Horse racing set for a resurgence within the U.S.

America’s oldest horse racetrack is closing after operating its final race on the ultimate weekend of 2024. 

Freehold Raceway in New Jersey, co-owned by Penn Entertainment, tried for many years to land a on line casino however failed. Like many tracks across the nation, it grappled with declining attendance and income. It had been working for greater than 170 years.

“Sadly, the operations of the racetrack can’t proceed beneath present circumstances, and we don’t see a believable method ahead,” mentioned Howard Bruno, the racetrack’s normal supervisor, in a news release saying the closure.

However business insiders, buyers and different lovers imagine horse racing in america may very well be poised for a resurgence — fueled by new investor curiosity, improvements within the sport and a growth in legalized on-line sports activities playing. 

In 2023, the game added greater than $36 billion to the U.S. financial system, supporting practically half 1,000,000 jobs, in keeping with the American Horse Council. 

Horse-racing income comes from a wide range of sources: tickets, hospitality, merchandise purchases on the monitor, licensing for TV or simulcast, sponsorships and playing.  

Dependable estimates of worldwide horse-racing revenues are exhausting to come back by, specialists say, partially due to the personal nature of possession and partially due to the wide range of metrics used. Income estimates vary from $44 billion to just about 10 occasions that.

A number of sources agree the game might see compound annual progress of roughly 9% within the years forward.

No catalyst for the game’s progress is extra essential in the intervening time than the income that comes from playing. 

The deal with, or the sum of money wagered on horse races, funds the purses, or the prize cash, awarded to successful horses. So does the casino-style playing at services related to race tracks.

For instance, Resorts World New York Metropolis, which operates video lottery terminals, is contractually obligated to show over 12% of its web win to the New York Racing Authority, or NYRA. Patrick McKenna, NYRA’s vice chairman for communications, mentioned that presently quantities to about $120 million yearly. Of that whole, $60 million goes towards purses, $40 million goes to capital enhancements, and $20 million funds operations.

When the dimensions of the purse grows it attracts increased high quality horses, and better high quality horses appeal to extra curiosity within the sport.   

In 2022, $12 billion was wagered on horse races, marking a brand new file, in keeping with an evaluation by the New York Thoroughbred Horsemen’s Affiliation, or NYTHA. The overall purse cash awarded that yr additionally set a brand new file, at $1.25 billion.  

Progress in sportsbooks in addition to the elevated entry People now should legalized, on-line sports activities wagering is fueling optimism for horse racing’s resurgence. New methods to guess on horse racing means a brand new era of sports activities lovers is getting publicity to the game. 

FanDuel, the nation’s main sportsbook by market share, partnered with the Kentucky Derby for a second yr in 2024. The corporate informed CNBC that the amount of bets on Derby day hit the identical degree as Tremendous Bowl playing in the identical yr.

The Kentucky Derby is the crown jewel of Churchill Downs — essentially the most important pure-play, publicly traded firm centered on horse racing. 

The corporate introduced a major enhance in adjusted EBITDA — earnings earlier than curiosity, taxes, depreciation and amortization — throughout Derby Week in 2024, with important sponsorships from corporations that wished to align themselves with the status occasion.

The corporate says file wagering numbers recommend the betting viewers just isn’t solely rising however turning into more and more engaged as they study the game, particularly on the cell platforms favored by a youthful demographic.

“Our operational methods current a mannequin for different racing occasions to observe. General, the Kentucky Derby is not only a standalone occasion however a blueprint for the way forward for horse racing,” mentioned CEO Invoice Carstanjen.

Corridor of Fame horse coach Bob Baffert mentioned the Kentucky Derby is particular as a result of it is a bucket-list race: “It is an Instagram second for everyone. All people goes. They’re taking their selfies: ‘I am right here. I am right here on the largest occasion.'”

However the high-profile Triple Crown races and the Breeders Cup could also be outliers — a form of World Collection within the horse-racing schedule that in any other case is crammed with on a regular basis competitions that draw solely a smattering of followers. 

Curiosity in additional peculiar races has been waning for many years.

The sum of money wagered on pari-mutuel racing — the place bettors gamble in opposition to different bettors and the chances always change forward of the race — has declined by about 55% since 2000, when adjusted for inflation, in keeping with the Paulick Report, an internet site in regards to the horse-racing business. 

Additionally, over the previous twenty years the variety of house owners, horses and trainers within the U.S. has plummeted, in keeping with the NYTHA researchers. They concluded that in 2022 horse racing had “on most days been lowered to a distinct segment market, albeit with a extremely core viewers.” 

Baffert informed CNBC he believes horse racing wants extra high-profile occasions with large purses to drum up buzz. And, like baseball, it wants superstars to attract in weekday audiences. 

Baffert, who is simply the second coach ever to have two Triple Crown winners, could also be horse racing’s best-known character. However controversy in recent times has overshadowed his success.

Baffert was suspended for 3 years from competing at Churchill Downs after a horse he’d educated, Medina Spirit, gained the Kentucky Derby in 2021 however examined optimistic for an anti-inflammatory drug that is not allowed on race days — and was disqualified.

This summer season, Churchill Downs lifted its suspension of Baffert after he publicly took duty for the failed drug check.  

Baffert returned to the storied racetrack the day earlier than Thanksgiving, with a 2-year-old horse named Barnes that had by no means raced earlier than however had fetched a powerful $3.2 million at an public sale in Saratoga, New York, from now-owner Zedan Racing Stables.

The median worth to buy a race horse is about $30,000, in keeping with BloodHorse, a publication for house owners and breeders that tracks gross sales and the state of the market.

Barnes gained by a nostril in his debut.  

Some well-known Wall Road names have earned a fame for recognizing — or creating — alternatives in horse racing.

Danny Moses, a dealer made well-known in “The Huge Brief,” is a sport fanatic, avid gambler and investor in race horses. And although he is recognized for his quick calls, he mentioned he is lengthy on horses.

“I believe the worth of horses are going to go up,” Moses mentioned, pointing to the larger payouts and purses introduced in by the growth in legalized on-line sports activities playing.

Moses is certainly one of 14 in an elite group of buyers in Starlight Racing, which presently owns 26 race horses. It is headed by former hedge funder Jack Wolf, and it produced 2018 Triple Crown winner Justify and 2020 Derby and Breeders Cup winner Genuine, each educated by Baffert.

Over just a little greater than twenty years, Starlight-owned horses have completed within the cash greater than 50% of the time, raking in additional than $64 million in whole purse cash. 

Wolf mentioned his expertise in hedge funds helped him to determine an modern mannequin to put money into horses, the place all companions share within the potential upside for a group of horses. He mentioned buyers must issue within the expertise and the enjoyment of the game into their expectations for return on funding.

“We have been all over the world with our partnership. That is what they’re investing in,” Wolf mentioned. So far as concrete monetary returns go, he mentioned, “We have been profitable some years, and a few years we have not been. It is a very powerful enterprise, a really powerful strategy to make a return in your cash, however it may be carried out.”

Wolf is now wanting on the races themselves. In 2017 he was CEO of the Pegasus World Cup at Gulfstream Park in Florida. The race set a brand new mannequin: Homeowners paid $1 million every for a spot within the race, which they might use, promote or lease.

The race’s $12 million purse was the richest on the earth. 

Although the Pegasus has reverted to a conventional race mannequin since then, Australia has embraced the “gate race” or “slot race” construction, with a number of the highest purses globally.   

And Moses is lobbying for extra U.S. races to observe the weird mannequin, pitching racetracks comparable to Monmouth, Santa Anita and others.

There stays a thorny downside for the U.S. horse-racing business: It is lengthy been seen because the Wild West so far as laws and oversight of horse welfare are involved, in keeping with Lisa Lazarus, CEO of the Horseracing Integrity and Security Authority, or HISA. The group was established by the Federal Commerce Fee to supervise the integrity of horse racing throughout state strains and in numerous racing services. 

Traders don’t desire their cash hooked up to potential guidelines or ethics points, Lazarus informed CNBC.  

“By prioritizing constant and clear practices, HISA goals to reassure followers and the general public that horse racing operates with integrity and security at its core,” Lazarus informed CNBC. “This dedication not solely fosters belief but additionally creates an setting the place innovation can thrive, attracting new house owners, contributors, and followers.”

However powerhouse operators Churchill Downs and the New York Racing Affiliation, or NYRA, are suing HISA over charges.  

In a press release to CNBC, NYRA insisted it is broadly supportive of HISA’s mission however is protesting “illegal, extreme and disproportionate monetary assessments.”

Lazarus mentioned that in the long run, HISA’s oversight and regulation will gasoline extra funding — much like that of sports activities playing or cryptocurrency — as a result of the foundations and legality are clearer. 

In 2020, racing horse deaths within the U.S. amounted to 1.41 per 1,000 race begins, in keeping with HISA, which launched a monitor security program in July 2022. After the company standardized doping laws and enforcement, horse deaths fell to an estimated 0.9 per 1,000 race begins in 2024.

It was the primary time the U.S. has achieved something under 1 within the metric and places it on par with dying charges in the UK, Japan and Australia, in keeping with Lazarus.

Homeowners and trainers hope that may assuage issues by lawmakers and regulators and discourage the form of backlash that may hinder progress of the game. 

Even when the game can overcome the widespread notion of its remedy of horses, racetrack services are in determined want of an overhaul. Outdated services discourage followers from attending. 

“They do not wish to go to a racing facility that is been there because the Nineteen Sixties with outdated infrastructure, with outdated loos,” mentioned Donna Brothers, NBC Sports activities racing analyst and commentator.

Churchill Downs is spending $300 million on enhancements to its paddock and grandstand. Belmont Park is present process a $500 million renovation, funded by a mortgage from New York state. And Maryland’s legislature in April accredited $400 million to overtake Pimlico, house of the Preakness Stakes.  

Brothers mentioned the business goes to should embrace new know-how, comparable to cell apps, to associate with the bodily enhancements. 

Dennis Drazin, CEO and chairman of Monmouth Park Racetrack and Sports activities Guide, mentioned the game’s true potential can solely be realized by a number of income streams. 

“Racetracks should embody gaming, leisure, fan expertise and innovation of their method for fulfillment,” Drazin mentioned.

NYRA, for one, is seeing a serious enhance from expanded nationwide tv protection of its races. Fox Sports activities, a minority fairness proprietor in NYRA Bets, airs 1,000 hours of horse racing all year long. NYRA mentioned that boosted whole wagers on its on-line platform 127%, from $306 million in 2016 to $696 million in 2023.

FanDuel purchased racing broadcaster TVG and has change into a number one operator in horse racing alongside NYRA and Churchill Downs’ TwinSpires, which licenses its playing operations to different sportsbooks together with FanDuel and DraftKings. 

DraftKings turned a naming sponsor for the 2024 Travers Stakes in Saratoga. 

Regardless of the Freehold Raceway closure, Penn Leisure mentioned in a press release it is trying to broaden gaming tied to horse racing.

“In these states the place industrial gaming just isn’t but accredited on the racetracks, comparable to Texas, we proceed to coach lawmakers on the success we have seen,” mentioned Eric Schippers, senior vice chairman of public affairs for Penn. “Gaming has helped to revitalize racing, driving increased purses, enhanced breeding packages and the preservation of household farms and open house.”