Off-shore rebate shops and the small horseplayer

[Dave_K]

Hi all, my first post here, and after surfing through several threads, I must say this is the most sophisticated handicapping/racing board out there.

How do people feel about rebate shops and the way they are changing the nature of pari-mutuel competition? I don't really like the fact that I pay an approximately 20% "tax" on my wagers, while higher-rollers WHO ARE BETTING INTO THE SAME POOLS (hence competing against me) are paying less than half that tax rate.

This situation makes it even harder than it already is for the small time bettor to beat the races. The big money chasing the few dollars left on the pari-mutuel table is getting bigger and bigger with rebates, squeezing out the little guy. Whatever "market inefficiences" there are (or, were) will be gobbled up by the "whales" betting through St. Kitts (or wherever else) at a reduced rate. This gives the big players (who already have the advantage of a big bankroll) a further, and perhaps insurmountable, competitive edge over the little guy.

Here are links to one article by Beyer and one by Matt Hegarty (DRF) about rebate shops:

http://www.washingtonpost.com/ac2/wp...&notFound=true

http://www.hbpa.org/newsdisplay.asp?section=3&key1=798

[Figman]

One of the two winners of that gigantic pick six at Aqueduct today wagered through the rebater RGS-St. Kitts and the wager came into NYRA through the Lewiston, Maine hub used by the "high rollers."

[andicap]

Doesn't Pinnacle give 7% on all wagers, big and small, thus leveling the playing field?

[Dave_K]

I should note that it wouldn't matter much to the little guy if the people betting huge sums through rebate shops were only average handicappers -- but they're not. The tracks themselves acknowledge that the rebate players do a lot better than average.

Consequently, a large (and getting larger) percentage of the pari-mutuel pools is due to the betting of these sharp handicappers -- who the little guy has to compete against (at double the tax rate).

Someone might say, "well instead of complaining about these shops, why don't you join one?". You can't just sign-up -- it's by referral only (at least the ones offering decent rebates).

[Dave_K]

Andicap, if bets through Pinnacle go into the host-track's pari-mutuel pools, and they do rebate at 7%, and they accept small wagers, then yes, that would appear to level the playing field for the smaller bettor -- if he's willing to bet off-shore.

If the rebate shops had separate pools, or made a fixed-odds book based on the on-track odds, I would have no problem. My problem is that wagers through these rebate shops go into the same pools that the $2 railbird at Aqueduct is betting into.

The irony of the situation is that rebate shops are proving what economists and horseplayers have been saying for years: lowering the takeout will increase handle to the point that more revenue is generated for the racetracks. The racetracks themselves now realize this (e.g., Magna cut the price for it's signal to St. Kitts last week) and don't want to lose the business of the rebate shops.

It's a really absurd situation where instead of directly lowering the takeout on-track, the take out is indirectly lowered via rebate shops. Not that I really care, but the racetracks are also implicitly encouraging American citizens to wager through Carribean betting shops (meanwhile, I can't open an account with UK-based Betfair, and NJ residents can't even wager with American companies).

[Suff]

Originally posted by Figman
One of the two winners of that gigantic pick six at Aqueduct today wagered through the rebater RGS-St. Kitts and the wager came into NYRA through the Lewiston, Maine hub used by the "high rollers."

Fig what did NY handle Today?

[Figman]

Aqueduct-10 races
on-track-$1,379,175
InState -$3,745,002
OutOfSt -$10,586,632
TOTAL - $15,710,081 (or $1,571,008 per race)

Gulfstream-11 races
on-track - $1,857,415
InState - $ 621,551
OutOfSt - $8,077,638
TOTAL $10,556,604(or $959,691 per race)

[Hosshead]

Let me see, does this sound right?

When a larger % of the pools is made up by Whale Money, you've got Whales betting against Whales? Looking for "market inefficiences", which there are fewer of. So even though they (whales) get the rebate money, there are not only fewer opportunities, but the payoffs are smaller, both because it is Whale vs. Whale? So they are making less money in that area, compared to what they were making before? Of course so are we. (I do think a lot of whale money goes into track pools.)

Hoss -- (Just a skipjack,....soon to be a Great White ! )

[Dave_K]

Sounds right to me. Sort of a positive feedback loop, where "success breeds more success", i.e., smartest players bet big money, win money, bet even bigger money, win more money, until there's no more money to be won (the "market" becomes "efficient"). The nature of pari-mutuel competition ensures that only the smartest handicappers get into this feedback loop, a sort of survival of the fittest.

The rebate shops (and US racetracks who implicitly encourage their existence) artificially make it easier for big players to turn a profit, so they can bet more money, so they can gobble up more of the "market inefficiency" and so on, and so on -- all at the expense of the little fish betting on-track or through American account wagering companies.

A somewhat analogous situation would be if Home Depot were given all kinds of tax breaks and subsidies, while the mom-and-pop hardware store, that is directly competing against Home Depot, had to pay full taxes, got no breaks, etc.

Originally posted by Hosshead
Let me see, does this sound right?

When a larger % of the pools is made up by Whale Money, you've got Whales betting against Whales? Looking for "market inefficiences", which there are fewer of. So even though they (whales) get the rebate money, there are not only fewer opportunities, but the payoffs are smaller, both because it is Whale vs. Whale? So they are making less money in that area, compared to what they were making before? Of course so are we. (I do think a lot of whale money goes into track pools.)

Hoss -- (Just a skipjack,....soon to be a Great White ! )

[cato]

I haven't been troubled by the whale impact on the game much becaue I have always asumed without investigation that the whales are generally going to be betting on the horses that are in the low, low odds ranges (and certainly if the horses were not in the low odds range in the ML, they will be after the whales start betting on them).

Since I am not all that interested in any horse that is at, say 5-2 or below, it seems that the whales would not have much impact on my betting, except in a positive way to drive the odds UP on the horses that I am interetsed in (that are normally in the range of 7-2--10-1)

To anyone who is fololwing the impact of the whales or has just thought about the issue, am I on point here or is it just wishful thinking?

Cato

[penguinfan]

My understanding is of-shore rebate places like Pinnacle (whom I use on occasion) take your bets into a seperate pool, a nice advantage for those who play smaller tracks but bet decent size win tickets, HOWEVER I have been told by management that on occasion your off-shore wager will be put into the track pool if deemed necessary by the off-shore book. If I can get say a $200 win ticket on a 3-1 horse at Mountaineer and have that money kept out of the pool AND get 7% back, I think that is a huge advantage for a player like myself because honestly $200 at a track like Mountaineer could lower the price of a 3-1 horse.
Reguardless of what the whales are doing I think you have to look at your wager as just that "your wager" and decide where you can get the best value for "your wager".

Penguinfan

[Dave_K]

Cato: good point. By definition, huge money is not bet on longshots. So, if in a particular race, there is a truly overlaid longshot, either: 1) the whales didn't bet this race, or 2) the whales were wrong. The thing is, at least according to the articles by Beyer and Hegarty, the whales are usually right.

Penguin: I agree that you have to evaluate each bet by itself in determining whether it has value, regardless of what the people in St. Kitts are doing. If you've found a "true" 3-1 shot who is paying 4-1, you've got a winning bet (in the long-term, that is), regardless of what anyone is doing.

The problem is, the bigger the proportion of the money in the pools that is smart money, the more rare the true 3-1 shots who pay 4-1 (or anything over 3-1, for that matter) are going to be.

[Buckeye]

Cato,
This would explain the "pounding the chalk" syndrome that occurs-- late (whale) money coming in. They are looking for the best type of horses to grind the rebates with. Don't play in their sandbox. Eventually, they won't be able to make any money there either.

[Buckeye]

There is no escaping the fact that if the whales are that good, they will eat up the small fishes no matter where they are, because the whales will start to look at the longer priced horses too.

Then it will just be the whales . . .

I'm not too worried about them being that good though

[alysheba88]

If the "whales" were so good, why were there such GREAT GREAT prices at Aqueduct yesterday? Shouldnt the smart money have driven down the prices? One of the biggest myths there are in my opinion is how much "smart money" there is in the New York pools. Dont agree at all.