British Race-Fixing Scandal May Be the Result of Exchange Wagering

Well that didn't take long. Just one day after we wrote about the potential abuses of betting exchanges, 11 people in Great Britain were found guilty of a race-fixing scandal that was the direct result of exchange wagering.
Among those convicted were four jockeys and two horse owners, who the British Horse Racing Authority said masterminded the plot.
According to online reports, the race-fixing scandal involved 10 races during a seven-month span in 2009. Two of the jockeys—Paul Doe and Greg Fairley—were convicted of deliberately stiffing horses and banished from racing for 12 years. The other jockeys, Kirsty Miczarek and Jimmy Quinn, were each banned for two years for having conspired in the commission of a corrupt practice.
At the heart of the scandal is exchange wagering, a form of head-to-head gambling on horse races that's currently legal in Europe and could be coming to America. In exchange wagering, one side will offer odds on a horse to other bettors, which is essentially betting that the horse is going to lose.
In this latest scandal, two racehorse owners—Maurice Sines and James Crickmore—used bettors to lay odds on their horses and then enlisted jockeys to assure the losing result. It is illegal in Great Britain for owners to offer odds on their horses through betting exchanges. Sims and Crickmore were each banished from racing for 14 years.
This certainly appears to be a cautionary tale for the U.S. racing industry. Exchange wagering has already been approved in two states in the U.S.--California and New Jersey—pending agreements between the exchange operator and the various industry stakeholders, i.e. owners, breeders, trainers, racetrack owners, etc.
Keep in mind that the race-fixing scandal described above is by no means an isolated incident. There have in fact been several such incidents in Europe since the advent of exchange wagering. Such chicanery isn't the only problem with exchange wagering, either.
In the traditional pari-mutuel model, racetrack operators and horse owners each receive a portion of each dollar wagered in order to continue operations. That's how they make their money and provide the wagering opportunities to bettors. With exchange wagering, the company that runs the exchange charges a commission for each bet and makes a small contribution to racetrack operators and purse accounts. Sometimes those that are putting on the show can receive as little as 2 to 3 percent.
Given these details, keeping the snakes in Pandora's box appears to be the only choice for U.S. regulators when it comes to exchange wagering.