Computer-Assisted Wagering Undermines Fair Play and Transparency in Racing - Episode Hero Image

Computer-Assisted Wagering Undermines Fair Play and Transparency in Racing

In The Money Players' Podcast · · Listen to Original Episode →
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TL;DR

  • Computer-assisted wagering (CAW) systems, by offering advantages like late decision-making and potential clandestine business arrangements, create an indefensible imbalance compared to traditional betting, undermining fair play in racing pools.
  • The industry's historical lack of transparency regarding CAW operations, exemplified by Churchill Downs' failure to disclose velocity's handle, fuels player distrust and justifies a cautious approach to wagering.
  • Professional bettors who prioritize long-term sustainability over quick gains, like Mike Maloney, strategically negotiated direct track rebates, sacrificing immediate profit for industry support and a more ethical wagering model.
  • The transition to professional horse betting requires rigorous discipline, where strict adherence to pre-defined rules and risk management guardrails consistently outperforms emotional conviction during inevitable losing streaks.
  • While traditional betting pools are increasingly "shark-infested" due to CAW, focusing on retail-friendly pools, lower takeout wagers, and specific contest formats can still offer opportunities for discerning players.
  • The shift from horse betting to active stock trading for some professionals highlights the parallels in analytical rigor and money management, with trading becoming a viable "plan A" due to industry changes in racing.
  • The diminishing edge in vertical exotics (exactas, trifectas) suggests a market correction, forcing experienced bettors to continually adapt and seek new opportunities as sophisticated modeling and CAW participation evolve.

Deep Dive

Mike Maloney, a professional horse bettor and author, is shifting his focus from horse racing to actively trading stocks, citing industry changes and a lack of transparency as key drivers. This transition signifies a broader trend of professional gamblers seeking more stable and lucrative markets, and it highlights the increasing challenges within horse racing, particularly concerning computer-assisted wagering (CAW). The lack of transparency around CAW has led to a lawsuit and a general erosion of trust, making it difficult for traditional players to find a consistent edge.

The core issue Maloney and others raise is the perceived unfairness and opacity surrounding CAW. While the book "Betting With an Edge" advocates for CAW to play by the same rules as humans, Maloney believes this is not the case. He uses a poker analogy where one player always has the advantage of acting last, highlighting the potential for unfair information or strategic advantages that CAW might possess. This lack of transparency is not isolated to individual betting systems; Maloney points to Churchill Downs' annual report, which omits crucial data on handle for their wagering platform, Velocity. This deliberate opaqueness fuels skepticism and suggests that the industry is actively obscuring information rather than fostering trust.

The implications of this shift are significant for the horse racing industry. Maloney's decision to scale back his handle and focus on stocks indicates a declining profitability or increasing difficulty in finding profitable opportunities within racing. This trend, if widespread among professional bettors, could lead to reduced liquidity in betting pools, making it harder for all participants to find value. Furthermore, the ongoing concerns about CAW and the lack of transparency could deter new players and further alienate existing ones. The industry's failure to address these issues proactively risks a long-term decline in engagement and revenue, as skilled bettors like Maloney seek more favorable environments. The focus on retail-friendly pools and the importance of game selection, as discussed by Maloney, become paramount survival strategies in this evolving landscape.

Action Items

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  • Build prototype: Test X hypothesis using Y framework with 3-5 example datasets (2-week sprint) to validate potential improvements.

Related Episodes

Key Quotes

"I doubt that I will [continue betting horses] just to catch up on my personal work life. I've been like a lot of professional players, I've been slowly dialing back my handle of the last several years not by choice just by the way the industry has laid things out. I took a hard look at things and wasn't really enthused with the direction of racing overall and I thought I need to have a plan B."

Mike Maloney explains that he has been reducing his betting volume not due to a lack of interest, but because of industry changes. He has developed a "plan B" in stock trading, which has become his primary focus, indicating a shift away from horse racing as his main professional pursuit.

"There are so many similarities between actively trading stocks and playing horses seriously. Does it scratch the same itch in terms of the intellectual exercise? I mean, certainly you don't have those moments of adrenaline to know if you were, you know, quote unquote right or wrong in that quick of a time frame, or am I looking at it wrong?"

Mike Maloney is asked by Peter Thomas Fornatale if stock trading offers the same intellectual satisfaction as horse betting. Maloney acknowledges the comparison but questions whether the adrenaline rush of quick betting decisions is replicated in the stock market, suggesting a potential difference in the immediate feedback loop.

"The analogy that I've heard is a poker game. If you know, if I sit down at a poker game and the host is is charging a 20 rake... and then if you went further and found out that there was a, you know, kind of a clandestine, at least in the beginning, business arrangement between the person running the poker game and this player who constantly every hand gets to make the final decision, then I would definitely get up and leave."

Mike Maloney uses a poker game analogy to illustrate his concerns about computer-assisted wagering (CAW). He argues that if one player consistently has an unfair advantage, like always being on the button and seeing all other actions before deciding, it would be an indefensible situation, drawing a parallel to perceived inequities in CAW.

"The way to handle a long drawdown is to have those guardrails to have those rules in place in the beginning that protects you. And in my case, I bet less and less as my results tell me to. If I'm not doing well, I'm betting less every day in a lot of instances as when I'm in a losing streak. So that protects you and just gives you some cushion there to ride it out."

Mike Maloney emphasizes the importance of pre-established rules and discipline when managing losing streaks in horse betting. He explains that his strategy involves reducing bet size during losing periods, which he believes protects his bankroll and provides the necessary cushion to endure difficult stretches.

"Discipline always trumps conviction. That's a beautiful quote. I love that. It fits so well in racing because, you know, if you're playing with a thousand dollar limit and you're actually your best idea of the day was in the ninth race and you lose... every bone in your body will want you to bet, you know, six hundred dollars in that last race and put yourself at risk of losing fourteen hundred or over your limit just because you think this is your best idea."

Mike Maloney highlights the principle that discipline is more critical than conviction in horse betting, especially when managing a bankroll. He illustrates how emotional urges can lead to overbetting after losses, potentially exceeding limits, and underscores the need for strict adherence to rules to avoid such pitfalls.

"The idea that popped into Sean's mind was, well, gotta be doing more in that pool then if the sharpest people aren't betting it. Right? But then, yeah, like you said, that was temporary because, like with so many other things, this is true in finance, it's certainly true in horse racing, more sophisticated modeling comes in, the pricing corrects, the opportunity goes away, and you got to find the next opportunity."

Peter Thomas Fornatale recounts a moment where Sean suggested betting more into a pool if sharp handicappers were avoiding it. Fornatale agrees that such opportunities exist but emphasizes that they are often temporary, as market efficiencies and improved modeling eventually correct any perceived edges, requiring constant adaptation.

"My thinking was the horsemen are getting paid and the tracks are profiting and I'm helping to sustain racing. More of your money is going into the industry under that model than going to a middleman. And, but there were, I was underpaid for the let's see, for the 20 years that I had various deals with race tracks, I was underpaid that entire time."

Mike Maloney explains his rationale for negotiating rebate deals directly with racetracks in the late 1990s. He believed this model benefited the industry by keeping more money within racing and supporting horsemen and tracks, rather than going to intermediaries, though he acknowledges he was financially undercompensated for two decades.

"I think the key to it is is the pace scenario and looking at most of this field, we just a lot of the horses have been coming from from further out the pace and they probably would like to and then I might set up for a horse like Chip Poncho in this spot who I kind of view as a horse speed because he does have the most speed in here."

Jackson Muniz analyzes the pace scenario in the Gun Runner Stakes, identifying Chip Poncho as a potential beneficiary. Muniz suggests that many horses in the field prefer to race from further back, which could allow Chip Poncho, who possesses significant early speed, to control the pace and have an advantage.

Resources

External Resources

Books

  • "Betting With an Edge" by Mike Maloney - Mentioned as a resource for understanding money management and betting strategies, with specific discussions on Computer Assisted Wagering (CAW).

Articles & Papers

  • Daily Hai Nisai Stakes (Kyoto Racecourse) - Mentioned as the most prestigious prep race for the Asahi Hai Futurity Stakes.

People

  • Mike Maloney - Guest, author of "Betting With an Edge," discussed his transition from antique dealer to professional bettor and his views on horse racing and stock trading.
  • Peter Thomas Fornatale (PTF) - Host of the podcast, author, and interviewer.
  • Jake K - Mentioned in a conversation with Mike Maloney regarding stock trading and horse betting.
  • Andy Beyer - Encouraged Mike Maloney and PTF to discuss CAW further in their book.
  • Ernie Dolman - Mentioned as having negotiated rebate deals with racetracks in New York before Mike Maloney.
  • Sean Bourman - Discussed with Mike Maloney regarding profitability in vertical exotics and the evolution of betting pools.
  • Paul Matties - Mentioned as a sharp bettor.
  • Nick Saban - Quoted regarding the concept of "poison" in racing, referring to ego and emotions.
  • Mikey P - Co-host, discussed Derby prep races.
  • Jackson Muniz - Guest, discussed Derby prep races.
  • Ryan Anderson - Guest, discussed Derby prep races.
  • Matt Dinerman - Mentioned as covering Oaklawn with Mikey P.
  • Jose Ortiz - Jockey mentioned as riding "Musket."
  • Steve Asmussen - Trainer of "Chip Poncho."
  • Ken McPeek - Trainer of "Liberty National" and "Very Connected."
  • Mike Maker - Trainer of "Crown the Buckai."
  • Brad Cox - Trainer of "Arabia Wild" and "Mr. Punch."
  • Brian Brian - Jockey mentioned for a rail skimming trip.
  • David Ornrock - Mentioned for a statement at a symposium.
  • Walter Rodriguez - Trainer of "Big Apple Patrick."
  • Christophe Lemaire - Jockey mentioned for riding "Admire Quads."
  • Yuga Kawada - Jockey mentioned for riding "Corteo Sole."
  • Kohei Matsuyama - Jockey mentioned for riding "Ikaro Alba."
  • Ryusei Sakai - Jockey who previously rode "Ikaro Alba."
  • Ryan Moore - Jockey who rode "Salios" in 2019.
  • Jiru Engel - Mentioned in relation to "Tagano Laria."

Organizations

  • In The Money Players' Podcast - The podcast where the discussion took place.
  • Twinspires.com - Mentioned for hosting Kentucky Derby prep contests.
  • JRA (Japan Racing Association) - Mentioned for races on Saturday night in Japan.
  • Churchill Downs - Mentioned in relation to its annual report and horse racing.
  • Velocity - A Churchill Downs entity that allows computer players access.
  • Elite Turf Club - Described as a high-end, high-rebate shop.
  • NARA (National Association of Racing Advisors) - Commended for taking the lead in addressing issues for retail players.
  • Pro Football Focus (PFF) - Mentioned in relation to Kevin Cole.
  • Gallop Out - A segment or group discussing Kentucky Derby prep races.
  • In The Money Media Network - Mentioned for coverage.
  • Morning Line IO / ITM - Sponsor offering shares in horses participating in Derby preps.
  • Asahi Hai Futurity Stakes - A Japanese horse race for two-year-old colts.
  • NHK Mile Cup - A Japanese horse race.
  • Yasuda Kinen - A Japanese horse race.
  • Mile Championship - A Japanese horse race.
  • Hopeful Stakes - A Japanese horse race over 2000 meters.
  • Daily Hai Nisai Stakes (Kyoto Racecourse) - A Grade 2 race and a prep for the Asahi Hai Futurity Stakes.

Websites & Online Resources

  • inthemoneypodcast.com - Website for the podcast, used for contact and information on books.
  • X (formerly Twitter) - Mike Maloney's handle is on the cover of his book.

Other Resources

  • Computer Assisted Wagering (CAW) - A central topic of discussion, with concerns about fairness, transparency, and industry handling.
  • Rare Earth and Associated Miners - Mentioned in the context of stock trading.
  • Kentucky Derby Prep Races - Races discussed for handicapping and betting.
  • Gun Runner Stakes - A specific Kentucky Derby prep race at Fair Grounds.
  • Springboard Mile - A specific Kentucky Derby prep race at Remington Park.
  • Kentucky Derby Championship (KDBC) - A contest on Twinspires.com.
  • Turfway Qualifier - A contest on Twinspires.com.
  • Synthetic Championships - A contest on Twinspires.com.
  • Win Pool - Mentioned in the context of tracks cutting it off early.
  • Pick One - A wager discussed as underrated.
  • Rainbow Six - A type of wager with carryovers.
  • Vertical Exotics - Types of wagers discussed for profitability.
  • Horizontal Exotics - Types of wagers discussed for profitability.
  • Exactas - A type of wager.
  • Trifectas - A type of wager.
  • Superfectas - A type of wager.
  • Action Bets vs. Prime Bets - A strategy for managing action and risk.
  • Contests - Mentioned as a way to scratch the action itch.
  • Live Money Contest - A type of contest.
  • 2 Win Place Contest - A type of contest.
  • Place Bet - A type of wager.
  • Win Place Show Pools - Pools where discrepancies can occur.
  • Overlays - Mentioned in the context of betting opportunities.
  • Carryovers - Mentioned in the context of wagers.
  • Low Take Out Pools - Pools with lower deductions, considered advantageous.
  • Retail Friendly Pools and Wagers - Pools and wagers promoted for retail players.
  • Game Selection - Emphasized as a crucial factor in betting.
  • Retail Only Wagers - Wagers designated for retail players.
  • Offshore Site - Mentioned as a type of betting platform not used by Mike Maloney.
  • Vegas Deal - Mentioned as a type of betting arrangement not used by Mike Maloney.
  • Rebate Deal - Negotiated with racetracks by Mike Maloney.
  • Simulcasting - The broadcast of races from different tracks.
  • Annuity for Racing - How Mike Maloney viewed his wagering model.
  • Middleman - Mentioned in relation to rebate structures.
  • Ownership Participants - Tracks being ownership participants with middlemen.
  • High Rebate Shops - Shops offering significant rebates.
  • Class Certification - Mentioned in relation to a lawsuit.
  • Discovery Stage - Mentioned in relation to a lawsuit.
  • Retail Player - The focus of NARA's concern.
  • Long Run Outs / Drawdowns - Periods of losing streaks in betting.
  • Bankroll - The total amount of money available for betting.
  • Ego and Emotions - Factors that can negatively impact betting decisions.
  • Guardrails / Rules - Systems put in place to protect bettors.
  • Zero to 60 in Five Seconds - Analogy for ramping up bet size too quickly.
  • Action Itch - The desire for excitement and betting activity.
  • Even Money Bet - A bet with low odds.
  • God Complex - A psychological state of overconfidence.
  • Overlay - A bet where the odds are higher than the perceived probability of winning.
  • Pace Scenario - The projected speed of the race.
  • Speed Figures - Metrics used to evaluate horse performance.
  • Keba Time Index - A metric used in Japanese racing.
  • Late Comer Note - An observation on a horse's performance.
  • Multiples - Bets involving multiple races.
  • Pick Five - A type of multi-race wager.
  • Dirt Router - A horse that performs well over longer distances on dirt.
  • Maiden Special Weight - A type of race for horses that have not won.
  • Claimers - Horses entered in claiming races.
  • Starter Allowance - A type of race.
  • Fast Main Track - A standard racing surface.
  • Wet Track - A racing surface affected by moisture.
  • Two Turns - A race that involves running around two bends.
  • Fast Going - Refers to a fast, dry track condition.
  • Pace Collapse - A situation where the expected pace of a race does not materialize.
  • Speed Figure - A numerical rating of a horse's performance.
  • Main Track Only Entry - A horse entered in a race that only runs on the main track.
  • Off the Turf Race - A race that was originally scheduled for turf but moved to the main track.
  • Garden Trips - A favorable racing trip for a horse.
  • State Breds - Horses bred in a particular state.
  • Cavalry Charge - A description of many horses running together.
  • Triple Crown Trail - The series of races leading up to the Triple Crown.
  • Grade One Action - High-level horse racing events.
  • Derby Points - Points awarded in prep races that contribute to Kentucky Derby qualification.
  • JRA Crew - Refers to the team covering Japanese racing.
  • Futurity Stakes - A specific race in Japan.
  • Belmont Stakes - A Triple Crown race.
  • Preakness Stakes - A Triple Crown race.
  • Kentucky Derby - A Triple Crown race.
  • Derby Trail - The path to the Kentucky Derby.
  • Breeders' Cup - A series of major horse races.
  • Derby Day - The day of the Kentucky Derby.
  • Kentucky Derby Day - The day of the Kentucky Derby.
  • Kentucky Derby Day for May 2nd, 2026 - A specific future date for the Kentucky Derby.
  • Derby Preps - Races that serve as preparation for the Kentucky Derby.
  • Kentucky Derby Prep Races - Races that serve as preparation for the Kentucky Derby.
  • Gun Runner Stakes - A specific Kentucky Derby prep race.
  • Springboard Mile - A specific Kentucky Derby prep race.
  • Asahi Hai Futurity Stakes - A Japanese horse race for two-year-old colts.
  • Nigata Grade Three - A specific horse race.
  • Daily Hai Nisai Stakes - A Grade 2 race and a prep for the Asahi Hai Futurity Stakes.
  • Kyoto Grade Two Race - A specific horse race

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