U.S. President George Bush in October signed into law a new trade bill that, among other things, removed an alien withholding tax that imposed a 30 percent commission on foreign bets placed on horse racing tracks in the United States.
What does the new law mean to tracks and wagering operators both in the United States and abroad? IGN looks to Bill Mummery, the technical director for Betinternet.com, and AmericaTab chief Charlie Ruma, for the answers.
We asked them:
How will the law affect your company's business, and will you make any changes as a consequence of the tax removal?
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"This change in the law will, for the first time, allow the (racing) industry to truly exploit and market its product on a global basis."
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Bill Mummery: The abolition of the alien withholding tax signed into law by President Bush on Oct. 23 has no impact on betting operators within the U.S. taking wagers from U.S. citizens. The U.S. domestic withholding tax rules remain the same
The major opportunity it provides is for the race tracks who currently host their own co-mingled pools.
Until now, the overseas player did not see value in betting on U.S. racing when every dollar of dividend was subject to 30 percent withholding, and the host tracks were understandably concerned about remitting gross dividends overseas since they ultimately could be liable to the IRS. We in the Isle of Man have in the past enjoyed "trusted third-party status" due to our own registration with the IRS.
This change in the law will, for the first time, allow the industry to truly exploit and market its product on a global basis.
Betinternet.com has a state-of-the-art Amtote hub based in the Isle of Man and already has the ability to co-mingle to circa 80 U.S. tracks. These changes give us the opportunity to generate much larger volumes of international wagers from as far away as the Far East, South America and Russia.
Indeed, the first benefits of the tax changes are already feeding through to our hub and, therefore, the host pools.
We shall become even more focused on building the existing relationships with U.S. host tracks and demonstrating our ability to assist in the globalization of their racing product.
We have a world-class hub and associated technologies that we have developed both in secure, resilient data transport, multi currency solutions and interfaces to enable other approved partners to offer the product. We operate from a well regulated and respected jurisdiction, with world-class technical infrastructure and are, therefore, ideally placed to achieve global growth for, and thus with, our U.S. tracks.
Bill Mummery, technical director for Betinternet.com, was responsible for the installation and development of the Amtote hub in the Isle of Man as well as its business model. He has 30 years experience in international business and has been involved in the international gaming industry since 1998. Betinternet.com is an Isle of Man-based Internet sports book operator.
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"We have now tripled or quadrupled the amount of audience that we can expose the product of quality U.S. racing to, and that has got to be enormous."
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Charlie Ruma: In terms of the opportunity for the horse racing industry in the United States, the impact is enormous. America TAB basically has been shut out of major distribution of our signal on an international basis because of this tax. All of a sudden we're now faced with a situation where we broaden our horizons immeasurably. Right now AmericaTab is investigating the laws in 17 different countries-- both Spanish and English speaking--so that we can get an understanding of doing business in those countries, set priorities and start expanding our membership base into foreign nations. That was just totally unavailable to us in the past because of this surtax. It just didn't make sense, and it shut out the wagering possibilities for an American product in those countries.
The impact on the industry is also huge. We have now tripled or quadrupled the amount of audience that we can expose the product of quality U.S. racing to, and that has got to be enormous. I don't think we are going to fully understand what has occurred for a while, but once we do get a sense of the magnitude, we're going to see major U.S. tracks really catering to and designing their products for international simulcasting.
Beulah Park is not a major track, but it is major when it comes to simulcasting because of the timing of our product, and the fact that we are entering the market when most major tracks are closed or most eastern race tracks are closed for the winter. So we look at when other tracks are running, and we try to run on off days so that we are expanding the distribution of our product, and it has been very successful.
Beulah has been involved somewhat in international racing. We have been working with Philadelphia Park's effort in a program called At The Races, which is based in Great Britain. We have been one of their simulcast partners and have been very active in working throughout that program. As a matter of fact, there are times when we know that certain players are going to be watching from Great Britain, and it might be a birthday and we will have our hosts--the twins--actually wish a certain customer happy birthday. Or one twin will take United and the other will take Manchester in terms of soccer games. We are actually catering to and creating markets for people to watch our product. And that is that kind of thing that we are going to have to do as we start moving into the future. Beulah Park's product is not fabulous in terms of the competitiveness and the quality of horses, but we do have full fields and we do have great wagering opportunities, especially for exotics, and we're catering to the crowd that likes to watch and wager on that. We're finding that the British market loves the big fields. When they are watching American racing and they see a race from Hollywood with five horses and one is at 3-2, it doesn't get their attention. It's nice racing, and they're great horses, but it's not a good wagering opportunity. On the other hand, if you are looking at Beulah Park and we've got 12 entries and we've got three or four that are in the 4-1 or 5-1 range, all of a sudden you've got some betting opportunities and possibilities of a big hit in a trifecta or a superfecta wager.
So that's the way we're playing this. Beulah Park--both as its interest in AmericaTab and its interest in all advance deposit wagering companies--is saying we really do welcome the opportunity for these companies to get into international opportunities and expand our signal into international markets. We want to make sure that every single advance deposit wagering company is dealing with us.
Charles J. Ruma is President of Heartland Jockey Club (doing business as Beulah Park) in Grove City, Ohio. He has been directly involved with the operations at Beulah Park (thoroughbred racing) since July 1986. During his involvement, Beulah Park has undergone a $7 million renovation and has expanded its racing dates from 90 days to 152 days. Ruma is a member of the board of directors of the Thoroughbred Racing Association. He was singularly responsible for the approval of a telephone account wagering system, OhioTAB, at Beulah Park in 1994. In 1999, he was successful in convincing the Ohio State Racing Commission to include the Internet as an approved device for addition to the account wagering system. OhioTAB was formed as an Ohio LLC, with Heartland owning two thirds of the company, and River Downs, a Cincinnati racetrack, owning one third. A new company, AmericaTab was formed to become national in scope and attract affiliated sites to join the already successful electronic platform. OhioTAB currently owns 96 percent of AmericaTab. Ruma has also been in the real estate development business for over 35 years and has vast experience in many facets of the industry. Mr. Ruma served as president of the National Association of Homebuilders, a trade association representing over 200,000 companies, in 1999.