By Aara Ramesh
The sport of horse racing is a unique one due to its long-standing, storied relationship with wagering. It is one of the few forms of entertainment whose inception and endurance is directly linked to betting on the outcome of bouts. Today it is a multi-billion dollar industry that generates revenues for private enterprises and public entities alike. According to official figures, the total amount bet on horse races in the U.S. in 2020 was $1.093 billion, with the overall purse standing at $869.8 million.
Horse races today are almost exclusively run by three-year-old American thoroughbreds. In the initial years of the sport, the focus was on stamina, rather than speed. After the Civil War and continuing into the present, however, speed became the central core of the events. Most thoroughbreds reach their peak performance at the age of five, but it is rare to find races for horses older than four nowadays.
Before its formalization, horse racing was largely the outcome of a dispute between rich horse owners trying to compete to see who had the faster animal. It was quite a rowdy spectacle, with the owners often riding the horses themselves and attempting to shove each other off the steeds, punching and grabbing at one another, and engaging in not-so-friendly “trash talk.”
Early History & Post Civil War
The concept of modern racing is thought to have begun in the late 1770s in England, when the three classic races (Saint Leger, the Oaks, and the Derby) were established one after the other. Before that, Europeans had brought horse racing over to the colonies. New Market, the first racetrack in North America, was established by the British in 1665 in New York, near what is today Long Island.
With its wide appeal and simple rules, horse racing spread quickly up and down the Atlantic Coast. In its early days, it was the exclusive purview of the rich. In fact, in some places it was legally outlawed as a form of entertainment for the poor. The fledgling country’s first jockey club was established in 1734 in Charleston by rich horse owners and breeders.
In the lead up to the Civil War, horse racing became a microcosm of the larger conflict between the North and the South. Long Island’s Union Race Course set up a race in 1824 between two thoroughbreds, American Eclipse from the North and Sir Henry from the South, with a $24,000 prize on the line. It was a spectacular success. In fact, some consider this to be the country’s first national event.
The Civil War effectively put a halt to horse racing, but the sport picked back up rapidly after the end of the war. In the late 1800s, formalized betting was introduced to the races as another draw for spectators. Most of the early crowds in this era were from the middle and lower classes, mainly people looking for a quick way to make money.
The first race of what would eventually go on to become the American Triple Crown — one of the most prestigious events in horse racing across the world — took place in June 1867. The first Belmont Stakes was run at Jerome Park, though it later moved to Belmont Park and became the third race in the Triple Crown. In May 1873, the first Preakness Stakes was run at the Pimlico Course in Maryland. Later, it would become the second race in the competition. Finally, in 1875, the inaugural edition of the Kentucky Derby was held at the Louisville Jockey Club Course, today known as Churchill Downs. Today, it is arguably the most famous of all the American races and the one that kicks off the Triple Crown. Since 1875, the first year in which all three races were in existence, only 13 horses have won the Triple Crown. The first was in 1919, and the largest gap between wins was a whopping 37 years between Affirmed’s feat in 1978 and American Pharoah’s in 2015.
In February 1894, the Jockey Club was established in New York City. It remains to this day the leading organization in the sport, setting rules and regulations for racing, race courses, and thoroughbred breeding. Since its inception it has maintained “The American Stud Book,” a registry that meticulously records the lineages of every thoroughbred horse imported into North America and the descendants of every horse listed.
In the early decades of the 1900s, however, as the temperance movement started to gather steam, wagering on horse races began to fall out of fashion, with the morality of gambling throwing the future of the sport into doubt. Despite the existence of over 300 race tracks across the country, in 1909, first California and then New York banned betting on horse races. It wouldn’t be until 1933 that the former would legalize it once more.
Post World War I To Present Day
After World War I, Americans started embracing the pari-mutuel betting system, originally introduced in 1908, leading to the sport gaining favor once more. A pari-mutuel model is one in which a common betting pool is established, with the amount shared between those who place bets on the winning horses, with management also getting a cut.
Between 1933 and 1939, 21 states legalized horse race betting as a way to find revenue in the aftermath of the Great Depression. The years just preceding the outbreak of World War II saw some of the biggest turnouts in the sport’s history. In November 1938, the world-famous Seabiscuit beat War Admiral, with an estimated 40 million listeners tuning in to listen to the race. The following year, 75,000 people attended a race to watch Seabiscuit come back to seize victory at the Santa Anita Handicap, an event with a purse of $100,000. In 1973, the renowned horse Secretariat won the Triple Crown, the first time a horse had done so in 25 years.
Today, virtually every aspect of the sport is different, except for its ties to gambling. Originally, horse owners would pool their money to form a purse that would be distributed among them at the end of the race, based on the results. Today, purses are usually made up of the stakes fees that owners pay. Generally, the winner takes 60% of the purse, with the second, third, fourth, and fifth place finishers receiving a diminishing portion of the remaining amount.
Horse racing in the U.S. is almost an entirely private enterprise, with tracks and horses privately owned, with a profit motive. Some revenue is generated for the state as well, through taxes on bets. Trainers and jockeys function as independent contractors. Breeding thoroughbreds is an extremely lucrative endeavor, with the population highly controlled. Artificial insemination is strictly prohibited for thoroughbreds and the mating process must actually be witnessed to confirm it was natural. As a result, the breed is highly valuable.
Unsurprisingly, horse racing has been a hotbed for cheating and corruption. Illegal off-course betting became dominated by organized crime in the 1930s, while race fixing and running ringers were also popular. In the recent past, horses have been subjected to steroid drugs to increase their racing life span in the midst of a packed schedule. The latest development in this is the ongoing saga over whether the latest winner of the Kentucky Derby, Medina Spirit, tested positive for a banned drug or not.
The 2020 betting and purse figures cited at the start of this report reveal that the sport was hit hard by the Covid-19 pandemic. The $1.093 billion bet was a 1% drop off from 2019, when it was $1.013 billion, which itself was 2% lower than it was in 2018. This, however, paled in comparison to the purse. The mere $869.8 million in 2020 was a 25% reduction over 2019’s purse. This is the first time the winnings have fallen below the $1 billion mark since 1999 and the lowest total since 1997.