Kentucky looks to crack down on illegal horse bets

Mike Maloney bets millions of dollars each year on horse races, but a small-dollar bet in which he tried to cheat the wagering system to prove it could be done has racing officials in Kentucky and elsewhere scrambling for solutions.

Maloney spoke Monday to a Kentucky panel that is looking into how best to beef up wagering security at the Kentucky Derby and other races in the state. He said ensuring the integrity of race wagering is so important to bettors, he suspects many would be willing to help pay for an electronic monitoring system through a small percentage of their winnings.

"Our wagering system is flawed," Maloney said. "I think any reasonable person that will take the time to take an honest look at it and find the facts would have to agree with that."

Although some of the proposed solutions to find cheaters are high-tech, requiring the same kind of sophistication Wall Street uses to detect insider traders, Maloney said many of the problems can be eliminated if racetracks simply monitor the exact time their races start. Most don't, he said, so it's impossible to know if bets were placed after the horses had broken from the gate.

Maloney said this practice of "past post" betting was so persistent, he intentionally placed a small simulcast bet last spring at Keeneland for a race occurring in New Orleans. He immediately reported the snafu with the betting window and has become a leading spokesman in the industry for ramping up betting security.

While the practice of illegal betting cheats prominent horse players, Maloney said the appearance of wrongdoing is even worse for casual bettors, who are already intimidated by racing. Unlike identity theft, in which a customer can usually recoup a fraudulent loss that appears on a credit card, there's really no way for a horse bettor to get back a portion of winnings lost to illegal activity or a problem with the system, he said.

"Some of it can be intended larceny," Maloney said. "Some can be incompetence. Some can just be human error."

Past-post betting is one of several illegal wagering activities Kentucky officials plan to hunt through an electronic data firm it is considering hiring. The company, Advanced Monitoring Systems, is led by Isidore Sobkowski, who used similar procedures to find insider traders at Wall Street before being signed on to do some work for the racing industry.

"Bad guys keep on getting smarter," said Sobkowski, who demonstrated the technology at Monday's meeting. "There's no limit to the amount of creativity people who game the system have to do that."

Among the unlawful betting practices Sobkowski says his company can find are large wagers placed early, then withdrawn shortly before post to muddy the odds and suspicious bets against favorites, which often can suggest insider information.

Lisa Underwood, executive director of the Kentucky Horse Racing Commission, said the fee to Kentucky for the service would be about $600,000 a year, paid through a small fee on betting activity.

The panel also discussed whether to implement a system allowing the same button to open the starting gate and close the betting windows.

But Gary Biszantz of Cobra Farm suggested a much easier solution would work. He said all betting should cease at least a minute before horses are loaded into the gate.

"I just think the simple way to do it is the easy way to do it," Biszantz said.

Maloney said high-dollar bettors would have no problem with that but tracks might because it would reduce the number of bets placed on a given race.