having to go to a casino or racetrack. Though some games are dependent on dealers, such as blackjack, the current big-ticket game, poker, is played for real money in garages, basements and game rooms around the world. One can grab a beer, go to the weekly poker night in his buddy’s basement and lose 20 bucks just as easily as he can go to the local racetrack’s card room, and he doesn’t have to worry nearly as much about his personal conduct.

An interesting option gaining steam both nationally and in Michigan is instant racing. The machines allow users to wager on stripped-down versions of previously run races on a device resembling a self-service terminal. Oaklawn Park in Arkansas was the early adopter of the new form of wagering and saw its purses and field sizes rise. An interesting piece on instant racing can be found on The Thoroughbred Brief, written by guest poster John M. Lockwood, Esq. outlines some facts and issues surrounding the games.

The challenge facing instant racing machines is state Supreme Courts don’t seem to know what to make of them. As Lockwood’s editorial notes, some states have ruled them as pari-mutuel wagering the same as the actual live races and gave them the go-ahead. A recent push to get instant racing legalized in Michigan banked on rulings like this, but so far, little has come from it. Other states have labeled them a closer relative of  the slot machine and treated them as such.

Of the three alternative wagering options discussed in this post, instant racing would appear to have the least immediate drawing power. People know what poker is and most can wrap their minds around online wagering. Not much explanation needed. Putting a sign out front that reads “Instant Racing”, however is not quite the slam dunk. Some advertising or other form of public education would probably be needed to get the person on the street both aware and interest in what instant racing has to offer. The risk seemed to work in Arkansas, other racetracks might not be so lucky.

Like slot machines, there is still a sense of trial and error associated with these forms of alternative wagering. In most cases, the results appear promising, but the permanent effects of expanded gaming on the racing industry remain to be seen. When a track can perfect the balance between the races and the alternative wagering without making one of them a sideshow, that operation stands to make a good deal of money.

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12 Comments

Filed under Commentary, Great Lakes Downs, Polls

12 responses to “The Alternative Scene: Part Two – ADW, Card Rooms, etc.

  1. ragman

    I don’t think there was any internet gambling when the 1995 racing law was written.
    If I read 431.317 Sec 17 (7)
    Any act or transaction relative to pari-mutuel wagering on the results of live or simulcast horse races shall only occur or be permitted to occur within the enclosure of a licensed race meeting. A person shall not participate or be a party to any act or transaction relative to placing a wager or carrying a wager for placement outside of a race meeting ground. A person shall not provide messenger service for the placing of a bet for another person who is not a patron. HOWEVER, THIS SUBSECTION DOES NOT PREVENT SIMULCASTING OR INTERTRACK OR INTERSTATE COMMON POOL WAGERING INSIDE OR OUTSIDE THIS STATE AS PERMITTED BY THIS ACT OR THE RULES PROMULGATED UNDER THIS ACT.
    I think that ADW wagering would fall under common pool wagering.
    Pinnacle is missing out on a lot of handle from residents not being allowed to bet on Michigan tracks through ADWs. Almost anyone that works(money) finds it impossible to bet. All the bettors from GLD are doing what? So am I breaking the law if I take a bet to the track for my wife? Wasn’t prohibition ended because it wasn’t enforceable.
    If you pop for $602.00 for a $2 bet you shall enter it on your Mi tax return and you cannot offset it by deducting your losses. Don’t see many payoffs like that at Pinnacle. These midget pools are costing the state money.
    ADWs wagering is the only thing growing pools.
    It’s time for Michigan to wake up.

  2. ahorseofadifferentcolor

    Hazel Park and Northville Downs both offer “charity” poker games on a daily basis. They found a way around the gaming table loophole, Pinnacle should follow their lead.

  3. ragman

    Mi-bred
    Could you put a number on a Mi law that addresses ADWs. I know that when internet poker was shut down(?) by the US, horseracing was given an exemption.

    Also where does this $50 mil wagered by Mi residents in 2008 with ADWs come from? If we do some math and said each ADW bettor in Mi bet $500 per week times 50 weeks it would equal $25k per year. And a little division would approximate 2000 ADW bettors in Mi. I go to all the tracks and know an awful lot of horse players but I only know one person that bets through an ADW and his wagering doesn’t even come close to $25k per year. So I doubt that $50 mil per year is accurate. But if it was true wouldn’t you expect that at least 10% of this might be bet on Mi racing if allowed.
    If field sizes and quality remain low Pinnacle is in trouble. Mi horsemen can’t support the meet. If you need a specific example try the Moonbeam Stks. Yawm Estoora defeating a 4k claimer in a 4 horse field.

  4. mibredclaimer

    Ragman,
    I’m afraid I don’t have a number for you. I’m going by just about everyone I’ve asked, from the tracks, to the horsemen to people in Lansing telling me they’re not allowed. If that many people say it can’t be done, it must be in there somewhere.

    I think what hurts the cause against installing ADW is some see it as a form of expanded gaming. While, like you said, it is a form of common pool wagering, it is a method that did not exist before Prop 1, so opponents may be banking on that to keep it off the books.

    From the first stipulation of Prop 1:

    The proposed constitutional amendment would:
    • Require voter approval of any form of gambling authorized by law after January 1, 2004.

    This was put in to retroactively kill the slots bills that were in Congress at the time, but it could also be used to group ADW, a form of wagering that wasn’t already available in MI before 2004, under the umbrella.

    Like I said before, there is a lot of gray area and, to paraphrase your reply, unenforceable rules surrounding ADW in the state. Honestly, I’m learning as I go with the whole situation, so there are still plenty of holes in my understanding of the issue.

    Couldn’t agree with you more on it’s effects on the pools, though. We need to get this done.

    As for the $50 million, those figures were supplied to me by the HBPA. I’m sure they would be happy to answer any questions you might have.

    ahorseofadifferentcolor,
    I agree with you about Pinnacle trying the charity poker games. Anything to bring in some new fans is worth a shot. I’m just not sure where they would put them at this point in time.

  5. BJChicago

    What would be the purpose of allowing card rooms at the racetracks? If you say to bring in warm bodies to the track, how much crossover would there be to the racetrack? Anyone who frequents a racino will tell you that there are 1) race fans and 2) casino players. There are more racetrackers who dabble in casino games than the other way around.

    If the intent of live poker is to create an additional revenue stream, you have to consider that poker is a loss leader for many casinos, live poker is not that lucrative. Most casinos just hope that card players put a few dollars in the slots on the way to the can.

    Let’s be honest, alternative gaming is never going to fly on-track in Michigan because you can only squeeze the same udder a few times before it stops giving milk. You already can play keno at bars, lottery at gas stations, and existing casinos are already sucking players dry. Add in the fact that discretionary income is way down and you have a losing proposition.

  6. ahorseofadifferentcolor

    What would be the purpose of allowing card rooms at the racetracks? If you say to bring in warm bodies to the track, how much crossover would there be to the racetrack?

    I wasn’t suggesting that card rooms would be the answer but merely a life preserver to help keep us afloat until a viable solution is reached. Unless we can offer a quality product to bet on, the pools will be pale by comparison to tracks with casino supplemented purses and more lucrative breeding incentives.

  7. mibredclaimer

    BJChicago,
    Right now, there are at least three Tribal casinos under construction or in development in the state of Michigan. Unless the people in charge of their economic forecasts are just telling them what they want to hear, the saturation point must not be broken yet. Why take yourself out of the game based on a perceived notion?

    That said, all of Michigan’s racetracks do face the challenge of having a casino in or near the same town. That hurts the cause. However, people tend to like new things. If the racinos were built and played to the weaknesses of the established casinos, they might have a chance. Heck, the casino at Indiana Downs was better than anywhere I’ve been ’round these parts. Sometimes it isn’t who does it first, it’s who does it best.

    I don’t know if poker on its own is the magic bullet that would bring racing in this state to prominence, but it’s a good first step.

    ahorseofadifferentcolor,
    I just echoed your sentiment on the bridge to bigger and better things and agree with you that an improved product is necessary. In fact, I will be tackling this issue in the near future, so keep an eye out for that.

  8. I admit I am an ADW better playing from my home every week. I cant get to Pinnacle or Hazel Park to wager as often as I want to so ADW is the solution. I would play Pinnacle via ADW if available, but thats not an option. Do I feel guilty about taking money out of the horsemans pockets? Absolutely not, do the horsemen feel guilty about the product being offered at Pinnacle? I doubt it.

  9. mibredclaimer

    Ba-zing!

    But seriously, I think it is definitely worth the tracks’ and the state’s while to legalize ADW. As Ragman noted earlier, the entire western half of the state got left in the dark when they closed down Great Lakes Downs, and I am sure plenty of them would still like to place a bet on the horses they saw run in Muskegon (and others, of course).

    If, god forbid, something should ever happen to Mount Pleasant, my nearest option for live or simulcast betting would be two and a half to three hours away. ADW would become my only realistic choice if I couldn’t get out of town, and with classes starting back up, that gets more and more likely.

  10. BJChicago

    ADW just got signed into law in IL today….hopefully MI can make a surrounding state argument.

    Regarding racinos, I visited an old stomping round this weekend, the (former) Dubuque Greyhound Park, (now the Mystique Casino or some nonsense). Believe it or not, DGP got a few thousand fans a night as recent as early this decade, until Iowa expanded gambling. The powers at be tore down the clubhouse to put in a casino, and left the apron of the racetrack. On a beautiful night, there were about 50 people playing the dogs/simulcast races (dogs, horses)…and 100 times that of slots and table games players. I’m sure the kennel owners are making enough money to survive thanks to the slots…but the long-term affects of the game is pretty obvious.

    Now I’m not trying to say dog racing is overally comparable to the horses (dog racing is a gimmick at the end of the day), however I’m sure this same scenario plays out at many a horse racino in this country. And how can that be the long-term answer?

  11. Rox

    With Pinnacle being owned by race horse oriented people, the addition of slots should not hurt the amount of patrons coming to bet, or view racing, as hopefully they would stay horse friendly, unlike other tracks where racing was basically pushed down the casino owners throats as a way to get into the state. How ever, Pinnacle needs to be fan friendly, and attract better horses to attract the betting public. It remains to be seen if this will happen.
    Also, the horsemen need a good contract, not a give-away to keep the track open, or they are doomed. Read about Turfway.

  12. mibredclaimer

    BJChicago,
    Congratulations on the good news with ADW.

    I don’t know if it’ll help Michigan’s cause for expanded gaming though. Lansing doesn’t seem to be very receptive to the “other states” argument. In fact, when the successes of Indiana and Pennsylvania were brought up at a recent Ag Appropriations meeting, one congressperson replied “Well, I’m sure there are things where those states are saying ‘look at what Michigan is doing.'” What he didn’t take into account is those states may be looking, but they’re also pointing and laughing.

    As for the attendance issues, keeping people coming to the races is definitely something that will merit continuing discussion. Did the dog track do much in terms of promotional events, such as a Scholarship Day? With the added revenue the slots would kick in, some of it needs to go toward marketing to give people reasons to come to the races and stay there. Hopefully the brass at Pinnacle keep this in mind if they should benefit from alternative wagering.

    Rox,
    I agree having the track operated by “horse people” ought to help keep the racing side of things respectable if slots should ever become a reality. If the product improves like it should from expanded gaming and the track is marketed well enough with the additional money, I don’t think there will be too much of a problem.

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