Rebate shops give back plenty to sport

A pretty good argument can be made that the creation of the so-called rebate shops have been just about the best thing that has ever happened to horse racing.

Updated: January 31, 2005, 4:38 PM ET
By Bill Finley | Special to ESPN.com

A pretty good argument can be made that the creation of the so-called rebate shops have been just about the best thing that has ever happened to horse racing. They have created hundreds of millions in betting handle that otherwise never would have existed and have actually given some high rollers a legitimate chance of beating a game that had been virtually unbeatable.

It's a simple formula. Because the rebate shops may typically collect 15 percent or more from a bet as their portion of the takeout they can afford to give a customer some 10 percent of his action back in the form of a rebate and still be guaranteed a nice profit. Customers who may have lost 4 or 5 percent of the amount they bet are now winning 4 or 5 percent and therefore betting far more than they did in the pre-rebate days. Everyone comes out a winner.

Yet, rather than embrace the concept of rebating, the industry has largely regarded the betting shops as pariahs. Never has the climate been worse than it is now, after a handful of rebate shops were used by a group allegedly involved in a money laundering scheme that came to light in a federal indictment that also linked the group to a milk-shaking incident at Aqueduct.

It has gotten so bad that the New York State Racing and Wagering Board ordered all tracks within the state to stop doing business with 10 rebate shops, essentially cutting off anyone offering a meaningful rebate to its customers.

It's understandable that the industry wanted to immediately start cleaning up the mess left behind by the embarrassing news of the indictments, which were splashed all over the front pages of the New York tabloids. But the way the industry has ganged up on the rebate shops has been a knee-jerk overreaction that could ultimately do the sport a lot more harm than good. Racing can ill afford to throw away its best customers, the big players that have been flocking to rebate shops and pumping money through the windows with abandon.

At the very worst, the three rebate shops involved in the indictment, none of which have been charged with any crimes, are guilty of nothing more than accepting bets from some allegedly disreputable characters without going to lengths to identify them. When the individuals opened accounts and apparently started betting huge amounts the three shops involved, Lakes Region Greyhound, Euro Off-track and one run by the Tonkawa tribe, didn't ask many questions. Who would have? There's not a racetrack in America that would have turned that level of business away or had any reason to do so.

The bad guys in this case were, among other things, involved in a scam whereby they improperly used social security numbers to collect tax refunds on betting losses that weren't due to them. It was all part of an illegal gambling and money laundering operation, but that still doesn't make rebate shops the villain. Allegedly, it was the so-called Uvari Group that was up to no good and not any of the rebaters. The Uvaris allegedly chose betting as the vehicle for a scam, rather than, say, the stock market. Plenty of shady stuff happens with the stock market all the time, but no one has ever suggested we shut down the New York Stock Exchange. Most rebate shops play by the rules and the vast majority of their customers are nothing more than big bettors who are trying to make a legitimate buck.

This is a problem racing is going to have to solve fast. By turning its back on the rebate action, tracks are going to lose millions in handle and lose it quickly. Their next step will have to be to cut purses, which will make exactly no one happy.

No one should have any problem with asking rebaters to be more careful with whom they do business. Everyone should be properly identified and no rebater should be allowed to withhold that information from any track that wants to ask questions. There's no reason the rebate shops should have any problems complying with that request.

Once that's done, it will be time for all of them to get back into business. But don't expect that to happen. The industry has always had a problem with allowing a side business to make handsome profits off the tracks' product.

There's some validity to that complaint, but racing has created its own problems. It sells its simulcast signals too cheaply and didn't show the same foresight that the rebate guys showed when figuring out rebating was a great way to improve business. Racing ought to spend a lot less energy complaining about rebaters and spend a lot more figuring out how the racetracks can get into the rebate business themselves. Put the rebaters out of business by offering the bettor a product (discounted wagers for prime customers) that is every bit as good if not better. Don't kill rebating. Or at least aim the gun somewhere else besides your foot.

• Bill Finley is an award-winning horse racing writer whose work has also appeared in The New York Times, USA Today and Sports Illustrated.
• To contact Bill, email him at wnfinley@aol.com

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