Horse racing in Nevada is about to get more profitable for casinos. A change in state law and new regulations that go into effect Jan. 1 will modernize how races are disseminated, ending an era that started with mobster Benjamin Siegel in the 1940s.
A disseminator furnishes race and sportsbooks with racing information used to determine winners and payouts. It’s a licensed company that sends official race information and live broadcast signals to licensed racebooks.
“It will modernize our approach (to horse racing) by eliminating disseminators, while making sure all the regulatory issues involved are consistent in their approach,” said Gaming Control Board Chair Mike Dreitzer in backing the regulation change.
“Hopefully, this will benefit Nevada,” added Gaming Control Board member George Assad. “We need to make sure that horse racing can thrive in Nevada and hopefully this will effectuate that concern.”
In the mid-1940s, Siegel was considered the first race disseminator in Nevada. The service he offered to bookmakers included track information, jockeys, morning-line odds, odds updates, and official results and payouts, according to Rusty LeBlanc, chief of the audit division of the Nevada Gaming Control Board.
In 1949, Nevada required disseminators to be licensed to protect the public interest. Wire services used teletype machines to transmit entries, odds, and live race calls. In the early 1980s, live video simulcasts appeared in Las Vegas casinos and in 1983, Caesars Palace signed an exclusive contract with the New York Racing Association, LeBlanc said.
That created concerns that one operator would monopolize racing simulcasts and information and the Nevada Legislature required that all racebooks receive the information fairly and equally, placing disseminators under strict regulation, LeBlanc said. Simulcasts in Nevada spread rapidly with broadcasts from around the country, but the rights fees were high and disputes grew.
In 1987, the Nevada Gaming Commission adopted rules that alleviated the problem, but there was a transformation from 1989 to 1991, when the Nevada Pari-Mutuel Association was formed and the Las Vegas Dissemination Company (LVDC) became the state’s only licensed operator. That led to racetracks sending wagers directly into the track’s parimutuel pools and eliminated the need for casinos to book races and take the risks. Casinos received a commission from the wagers by customers, regardless of the race outcome.
Today, simulcasts are controlled by racetracks and their vendors rather than the disseminator, LeBlanc said. Racetrack websites provide data in real time, but the regulatory structure in Nevada hadn’t kept up with the technology.
Senate Bill 203 eliminated the need for a licensed disseminator and now permits tracks to enter into an agreement with Nevada racebooks to provide live broadcasts and results. All racebooks receive feeds on the same financial terms, removing outdated bidding requirements.
“The simulcast industry wouldn’t exist today without the service rendered by disseminators in the past and their vision of the future,” LeBlanc said. “Nevada’s dissemination rules made sense in the era of teletype machines and early simulcasting. However, they no longer fit today’s technology and racing operations.”
At a Gaming Control Board meeting in December, gaming attorney Marc Rubinstein, appearing on behalf of the Nevada Gaming Commission’s Off-track Pari-Mutuel Wagering Committee and Nevada Pari-Mutuel Association, welcomed the state law that eliminated the need for tracks to enter into an agreement with a licensed disseminator to furnish the live broadcasts and results. He said the changes were sought when the Las Vegas Dissemination Company said it could no longer do business profitability without a substantial increase in fees.
“We did a short-term agreement to increase the fees, but at the same time needed to have somebody come in and replace the LVDC. There were interested parties, but barriers to entry,” Rubinstein said.
The Off-Track Pari-Mutuel Wagering Committee, which includes casino executives, negotiates the rates for agreements with tracks.
“We felt there is no longer a distinction between sports and race wagering from a regulator control point of view and for more than 60 years on the sports side, we’ve never regulated how results are obtained,” Rubinstein said. “We’re trying to put race wagering on the same footing.”
Rubinstein said there’s still an important role in horse racing for a disseminator, or a “systems operator,” that puts the wagers accepted at each racebook into a pool, then sends that en masse into the track pool. Based on the results, money comes back and each book pays out. A reconciliation has to be done because some books have more winning wagers than others, he said.
“We don’t have anyone else in Nevada who’s capable of doing that, and because of the nature of that job, it doesn’t require full-on licensing, which is a deterrent to out-of-state providers,” Rubinstein said. “We wanted to make the barrier to entry more reasonable. We changed it from full licensing to a registered service provider and we eliminated the need for servers doing that computing having to be located in Nevada. Because of that, LVDC put itself up for sale and entered into a sales agreement.”
Earlier this month, Australia-based BetMakers announced it signed an agreement to acquire LVDC for a reported $800,000. The company said the acquisition was expected to contribute $4.5 million in revenue and be at least adjusted EBITDA breakeven in year one.
Todd Roberts, president and owner of the Las Vegas Disseminator Service, told regulators he didn’t like how the process was handled by lawmakers in Carson City and that a group of casino licensees can legislate another licensee out of business overnight with no consultation. Loans and existing contracts with racetracks create damages, he said.
“I’m not saying the regulations didn’t need to be modernized, but the way it came about doesn’t reflect Nevada in a great way, in my opinion,” Roberts said. “After 40 years of service, you would think somebody would say thank you, but instead you get legislated out of business.”
Rubinstein said everything was done in the open and wasn’t a “hatchet job” on Roberts and his family legacy; it was done to save the viability of pari-mutuel wagering in Nevada. “And it had to be done very quickly.”
With the changes in the law, racebooks will now have to contract with the tracks for non-pari-mutuel wagers. Roberts suggested that could ultimately lead to changes in horse wagers offered.
“Book wagering might make a good comeback and Nevada is miles ahead of other jurisdictions that don’t allow it,” Roberts said. “If that model were to be proven by the new systems operator who is an expert in that area, it could be a big win for Nevada.”
Rubinstein said existing contracts prohibit racebooks from taking book wagers on anything offered at the track. Those that can be taken include quinellas, since many tracks don’t offer them. He said there’s interest in going back and expanding horse racing book wagers, even though there’s a risk.
“I think there’s interest from the hub operator to help facilitate that,” Rubinstein said.
