The administration and regulation of horse racing betting
Horse racing betting is distinguished from other gambling games by its history, linked to that of breeding and improving different breeds of equines. The French racing system has been very administered since the first organic law of June 2, 1891, which subordinated racing companies to the control of the Ministry of Agriculture and authorized those whose exclusive goal is the improvement of the horse breed, to organize in their racecourses the taking of bets on the model of pari-mutuel betting. In this article, you will discover the essentials to know about the administration and regulation of horse racing betting.
How does the opening up of online gaming to competition threaten the financing of horse racing?
From the beginning, the State planned to collect levies on stakes to finance charities on the one hand, and livestock farming on the other. In addition, the needs of reconstruction after the First World War gave rise to new levies intended to finance the construction of hospitals, drinking water supply networks, and the modernization of agricultural education. In 1930, the Parisian companies received authorization to take bets outside the racecourses; they then grouped together under the name of PMU to manage and collect bettors' stakes. The motivation for gambling then prevailed over the spectacle and sport that attracted the public to the racecourses.
The new levies on stakes were directly linked to the budgets of the ministries concerned and allocated to the various beneficiaries without going through the national budget. In 1941, they already represented 12% of the bets recorded by the PMU. The levies would reach 14.5% in 1956, allowing the creation of new funds for families (1956), for the development of sport (1980) or for community life (1984). In order to maintain control over the PMU, the State imposed a restructuring of the racing institution which resulted in 1983 in the transformation of the PMU into an economic interest group, under State supervision, through which racing companies had to go to organize bets outside the racecourses.
This monopoly allows the PMU to display a significant turnover, among the fifty largest in France in all sectors, and to contribute to the financing of the horse racing industry and the national economy. Indeed, the ten billion euros of bets taken in 2011 brought in more than a billion euros to the State and a little more to the racing industry through the return to the racing companies, including among other things the financing of the operating costs of the PMU. The players in the equestrian world are investing more and more in the best accessories by sourcing from reliable companies such as La Sellerie Française .
However, the development of online games on the internet, which are difficult for the State to tax although easily accessible to players, has disrupted the balance of the system at a time when, moreover, the European Union was telling France that the monopoly of the PMU (and of the Française des Jeux, FDJ) was in total contradiction with the European desire to liberalize services and offer more competition in terms of games. Other European countries were incriminated for the same reasons. Some chose to quickly comply by liberalizing games, completely like Italy and the United Kingdom or more partially like Germany and Belgium, while others such as Portugal and Sweden defended the State monopoly on the grounds of the fight against addiction, committing to containing the amount of stakes.
Given the commercial efforts of the PMU and the FDJ to develop the customer base, it was difficult for France to argue for maintaining the monopoly by putting forward good results in terms of limiting dependency through reasonable and responsible gaming 114. The various arbitrations thus resulted in the law of 12 May 2010 which opens the online gambling and games of chance sector to competition. This law attempts to respond to the demands of the European Union while legalising the existence of private operators through their approval (7 horse racing betting operators were approved as soon as the law was applied). The law imposes a maximum return to players rate of 85%, a direct tax of 7.5% of stakes and a royalty of 8% on the sums committed by bettors to the benefit of the racing companies under the public service mission of improving the equine species and promoting breeding entrusted to them.
This last measure was not accepted at the European level, which opened proceedings against France concerning the compatibility of this fee with European law. Pending the outcome of this review, tax arrangements allow racing companies to recover these amounts. The law opening up the market also allowed the municipalities where racecourses are located to benefit, in proportion to the stakes actually placed on the racecourses, from a 15% fraction of the tax levy on horse racing bets, up to a total of ten million euros and 700,000 euros per municipality. The opening up to competition has not so far penalized the PMU, which has established itself as the leading betting site in France thanks to its successful diversification in a context where online betting only represents around 10% of stakes, but nevertheless shows strong growth (+30% between 2010 and 2011).
More uncertain is the future of the financing of the horse racing industry. Indeed, the potential questioning of the return to the Racing Companies threatens the current operation of the races to the extent that the fee represents 80% of their budget, a budget intended for the organization of the races, the maintenance of the training centers and more particularly for the payment of bonuses and allowances to the breeders and owners of horses. In addition, part of the amount paid to the racing companies makes it possible to finance structuring and innovative projects for the entire equine industry through the ÉPERON fund (nine million euros in 2010). This resource is thus decisive to the extent that, moreover, there is no image right that would allow compensation for the use of the races to support betting.
Regulation to be built between free competition, consumer protection, and financing of the sector
The operation of the racing sector, whose economy is largely based on horse racing betting, is thus caught up in the whirlwind of gaming policy that concerns a wide variety of operators. Its future, to remain based on the historical system, depends first and foremost on maintaining a return of stakes to the Racing Companies. If the 8% share seems "institutionalized" on a French scale, it remains uncertain at European level. The principle of a levy allowing the organization of races and the payment of incentives could certainly be justified to be compatible with European law.
In the best case scenario, France will manage to defend a return of 8% of the stakes for the financing of the missions entrusted to the Racing Companies, possibly reduced in the event of continued growth in horse racing betting. Indeed, maintaining this percentage in the long term can certainly only be defended by the need to maintain a sufficient overall amount to guarantee the operation of the races. Furthermore, the general issue of the regulation of gambling and games of chance is only in its infancy with the 2010 law. The multiple debates on the subject have the virtue of reviving concerns about the social and health impacts of gambling and games of chance.
The desire for openness and stimulation of competition that currently prevails may very well find itself, in the long term, confronted with its consequences in terms of public health and lead to a return to the State monopoly on gaming, in a different form from that which existed in the past, based on control of the issues and rules guaranteeing responsible gaming. In the long term, with the development of powerful global operators, a total liberalization of gaming, including in "physical" points of sale, cannot be ruled out due to the inability to control and tax companies.
For racing, this would mean the total disappearance of financial returns to the industry and the concentration of racing by private companies on a few racecourses that bring together the technical, material and human resources. These possible developments must be put into perspective in relation to the interests of punters. The return to the industry, if it manages to be sustainable, will only ensure its sustainability if the stakes are sufficient. Organizing 18,000 races per year for 30,000 active horses cannot be done without the contribution of punters or players who will have to make choices among the multitude of offers that will be proposed to them.