California racing eyes online gambling to survive

LOS ANGELES -- The state's stagnant horse racing industry, facing an aging fan base and declining attendance, needs to dial into the information age if it's to keep up with increasing competition from state lotteries and Indian casinos, industry experts said.

The amount bet on horse racing within California has declined nearly 7 percent during the past 10 years to an estimated $2.7 billion this year. Meanwhile, sales for California lottery games and the state Lotto increased nearly 17 percent during roughly the same period, to $2.5 billion in the 1998-99 fiscal year.

To reverse the trend, the horse racing industry wants state lawmakers to legalize electronic gambling, allowing bets to be placed over the telephone, Internet or other means. Bets can now be placed only at one of 12 tracks around the state or 23 additional venues where races are beamed via satellite.

"With the advent of the Internet, the horse racing industry really needs very, very much to be an active participant in that opportunity to sustain itself," said Anthony Cabot, a Las Vegas attorney and expert on Internet gambling. "If it loses that opportunity with the proliferation of gambling across the United States, the future of the industry is in real doubt."

But events last week in Los Angeles demonstrate the industry could face an uphill run. An online company that allows gamblers to wager on horse races at 33 tracks nationwide voluntarily suspended operations for California customers pending an investigation by the Los Angeles County District Attorney's office.

The investigation centers on whether the company, Youbet.com Inc., was violating state anti-bookmaking laws. It is illegal for California residents to gamble on horse races electronically, although the state Attorney General's office says it's unclear if California residents can place electronic bets on races in other states.

Company officials said Youbet acts only as a conduit, forwarding bets for its 11,500 subscribers to a Pennsylvania company that then places them with the tracks.

Such electronic gambling is a booming industry worldwide. Some 300 Internet gambling sites, many of them based in the Caribbean, generate at least $600 million a year in wagers on sporting events, lotteries, slot machines and other games of chance, Cabot said. Under federal law, Nevada is the only state that allows wagering on sports other than horse racing.

Nine states allow horse racing bets to be placed electronically, some of which have agreements with California tracks to share revenue.

But state horse racing officials say there is a vast reservoir of gamblers who skirt the legal avenues and go unnoticed because of the difficulty in monitoring electronic transactions. They estimate California residents electronically wager from $115 million to $150 million a year on horse races in-state and out.

Legalizing such betting systems here, they say, would keep a chunk of that money at home.

"What we're trying to do through the (electronic) wagering system is stop the bleeding," said Norm Towne, president of the California Association of Thoroughbred Racetracks, an industry group representing Del Mar, Santa Anita and five other racing associations. "We don't have any way to combat that because it's illegal in our state to do it."

State Assemblyman Herb Wesson Jr., D-Los Angeles, has introduced a bill to legalize electronic betting for race tracks.

Towne hopes it will revive an industry on the decline. The number of people betting on horse racing statewide has dropped from a peak of 12 million in 1990 to 9.5 million in 1997, the last year for which statistics are available.

Industry experts point to the proliferation of California Indian casinos, with their quick-action, non-cerebral video slots as the main draw for today's generation of gambler. Horse tracks just haven't kept pace.

"Their customer base is aging out. They're not attracting new players. It's expensive to go to the track, to park, to get the racing form, and it's hard to learn how to do handicapping," said I. Nelson Rose, an expert on gambling law and a professor at Whittier Law School in Costa Mesa.

Critics, however, are wary of making gambling as accessible as online stock trading. Placing bets with the click of a mouse "plays into the hands of compulsive gamblers" and can hook a younger, computer-savvy generation that otherwise might never step foot in a race track, said Tom Tucker, executive director of the Palm Springs-based California Council on Problem Gambling.

"Anytime you increase accessibility to gambling," he said, "you increase problem gambling."

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