Horse racing has had a run of good luck, including record thoroughbred sales numbers, and an increase in wagering dollars, just in time for its annual championship event.
Additionally, serious horse players may avoid paying taxes on most high-paying exotic wagers made at this year’s Breeders’ Cup, to be run Friday and Saturday at Del Mar Thoroughbred Club in the San Diego area.
Wagering on horse races in the U.S. totaled $8.51 billion through the third quarter of this year, up 1.3 percent over last year, according to Equibase, the industry database owned by The Jockey Club. Wagering, or handle, is on track to be up for the third year in a row, according to Equibase numbers.
Total wagering last year was $10.74 billion and has been between $10.5 billion and $11 billion since 2011 in the United States. The 2016 number is down nearly 30 percent from its peak of $15.18 billion in 2003.
“Things have flattened out in the last couple of years,” said Steven Crist, former editor and CEO of The Daily Racing Form. “And for an industry that was in free fall five to 10 years ago, that’s very good news.”
That enthusiasm in recent weeks has appeared to spread to horse ownership. Kentucky’s Keeneland sold 2,555 yearling thoroughbreds for $307.9 million at its annual September Yearling Sale. It was the first time the sale had topped $300 million since 2008.
The average price as well as the median price of horses sold both set records. The average price was $120,487, breaking the record of $112,427 set in 2006, and the median price was $57,000, beating the mark of $50,000.
“In a way, this foretells the future,” said Bob Elliston, Keeneland vice president of racing and sales. “People are making an investment on horses that haven’t run yet. They are doubling down.”
The horses sold at the Yearling Sale over 12 days in September won’t run until 2018 at the earliest, but Crist expects more good news soon, courtesy of a new rule passed by the Internal Revenue Service and the Treasury Department. The rule, which recently took effect, allows horseplayers to keep more of their winnings on wagers that pay $600 or more at odds of more than 300-to-1.
Studies have shown that horse players will rebet, or “churn,” money they have won, and Crist, who has been lobbying for the change since the 1980s, has speculated that the new rule could add as much as $1 billion to the overall U.S. handle on an annual basis, as horseplayers keep, and then bet, more of their money.
“I certainly can’t say with any confidence, ‘Oh, the handle is going to go up a billion dollars next year,’” Crist said. “But the math suggests if you rechurn the amount of money that was previously being withheld, that it could be an increase in that neighborhood,” he said.
In the few weeks since the rule change, the number of required tax forms being filed at tracks has dropped 97 percent to 99 percent, according to horse racing industry sources, and horseplayers are keeping about 90 percent of the money they would otherwise have to give to the IRS.
The NTRA has been working for 10 years and spent about $2 million to get the rule changed, using the Washington, D.C.-based lobbying firm The Alpine Group, said Alex Waldrop, NTRA CEO.
And the change is noticeable, Waldrop said. He gave an example: Someone who makes a $140 Pick Six bet, picking the winners of six consecutive races, would pay taxes only if the ticket paid $42,000. Previously, that same bettor would have had to report the ticket if it paid $600 or more.
“Horseplayers love it,” Waldrop said.
