New York State passed legislation allowing gamblers to place bets on horse racing at offtrack betting parlors, arguing that such a move would raise funds for education, but in fact it led to a decline in racetrack attendance and a small monetary return to the state.
During the immediate post-World War II period, horse racing in the United States was a vehicle for gambling and little more. State officials posed few objections, as wagering on thoroughbred racing was a bonanza for those states in which it flourished. Governments came to view racing as a cash cow, to be milked to provide funding for a variety of purposes.
Along with casino gambling in Nevada, betting on horses at tracks was one of the few forms of gambling that were legal in the United States during the early 1960’s. It would be difficult to estimate the total amount of illegal gambling that occurred in the country in forms ranging from numbers rackets to social card games to illegal bets on football, basketball, and baseball games and other sporting events. Most probably, illegal wagering could be measured in the tens of billions of dollars annually.
Fear of taints from gambling, which had caused scandals in baseball, football, and basketball, led leaders of those sports to oppose legalized gambling of any kind, although newspapers regularly reported odds and point spreads on games. In 1975, for example, the state of Delaware introduced a lottery based on scores of National Football League (NFL) games. The NFL sued the state on the ground that the lottery would harm the sport’s reputation. The lottery was unpopular anyway, because gamblers soon learned that they could get larger payouts on the Las Vegas betting line than through the lottery.
Horse racing was different, having a tradition of wagering. Where wagering existed, controls were tight and had been tested over time. Legal wagering on horse races, however, required attendance at the tracks. This distinction helped make the sport appealing. Wealthy gamblers might travel to Las Vegas casinos; middle-class gamblers drove to the local track. Those unwilling to go or uninterested in going to the track to bet could do so with illegal bookies, who were not difficult to find.
One exception offered a suggestion of what might have been and what was to come. The Irish Sweepstakes, initiated in 1930, combined horse racing with a lottery. The sweepstakes was popular in some circles, and although it was illegal, the results were duly reported by the press. Americans seemed to approve of that type of lottery and, by extension, gambling on horse racing. If that was true, proponents of wagering suggested, legalized gambling tied to races would not face strong opposition and could provide a basis for taxation. The craving for additional revenues that could come painlessly through legalization of wagering pressured legislatures to act.
Legalization of any form of gambling was a touchy matter, since throughout the country there were powerful forces in opposition. Equally strong forces favored gambling taxes, however, since the alternatives of raising other taxes or cutting spending were unpalatable.
There were several ways of gathering gambling taxes. One possibility was offtrack betting (OTB), tying a new form of gambling to one accepted in almost all states. Another was casino gambling; however, the somewhat unsavory reputation of casinos and fears that they would attract an unwholesome element militated against them.
Because wagering on horses was already lawful, taxing it seemed to be the best means of raising tax revenues from gambling. The arguments were vaguely reminiscent of those employed in 1932, when Democratic presidential candidate Franklin D. Roosevelt urged the repeal of Prohibition. Such an action, accompanied by imposition of taxes on alcohol, would raise revenues, provide enjoyment for a portion of the population, and create jobs. A 1963 poll of New Yorkers indicated the same types of sentiments. Every segment of the population—all races, religions, and income and age groups—favored OTB. Even churchgoers, who many had expected to be in opposition, came out in favor, by a margin of 69 percent in favor to 29 percent opposed.
Some trepidation remained. One-fourth of the respondents thought that OTB would have an unfavorable impact on the lower classes, and a third of them offered this as their major reason for opposition. Some saw opportunities for graft in OTB, while others feared an influx of organized crime. Moreover, there appeared to be significant differences in the public’s perceptions regarding wagering at tracks, which seemed like a sport, compared to betting at OTB installations, with the latter somehow suspect. Fully 64 percent of respondents said that they would never bet at an OTB installation; 21 percent thought they might do so less than once a week; another 13 percent expected to be there once a week; and only 2 percent said they would be daily attendees.
OTB thus had strong support. The only real questions were when, how, and under whose management it would take place. A subsidiary question was whether it, like the Irish Sweepstakes, would be connected in some way with a lottery.
This was an appealing notion. Lotteries
Congressman Paul Fino, a Republican from New York, introduced bills for a national lottery every year from 1953 into the early 1960’s. Fino developed the strongest case made to that time for lotteries, noting that not only would funds be raised through them for worthwhile public causes, but there could be tax cuts as well. In addition, organized crime, which controlled illegal betting, would be dealt a crushing blow.
In 1953, the New Hampshire legislature began debating the worthiness of a lottery. Some of the suggested lottery plans involved a tie-in with thoroughbred racing, but most did not. In 1964, a lottery based on numbers drawn at random was introduced. When the federal government declared its intention to tax the proceeds from that lottery, New Hampshire started to base lottery drawings on the results of horse races, which were exempt from the wagering tax. The initial success of this lottery encouraged other states, especially in the Northeast, to accelerate their plans for such gambling.
New York legislators considered such a lottery bill, with the funds generated to be used for hospitals. In 1964, a private concern, the American Sweepstakes Corporation,
In the absence of intervention by racing interests, New York State enacted a law on April 23, 1970, that instituted OTB; the law went into effect in 1971. At the time, proponents claimed that OTB would raise revenues, help the tracks, and lessen organized crime’s grip on sports betting. Racing industry leaders, including the influential Jockey Club, were adamantly opposed to OTB and would have nothing to do with it. This opposition perhaps erased racing’s best hope for prosperity and set the stage for the decline of thoroughbred racing in the United States.
Handled intelligently, OTB might have evolved into the kind of introduction to horse racing that Little League provides for baseball. At attractive locales, providing restaurants, bars, and chairs and tables at which patrons could socialize and watch the races on multiple television sets, OTB parlors might have become akin to social clubs where couples might seek an afternoon’s or evening’s entertainment. Familiarized with racing in this way, the next step then might be a visit to the track itself and the transformation of bystanders into fans. Several industry leaders, most notably journalist Steven G. Crist, recommended the establishment of a string of such OTB installations. Crist and others who supported him were ignored.
As it turned out, the New York OTB parlors were established primarily in storefronts and abandoned restaurants. Rarely cleaned, without chairs or furniture of any kind, and with poor facilities for following races, they attracted a generally seedy clientele concerned with gambling and not at all interested in the sport of horse racing. Moreover, those who wagered at the track got better odds, as did those who used the services of illegal bookies. Finally, middle-class Americans, seeing the kinds of people who frequented the OTB parlors, got the impression that the same types would be found in great numbers at the tracks. This discouraged attendance at the tracks. Rather than introducing people to horse racing and making the sport attractive, OTB actually kept people away. How much OTB harmed track attendance is a matter of contention, but that it had an impact is beyond doubt. The fact that track attendance in New York declined by almost half from 1970 through 1977 can be ascribed largely to OTB.
Nevertheless, OTB was a financial success. The state took the bulk of the earnings and distributed a small amount to the tracks that made wagering possible. Paul Screvane, the state official in charge of OTB, claimed the tracks actually benefited, noting that in its first five years OTB contributed $140 million to racing. Screvane ignored the many millions of dollars invested in the tracks, the horses, and other parts of the sport. In fact, the investment in racing and ancillary activities in the state was more than the total for professional baseball, basketball, and football combined, and these other sports made many times what racing did, by selling television rights.
In 1977, New York Racing Association (NYRA) secretary and vice president James P. Heffernan
The decline in track attendance barely troubled owners of and investors in the leading stables. Owners primarily enjoyed the status and the amenities that came from being at the center of the sport. Large crowds in attendance were unnecessary. Not until the early 1990’s did those few industry leaders who had favored OTB recognize the dangers the Jockey Club had foreseen.
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Clotfelter, Charles, and Philip J. Cook. Selling Hope: State Lotteries in America. Cambridge, Mass.: Harvard University Press, 1989. One of the best discussions available concerning lotteries in the United States. Includes discussion of offtrack betting. -
Crist, Steven. The Horse Traders: Inside the Billion Dollar Breeding Industry That Rules Racing Today. New York: W. W. Norton, 1986. Crist is a premier track journalist who in this book analyzes the economics of the industry. -
Rachlis, Eric, and Blossom Lefcourt, eds. Horse Racing: The Golden Age of the Track. San Francisco: Chronicle Books, 2001. A history of life at the track, with a focus on the Triple Crown races from the 1930’s to the 1960’s. Includes 150 rare photographs. -
Reed, William F. “Fading Fast.” Sports Illustrated, April 22, 1991, 90-96. Reed documents the decline of thoroughbred racing, placing much of the blame on the rise of organized gambling. -
Seligman, Daniel. “Privatize the Bookie.” Fortune, June 3, 1991, 248-249. Suggests that New York State would raise more revenues through OTB if it were privatized. Identifies inefficient management by the state as reducing profits from OTB. -
Wolfson, Louis. The Future Looks Bleak for the Thoroughbred Racing and Breeding Industry. Miami, Fla.: Wolfson, 1986. One of the leading critics of the way offtrack betting developed in New York offers his suggestions for alternatives.
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