Prediction Market Dominoes

It was announced this week that federally regulated prediction market Kalshi has entered the sports betting market. 

For those who are not as familiar with these mediums, they generally mirror what one can bet on a sports betting website, but you receive lower vig, and are able to cash in and out of a bet pretty seamlessly; should liquidity be available, of course, because you need someone to take the other side of your bet. 

Anyone who has played a betting exchange, or similar markets (that are currently available) will find them old news. 

I was involved with a peer to peer loans exchange start-up years ago that ran into a regulatory morass. Other exchange or market medium changes, like California racing given the go-ahead to legally offer horses in this way back in 2012, got stuck in a bog of craziness. 

• "The company’s regulator, the U.S. Commodity Futures Trading Commission, has a new acting chairman, Republican Commissioner Caroline Pham, who announced additional leadership changes on Wednesday. Those departures include that of the CFTC’s general counsel, Rob Schwartz, who recently argued against Kalshi’s election contracts before a panel of federal appeals judges. The leadership changes and the more approving view of Trumpworld toward prediction markets suggest companies like Kalshi could be free to launch even more event contracts like the sports-related ones."

This definitely looks to be shaped much better for success. 

There's still political risk - so many states get paid so much money for sports betting deals with the Fanduels or DKs of the world and they take that revenue stream seriously. But for bettors who are serious of getting great prices and not having to pay ridiculous cash out fees, it's certainly welcome. 

I guess another item is the bettor him or herself. 

In Canada, for example, the previous government deregulated the phone, internet and banking space, providing competition to the monster companies that held sway over consumers. This opened up cheap deals and better banking outlets, but consumers were married to the old way, and were infiltrated with "bundles" and special deals where they didn't move on from the old guard in any big numbers. 

Despite better prices, better cashouts and a great interface, I suspect similar occurs in this space, should these markets proliferate. DK and Fanduel (plus their branding) and SGPs, special offers and all the rest will probably do just fine. 

This always brings me back to what folks who read the blog have heard before, and you may be tired of hearing it. But Kalshi is new. From being new they have entered a betting space with new technology. They've got regulation on their side. They have an in. There's a non-zero chance they could be huge. 

Horse racing had this "in" more than 14 years ago. They had the ear of pols. They already worked with regulators. Exchanges were approved. 

People shouldn't be diving in to bet Kansas City Chiefs Super Bowl futures, or Kentucky Derby futures or whatever other futures that are or will be offered in the Kalshi market. They should be betting already into an horse racing industry owned or led market. It was given first-mover on this over a decade ago. 

Have a nice weekend everyone. 

In the Horse Racing Casino Revenue and Land Asset Bubble, All KPI's Lead to Bad Places

Bacon is covering the Gulfstream Park mess, and he provided an excellent summary here.  

Since AI is the new fancy version of Cliff's (Coles in Canada) Notes, the AI version of the above is that Gulfstream will probably be no more come 2028 (or sooner). 

In a presentation made by Keith Brackpool (there's a blast from the past in California takeout hike lore; these people seem to just move around), it was detailed the land was worth over $1B, which is a lot of scratch. Stronach bought the track for $95M in the late 1990's. 

Further to that, and this is most interesting to me, is the casino revenue. 

Look who tops the list - Pompano Park. The old time historic track that closed a (de)couple of years ago. Yes, the one with purses that rivalled a county fair, with horses (no offence) to match. 

Unpacking that disconnect: The entire sport of Florida harness racing (including the breeding industry in the state) was at a track that brought in $132M of revenue and no one could save the place. Even as it was receiving what many would consider scraps. 

If the sport of horse racing mattered to important people, Gulfstream would be racing, along with Pompano (with some of the highest purses in the world), Hialeah and Calder. But it doesn't. 

If your racing venue brings in tons of casino money it doesn't matter. 

If your racing venue is a storied track patronized by Andy Williams, Ed Sullivan or Colonel Sanders himself, it doesn't matter. 

If an entire industry, including racing and breeding, depends on your track, it doesn't matter. 

If your track has Pegasus races, and Pegasus statues, and is a staple of the sport's wagering make-up for the entire continent, it doesn't matter. 

This is nothing really that new. Balmoral Park in Chicago was quite a successful place in year's past and the home for Illinois racing. They'd do over a million a night, with purses most nights totalling less than $40,000. If we add $20,000 in cost to run a card, their handle revenue to cost ratio was probably in decent shape, but it went the way of the dodo bird, too. 

Casino revenue, check. 

Good horses, good trainers, a good place to watch a race, check. 

Storied races, historic venues that host Breeders Crowns and Breeders Cups, check. 

Big handles, check. 

You can have all of those things and still end up a parking lot or a strip mall. It's sadly the state of the sport.

Do the CRW Teams Have Body Language Covered?

There was an interesting discussion on the twitter recently with Chris asking, "we all know about the advantages for the CAW teams, but what are some advantages for the human player?"

There were some good suggestions, one of which was inside info which is a human trait, and I agree with that completely. We've seen some sharp fair odds computer players look dumbfounded when a horse they didn't figure runs off the screen where on-track they know. 

But intuitively, I suspect the answer to this question is frankly "not much". If you're going to bet hundreds of millions of dollars and have any skill in setting up an organization, you're probably going to have most bases - whether computer or human - covered. 

One area the teams try to cover is body language, but I'm not convinced they are particularly excellent at it (yet). 

First off, if a horse looks sore, it's pretty hard to change a line on the fly, especially with the extent of the soreness. Sore horses who are 8-5 on paper can be 5-2 fair odds, or 520-1 fair odds. Lame horses for me, you and many are an auto-pitch; we're not guessing degrees. 

Second, (and I'm the first to admit this could be anecdotal and I miss things like everyone else) I see little adjustment in the late betting when I personally see a lame or sore horse. 

Just in the past week there was a race where a horse came out looking horrible (who usually looks okay), and in my view should've been scratched. The multi-race wagers (wagers bet before you can see the animal on the track) indicated a strong betting team horse: odds of about 6-5 in the win pool. 

The betting opened hard with an even money win price, but after the parade the horse moved like we'd expect from sharp people noticing the soreness; he closed at 9-5. But it was only 9-5. If the teams were that sharp, wouldn't we expect a higher price? (The horse ran 8th).

I don't know exactly what goes on inside the "team room" but I have been around the block a little outside of it. 

Back before the word "CAW" was a thing, many sharps were betting on Betfair; but by sharps I mean some of the human folks Chris alludes to in his question. I'd often see movement after a post parade at the exchange based on how a horse looked. 

I particularly remember a stakes race at Saratoga where I faded a horse for more than I ever have, based on stiffness. She was from a top barn, and was 7-5, but not long after the parade she was 5-2 on the exchange, then 3-1. She finished at 3.9-1 and ran out of the money. Who were myself and others getting filled by on the buy end? From the betting bots. 

It's dumb to think we'd know more than a well-capitalized, well-run team of sharps. But to Chris's point I do believe there are avenues where we can be better than they are. We see it on the tote board each and every day. 

Have a nice Tuesday everyone.