CEO
CEO
We’re a B2B provider of online pari-mutuel wagering platforms to licensed off-track betting systems. Our Potent Platform supports both traditional online pari-mutuel wagering on live real-world racing events, as well as our Pari-Mutuel Powered Games, which consist of a number of different types of games which are used to display, in a unique way, the outcome of pari-mutuel wagers placed on live real-world horse races. In both instances, all wagers are placed with a licensed off-track betting system which submits the wagers into the commingled (i.e. combined) wagering pools at the race track where the live real-world horse race being bet on is being run.
I wanted to take the opportunity to explain how our system works, in detail, as we’ve seen some commentators make statements which are wrong, incorrect and inaccurate. Please understand we’re committed to full compliance with all applicable law and regulations, both federal and state. In fact, compliance is in our DNA. I’m a licensed attorney (for decades) and have worked with online gaming since its first start in 1997 – which was online betting on horse racing while I was General Counsel and Executive Vice President at Ladbroke, the British betting company, when they owned numerous racetracks in North America. Then I started a software company to provide the online technology for BetAmerica.com, which we later sold to Churchill Downs, the operator of that world famous race held always on the first Saturday in May – the Kentucky Derby. Then Jason King and I started Potent Systems, to bring new technology and new ideas to the horse racing industry.
But first, a little history about racing and betting on racing, to help you better understand it all, because the game, the law, the regulations are all very different from betting on other sports.
Pari-mutuel wagering is quite unique. It’s not operated the same as sportsbetting, where you’re betting against the house. In pari-mutuel, all wagers of the same type (win, place, show etc.) are combined into a common pool, and the players who pick the winner receive a pro-rata share of what was wagered, less a percentage of the wagers which is retained by the racing industry. The racing industry percentage is used to support racing at the race track being bet on, the horse owners, trainers and breeders, as well as costs of operations, such as live video streaming, systems at the racetracks for combining all wagers from all sources, communications costs and the cost of operating the online betting system.
Back in 1997, Ladbroke (the British betting company) launched, in partnership with a software developer called YouBet, a first system for online betting on horse racing. Ladbroke, relying on Pennsylvania state legislation that permitted electronic remote wagering, offered pari-mutuel wagering on horse racing. Currently, in the US, the vast majority of all wagering on horse racing is placed with someone other than the race track hosting the race which is being bet on, such as an online off-track betting system, another track or land-based off-track betting facility.
Wagering Permissible Statess
While the technology underlying various Pari-Mutuel Powered game systems operate differently, they all share one common idea. Simply put, Pari-Mutuel Powered games are games which display the outcome of pari-mutuel wagers placed on live real-world horse races. The first such games (to my knowledge) were launched by Churchill Downs in October 2012 on a website called Luckity.com. It presented the results of pari-mutuel wagers on live real-world horse races as a numbers game and later as a bingo-style game. Matt Hagerty, at DRF.com, commented that Luckity “provides games that appeal to bettors who enjoy gambling on the lottery, bingo, and slot machines even while staying well within the law by sending those bets into the parimutuel system”. Unfortunately, this first attempt at Pari-Mutuel Powered games was discontinued by Churchill in late 2014, as best as I can tell. You can read more about Luckity here and about its closure here.
The Pari-Mutuel Powered Games developed by Potent, together with the Potent Platform, are currently operated by a licensed off-track betting system, Lien Games Racing LLC, who completed a mobile first launch in April 2019. New games, new features and new functionality have been and are being regularly added since the initial launch.
Here’s the detail on the Pari-Mutuel Powered Games currently offered on the Potent Platform.
We first started with Pari-Mutuel Powered Virtual Racing Games. Each day the Potent Platform matches a series of virtual race games (whether cars, bicycles, motorcycles, or unicorns) to a live real-world horse race. When the virtual race game is offered to the consumer, each runner in the virtual race is matched to a runner in a live real-world horse race, and the odds and wagering information presented for the virtual runner is the same as the odds and wagering information of the corresponding runner in the live real-world horse race. The customer can then select either a win, place, show or exacta bet, the runner and the amount of the bet. The Platform will then use the selection to place the requested pari-mutuel wager on the corresponding runner in the live real-world horse race. Then, when the live real-world race is completed, the virtual race will be streamed to the customer, with the in-the-money runners of the virtual race finishing in the same order as in the live real-world horse race. If the customer picked a winner, they will receive the winnings paid by the wager placed on the corresponding live real-world race runner, just as they would at the race track.
Pari-Mutuel Powered Lottery Games on the Potent Platform consist of the consumer selecting five or six numbers, which correspond to the number of horses running in five or six consecutive live real-world horse races. The consumer pays for each combination of numbers which are selected. Those funds are then used by our licensed off-track betting system to place a pari-mutuel wager on a Pick5 (picking the winner of five consecutive live real-world races) or Pick6 (picking the winner of six consecutive live real-world races) wager type, selecting the runner numbers which correspond to the numbers selected by the consumer. After the live real-world races are run, the results of the Pick5 or Pick6 pari-mutuel wagers are then displayed to the consumer in a fun and entertaining lottery balls format. The play shown to the consumer will display the outcome of the live real-world races and will award the wager winnings to the consumer if the consumer’s selection was a winning combination.
Pari-Mutuel Powered Slots consist of the consumer paying for either four, 12, 28 or 60 plays of a slot game. The licensed off-track betting system utilizes the consumer funds to algorithmically places pari-mutuel wagers on the next live real-world horse race. The results the pari-mutuel wagers are then used to dynamically create a visual Slot game for the consumer to view, which will display to them the winnings received from the pari-mutuel wagers submitted on the live real-world horse race.
Pari-Mutuel Powered Match 3 games consist of the consumer paying for two, 5, 10 or 20 plays of a Match 3 game. The licensed off-track betting system utilizes the consumer funds and algorithmically places pari-mutuel wagers on the next live real-world horse race. The results of the pari-mutuel wagers are then used to dynamically create a virtual Match 3 game for the consumer to view which will display to them the winnings received from the pari-mutuel wagers submitted on the live real- world horse race.
Traditional Pari-Mutuel Wagering can also be offered on the Potent Platform, where the consumer is offered the ability to engage in traditional online pari-mutuel wagering, in which the licensed off-track betting system places a pari-mutuel wager based on the consumer’s selection of the race track, race, bet type, runner and bet amount. The pari-mutuel wager is then placed on the designated live real-world horse race, just as the games wagers are placed on live real-world horse races. The consumer can then watch the live race and receive the winnings resulting from the pari- mutuel wager which was placed.
You can see Potent Platform’s Pari-Mutuel Powered Games, as well as see traditional pari-mutuel wagering on horse racing, by visiting OffTrackBetting.com, where in permitted jurisdictions, you can play on your desktop, or download an iOS or Android application.
Another Example of Pari-Mutuel Powered Games
Another example of Pari-Mutuel Powered games can be found at DerbyJackpot.com, where races are only offered one at a time, and instead of offering standard wagering formats, you pick from among a number of options. With selecting either a “Monkey”, “Donkey”, or “Granny” bet, you pick a horse name, then click “Place Bet”, confirm, and a bet is submitted. With the “Gonzo” bet, you pick 2 or 3 cards from a flop of seven cards. Similar to Potent’s Lottery games, in their Lotto game, called the Pick4Evening or the Pick5Mid-Day, a consumer can select their own numbers, or select a “Random Quick Pick” or “Smart Quick Pick”, both of which select a series of numbers for the customer to confirm. The customer can also pick their own numbers. If the Quick Pick or self-selected numbers match the winners of the designated races, the customer wins. In all cases, the customer’s selections result in one or more pari-mutuel wagers being placed on live real-world horse races.
Unlike fixed-odds betting on other sports, which is governed exclusively by state law, pari-mutuel wagering on horse racing is governed by both federal law and by applicable state law. Under federal law, the Interstate Horse Racing Act (15 U.S.C. Section 3001 et. seq.), was enacted in 1978 to support the practice of being in one state and betting on a horse race running in another state. The new law permitted wagering communications to cross state lines in order to facilitate an individual in one state to bet on the outcome of a horse race in another state.
In 2000, with widespread racing industry support, the Interstate Horse Racing Act was amended to further clarify the Act’s coverage of an individual wagering with an online betting system located an another state. Specifically, the IHRA amendment made it clear that legal pari-mutuel wagers included an “individual legal wager placed or accepted in one State with respect to the outcome of a horserace taking place in another State and includes pari-mutuel wagers, where lawful in each State involved, placed or transmitted by an individual in one State via telephone or other electronic media and accepted by an off-track betting system in the same or another State”. The change was made to clarify the legality of and facilitate pari-mutuel wagering transmitted by an individual in one state, where pari-mutuel wagering is generally legal, to a licensed off-track betting system located in another state. No need for the off-track betting system to get permission from the state where the individual is located, unless such state has passed legislation which requires an out-of-state off-track betting system to also be licensed in such state (and pay a tax!). And though there is some question as to whether this additional state licensing requirement would survive a constitutional challenge, all licensed off-track betting systems, to my knowledge, adhere to this additional licensing where required if they accept customers from such state.
Which makes Pari-Mutuel Powered Games legal. As they are simply pari-mutuel wagers, with the outcomes presented in a different way. It’s legal in every state from which a licensed off-track betting system can accept traditional pari-mutuel wagers.
YES and NO. It’s not different in the way that the games, that is the graphical animations and sounds, simply communicate the outcome of the pari-mutuel wager. BUT THE BIG DIFFERENCE is that in Pari–Mutuel Powered Games, the outcome of the game is based on the results of a pari-mutuel wager made on a live real-world horse race. With wagering on Historical Horse Racing, pari-mutuel wagers are made on previously run horse races. This major difference impacts both the consumer experience and where they may be offered legally. No state currently authorizes online HHR pari-mutuel wagering. To provide a complete picture, Oregon did authorize it, and Luckii.com was launched in December 2020, but Oregon subsequently changed the legislation to prevent online HHR wagering.
Plus, the Interstate Horse Racing Act is not likely to be construed so as to provide a legal path for interstate HHR wagering. Language in the IHRA references a legal pari-mutuel wager “with respect to the outcome of a horserace taking place” in another state. “Taking place” sounds like the wager is contemporaneous with the race being bet on.
Happy to further discuss the topics presented here. I’ll add as needed, or as requests are received.
And don’t hesitate to reach out to me at john@potentsystems.com.
Thanks for reading.
John J. Ford
Chief Executive Officer
Potent Systems, Inc.
john@potentsystems.com
510-207-7455
