Microbets: Overall, the benefits trump any drawbacks
HALLANDALE BEACH, FLA.
A bettor playing Gulfstream Park's races last month cashed a ticket that was almost unprecedented in U. S. parimutuel wagering. He collected $221,677 for a winning combination that cost 10 cents.
The wager, dubbed the Rainbow Six, represents an innovation sweeping the sport: the microbet. Whereas the $2 bet once was the industry's standard, and most exotic wagers have been sold in $1 units, many tracks have begun to offer smaller bets. Customers at Gulfstream can play 10-cent superfectas, 50-cent Pick Fours and a 50-cent Pick Five as well as the 10-cent Rainbow Six.
This wagering concept was developed in Australia under the name Flexi-betting. An industry executive, Paul Cross, discussed the innovation at a U. S. horse-racing conference in 2006 and inspired a greyhound track to introduce wagers costing less than a dollar. Now most thoroughbred tracks offer microbets in some form.
The main rationale for microbets is to help smaller bettors play exotic wagers that typically require a multitude of combinations. Picking the first four finishers in a race is a formidable task; if a bettor wants to play a superfecta using all possible combinations of five contenders, a five-horse box with a $1 wagering unit would cost $120 and would exceed the budget of many players. The advent of the dime super means that a bettor can make the play for $12 and get in the game with the big boys.
Some people would say that this is not necessarily a good thing for less sophisticated bettors. Maury Wolff, gambler and economist, observed, "We're pushing people into more complicated bets that are much more difficult to put together intelligently. It's hard to screw up an exacta, but it's easy to screw up a superfecta play."
Though the microbets surely have some drawbacks, they offer one benefit that trumps any negative features. They shelter players from tax withholding by Internal Revenue Service. When a bettor wins $5,000 or more on an exotic wager paying odds of 300 to 1 or higher, the government extracts 25 percent of his payoff. (If a superfecta returns $5000, the player walks away from the window with $3750 and a tax form.)
For many players - those who don't itemize their tax returns and thus can't claim losses to offset their reported wins - this is money they will never see again. Taking so much cash out of circulation reduces players' betting capital and thus hurts the economy of the entire parimutuel industry. Because the payoffs on 10-cent supers, 50-cent trifectas, etc. are much less likely to exceed the $5,000 threshold, players keep more money and continue betting with it.
Some forms of microbets are more attractive than others, and I believe the worst of them is Gulfstream's Rainbow Six. Though it has proved popular since it was introduced here this winter, it is, in my view, a sucker bet.
In the Rainbow Six, bettors try to hit six winners as in a conventional $2 Pick Six, but the entire pool is paid out only when a single ticket has all six winners. If more than one perfect ticket is sold, the winners collect 60 percent of the money bet that day (less the track's takeout) and the remaining 40 percent goes into a jackpot that carries over to the next day.
"We know it's a gimmick," said Tim Ritvo, Gulfstream's general manager, but he saw the Rainbow Six as a way of appealing to a new audience. "It's giving the average lottery player a way to play for a huge jackpot without alienating our regular customers."
The comparison with the lottery is appropriate. In a conventional Pick Six, a player putting in a small ticket has less chance of winning than a big bettor or syndicate; but if he picks six winners, he gets the same payoff as the big boys and he can be grateful to them for fattening the pool. The dynamics of the Rainbow Six are very different. A player buying a small ticket has a minimal chance of holding a winning combination that all of the big players miss. His best hope is to select six winners and collect a consolation payoff. After money is taken out of the pool and goes into the jackpot, and after Gulfstream gets its cut, only 48 percent of the day's wagers are paid out.
That's a 52 percent takeout - worse than the lottery. I hope other tracks don't emulate Gulfstream and introduce their own version of the Rainbow Six: There are plenty of other possible betting innovations that are more fan-friendly bets.
Gulfstream introduced both the Rainbow Six and the 50-cent Pick Five this season to replace the $2 Pick Six, which had generated disappointing results. The traditional Pick Six can be the most exciting wager in the sport, but outside of California and New York it usually doesn't attract large betting pools that motivate players to dive in. However, the Pick Five got an enthusiastic reception at Gulfstream. "It's hittable, but the payoffs are good," Ritvo said.
With hundreds of thousands fewer possible outcomes than a Pick Six, the Pick Five is a more manageable wager. The 50-cent unit lets average players spread their bets to give them a reasonable shot dealing with the big, wide-open fields at Gulfstream. Yet the bet has produced payoffs of $69,853 and $47,959 this winter, and the median return has been more than $5,000, making it well worth the handicapping efforts of any horseplayer. Moreover, Gulfstream promoted the Pick Five by offering it with a takeout of 15 percent (compared to the extortionate 26 percent it takes from trifectas and superfectas) so by almost any standard it is an attractive wager. Other tracks are taking notice. Keeneland announced a few days ago that it will replace its Pick Six with a 50-cent Pick Five.
Over the years, the racing industry has had a poor record of developing attractive parimutuel products. The last truly revolutionary idea in the game was the guaranteed $1 million Pick Six pool. But thanks to microbets, the sport may be able to offer a new generation of wagering products.