Kentucky Derby betting integrity harmed by computer-assisted wagering

• Computer-assisted wagering (CAW) uses algorithms and AI to place large, last-second bets on horse races.
• A class-action lawsuit alleges that CAW groups are manipulating betting pools and creating false odds for the average bettor.
• Horse racing needs more transparency and to overhaul deals made to give computer-assisted wagering groups such notable advantages.

Placing a bet on the Kentucky Derby has the same appeal, innocence even, as filling out an NCAA Tournament bracket during March Madness. Picking winners can be based on knowledge or, in the case of many, based solely on liking the horse’s name or jockeys silks, in the same way choosing a basketball team for its mascot or colors sometimes yields success.

There’s something building on the horizon that could ultimately take the fun out of it. 

There’s no joy in finding out the game is rigged.

Computer-assisted wagering (CAW) barely caused a blip two decades ago, but improved technology, and an increase in volume, threatens to destroy the integrity of betting on horse racing by allowing what's akin to insider trading to thrive.

A level playing field is all we ask for, and that is truly becoming a facade with the CAW groups taking over.

Velocity, which is owned by Churchill Downs Inc., is one of the groups of high-volume bettors using CAW. The biggest team is believed to be the Elite Turf Club, owned by the New York Racing Association and The Stronach Group, the latter of which owns Gulfstream Park and Santa Anita Park.

It’s a secret society of sorts, existing and operating outside of perusing a Daily Racing Form to handicap races. They’re tapping into algorithms and artificial intelligence to process data and fluctuations in seconds, then make automated bets on a grand scale. And their ability to wait until the last millisecond to drop bets in odds-changing sums has skewed the scales in their favor.

A class action lawsuit filed in the U.S. District Court for the Eastern District of New York in October includes each of those groups among the defendants. The lawsuit was amended in February to add six more plaintiffs.

The language in the lawsuit didn’t mince words and simply labeled it illegal:

“As a result of this scheme, the betting pools are not being operated lawfully as parimutuel wagering and have become illegal gambling operations. And the “odds” presented to the average bettor at the time a bet is placed are false as a result of the manipulation of the bettors’ pool.”

There’s no application the general public can use to get into the club. There’s not a lot of transparency from the tracks about the groups, either.

The CAW players work covertly, to the extent that there’s not even a way to know how much money they’re dropping in a given pool that may influence the odds in a race.

There needs to be.

Transparency is the first place to start with making CAW acceptable. It’s not that the technology is harmful and should be abandoned. And horse racing tracks certainly don’t want to push away high-volume bettors whose participation helps drive up purses.

But some of their advantages need to be curtailed. Perhaps a separate pool for CAW bets that would manipulate odds? Perhaps a time limit to prevent last-second bets of a certain volume from doing the same? California and New York made the change in win pools already, as they now close CAW bets two minutes before post time. Kentucky needs to explore following suit.

And we haven’t even dipped into how the rebates that CAW players earn have to be torn apart and re-imagined. They get a percentage of their total wagering volume back regardless of results. That allows their betting style to play out more like a trading strategy than handicapping.

As Kentucky Derby 152 approaches, bettors will take to the windows and the kiosks with visions of winning big on the Run for the Roses. 

It’ll draw the old and, hopefully, the not-too-young. It will welcome the patrons who sit on Millionaires’ Row and those with infield tickets. It contrasts women clutching Hermes Birkin bags, standing tall in their best Christian Louboutin red-bottom heels, against disheveled-looking men in the old pair of lucky loafers they only break out for Derby Day.

Through the course of the day’s races leading up to Race 12 and the most exciting two minutes in sports, everyone — no matter their socioeconomic status, education level or ethnicity — has the same chance to hit that trifecta or Pick Six and walk away feeling like a million bucks.

And that level of equality must be protected at all costs.

Reach sports columnist C.L. Brown at [email protected], follow him on X at @CLBrownHoops and subscribe to his newsletter at profile.courier-journal.com/newsletters/cl-browns-latest to make sure you never miss one of his columns.