Despite the closure of America's oldest track, horse racing is poised for a comeback.

• After decades of declining interest, horse racing could be poised for resurgence.
• A boom in gambling makes for bigger purses and attracts higher quality horses.
• Investments in facilities and innovations in races could entice new generations of fans.

The oldest horse racetrack in America will shut down after its final race on the last weekend of 2024.

For over 170 years, Freehold Raceway in New Jersey, co-owned by , attempted to secure a casino but was unsuccessful. The track, like many others across the country, faced challenges with dwindling attendance and revenue.

Unfortunately, the racetrack's operations cannot continue under current circumstances, and we do not see a viable solution, stated Howard Bruno, the general manager, in a news release announcing the closure.

There is a possibility that horse racing in the US could experience a revival, thanks to increased investment, advancements in the sport and the rise of legalized online sports betting.

In 2023, the sport contributed over $36 billion to the U.S. economy and supported approximately 500,000 jobs, as stated by the American Horse Council.

The revenue generated from horse racing comes from multiple sources, including ticket sales, hospitality, merchandise purchases, licensing for TV or simulcast, sponsorships, and gambling.

Experts say that it is challenging to obtain dependable figures on global horse-racing revenues due to the private ownership structure and the diverse range of metrics employed. Revenue estimates vary from $44 billion to almost ten times that amount.

The sport is predicted to experience a growth rate of approximately 9% annually in the coming years, according to multiple sources.

Growth in gambling

The revenue generated from gambling is currently the most critical factor driving the growth of the sport.

The handle, or the amount of money wagered on horse races, funds the purses, or the prize money, awarded to winning horses. Additionally, casino-style gambling at facilities associated with race tracks also contributes to the purse funds.

The New York Racing Authority (NYRA) receives approximately $120 million annually from Resorts World New York City, which operates video lottery terminals. This amount is 12% of the net win of Resorts World New York City, and it is contractually obligated to turn it over to NYRA. Of this total, $60 million goes towards purses, $40 million goes towards capital improvements, and $20 million funds operations.

As the purse size increases, the quality of horses improves, which in turn increases the interest in the sport.

In 2022, a record $12 billion was wagered on horse races, and the total purse money awarded also set a new record at $1.25 billion, according to an analysis by the New York Thoroughbred Horsemen's Association (NYTHA).

The surge in sportsbooks and the ease of access to legalized online sports betting are boosting optimism for horse racing's revival. As a result, a new generation of sports fans is being introduced to the sport through innovative betting methods.

In 2024, the leading sportsbook in the country collaborated with the Kentucky Derby for the second time. According to CNBC, the betting volume on Derby day was equivalent to the Super Bowl gambling in the same year.

Crown jewel

The Kentucky Derby is the most significant pure-play, publicly traded company focused on horse racing.

During Derby Week in 2024, the company experienced a substantial rise in adjusted EBITDA due to crucial sponsorships from companies seeking to align themselves with the esteemed event.

The betting audience is growing and becoming more engaged as they learn the sport, particularly on mobile platforms preferred by a younger demographic, according to the company's record wagering numbers.

The Kentucky Derby serves as a blueprint for the future of horse racing, and our operational strategies provide a model for other racing events to follow, as CEO Bill Carstanjen stated.

Bob Baffert, a renowned horse trainer, stated that the Kentucky Derby holds a unique significance as it is a dream race for many: "The Kentucky Derby is a must-see event for everyone. It's a moment to capture on Instagram and share with the world. People come from all over to witness the excitement and take pictures to remember the occasion."

The Triple Crown races and Breeders Cup are high-profile events in the horse-racing schedule, but the majority of competitions attract only a small number of fans.

Interest in more ordinary races has been waning for decades.

Since 2000, the amount of money wagered on pari-mutuel racing has decreased by approximately 55%, when adjusted for inflation, according to the Paulick Report, a website that provides information about the horse-racing industry.

The number of horse owners, trainers, and racing events in the U.S. has significantly decreased over the past two decades, according to NYTHA researchers. As a result, horse racing has become a niche market with a highly engaged audience in 2022.

To increase excitement, Baffert believes horse racing should have more high-profile events with substantial rewards. Additionally, like baseball, it requires superstars to attract weekday viewership.

Despite being the second trainer to win two Triple Crown titles, Baffert may be the most recognized figure in horse racing. However, his recent success has been overshadowed by controversy.

After winning the Kentucky Derby in 2021, Medina Spirit, a horse trained by Baffert, was disqualified due to testing positive for an anti-inflammatory drug that's not permitted on race days. As a result, Baffert was suspended from competing at Churchill Downs for three years.

After admitting responsibility for the failed drug test, Baffert's suspension at Churchill Downs was lifted this summer.

On Thanksgiving Eve, Baffert returned to the renowned racetrack with a 2-year-old horse named Barnes, who had not raced before but had sold for an impressive $3.2 million at an auction in Saratoga, New York, to now-owner Zedan Racing Stables.

According to BloodHorse, the median price for purchasing a race horse is approximately $30,000.

Barnes won by a nose in his debut.

Wall Street funds

Some renowned Wall Street figures are known for identifying or fabricating prospects in the horse racing industry.

Danny Moses, a well-known trader from "The Big Short," is an enthusiastic sports fan, an avid gambler, and a horse investor. Despite his reputation for short calls, he revealed that he has a long-term interest in horses.

Moses predicted that the value of horses will increase due to the larger payouts and purses resulting from the growth of legalized online sports gambling.

Starlight Racing, owned by 14 elite investors including Moses, is headed by former hedge funder Jack Wolf and has produced two Triple Crown winners, Justify in 2018 and Authentic in 2020, both trained by Baffert.

Over the past 22 years, Starlight-owned horses have earned a top prize more than half the time, amassing a total of over $64 million in winnings.

Wolf stated that his background in hedge funds aided him in developing a unique investment strategy for horses, which involves all partners sharing in the potential gains for a group of horses. He emphasized that investors must take into account both their experience and the enjoyment of the sport when setting their expectations for a return on investment.

"Wolf stated that their partnership has taken them around the world and that their investments are focused on this partnership. In terms of concrete financial returns, he acknowledged that they have been successful in some years and not in others. He emphasized that the business is challenging and that it is difficult to make a return on investment, but it is possible."

Wolf is now examining the races themselves. In 2017, he was the CEO of the Pegasus World Cup at Gulfstream Park in Florida. The race established a new standard: Owners paid $1 million each for a spot in the race, which they could use, sell, or lease.

The race's $12 million purse was the richest in the world.

Australia has adopted the "gate race" or "slot race" structure, which offers some of the highest purses worldwide, even though the Pegasus has returned to a traditional race model.

Moses is advocating for more U.S. races to adopt the unique model, with tracks such as Monmouth, Santa Anita and others.

Ramping up regulation

The U.S. horse-racing industry faces a persistent challenge in terms of regulating and overseeing horse welfare, as it has long been perceived as a Wild West in this regard, according to Lisa Lazarus, CEO of the Horseracing Integrity and Safety Authority (HISA). HISA was established by the Federal Trade Commission to ensure the integrity of horse racing across state lines and in various racing facilities.

Lazarus informed CNBC that investors are not interested in having their funds linked to potential rule or ethical problems.

"HISA aims to reassure fans and the public that horse racing operates with integrity and safety at its core by prioritizing consistent and transparent practices. This commitment fosters trust and creates an environment where innovation can thrive, attracting new owners, participants, and fans."

HISA is being sued by powerhouse operators Churchill Downs and the New York Racing Association, or NYRA, over fees.

NYRA is generally supportive of HISA's mission but is protesting the "unlawful, excessive, and disproportionate financial assessments."

HISA's oversight and regulation will attract more investment, similar to that of sports gambling or cryptocurrency, because the rules and legality are clearer.

In 2024, racing horse deaths in the U.S. amounted to 0.9 per 1,000 race starts, according to HISA, which launched a track safety program in July 2022. After the agency standardized doping regulations and enforcement, horse deaths fell from 1.41 per 1,000 race starts in 2020 to an estimated 0.9 per 1,000 race starts in 2024.

According to Lazarus, the U.S. has achieved a death rate below 1 for the first time, which is comparable to the rates in the United Kingdom, Japan, and Australia.

Lawmakers and regulators may be appeased by owners and trainers, preventing backlash and hindering the growth of the sport.

New age of racing

Despite the negative perception of horse treatment in racing, racetrack facilities require renovation to attract fans.

Donna Brothers, NBC Sports racing analyst and commentator, stated that they do not wish to visit a racing facility that has been operational since the 1960s and has outdated infrastructure, including bathrooms.

Churchill Downs, Belmont Park, and Pimlico are all undergoing significant renovations, with Churchill Downs spending $300 million, Belmont Park receiving a $500 million loan from New York state, and Maryland's legislature approving $400 million for Pimlico's overhaul.

The industry must adopt new technology, including mobile apps, to complement physical improvements, according to the brothers.

Monmouth Park Racetrack and Sports Book CEO and chairman Dennis Drazin stated that the sport's full potential can only be achieved through various revenue sources.

Drazin stated that for racetracks to be successful, they must incorporate gaming, entertainment, fan experience, and innovation into their formula.

NYRA has experienced a significant increase in total wagers on its online platform due to expanded national television coverage of its races. Fox Sports, a minority equity owner in NYRA Bets, airs 1,000 hours of horse racing annually, and this coverage has boosted NYRA's total wagers by 127%, from $306 million in 2016 to $696 million in 2023.

TVG, a racing broadcaster, was acquired by FanDuel, making it a leading operator in horse racing alongside NYRA and Churchill Downs' TwinSpires, which licenses its gambling operations to other sportsbooks including FanDuel and DraftKings.

became a naming sponsor for the 2024 Travers Stakes in Saratoga.

Although the Freehold Raceway has shut down, Penn Entertainment stated that they are still considering expanding their gaming operations in conjunction with horse racing.

"Eric Schippers, senior vice president of public affairs for Penn, stated that in states where commercial gaming is not yet approved at racetracks, such as Texas, they continue to educate lawmakers on the success they've seen. He emphasized that gaming has helped to revitalize racing, driving higher purses, enhanced breeding programs, and the preservation of family farms and open space."