No underground market for horse racing
Speculative drive may be in our nature. Speculative drive has been combined with various entertainment activities and games, creating different speculative products. The most notable examples are the lottery, casinos and sports betting. They always accompany concerns and control. But experience has taught us that control only leads to new speculative products or expands the underground market, failing to reduce the overall speculative market.
If these products cannot be abolished, we should make sure they don’t become a part of the underground economy. If they do, minimum regulation wouldn’t be possible. Horse racing is a notable betting product in Korea. Its underground market has surpassed the size of its official market. According to the National Gaming Control Commission, the size of the underground horse-racing market has grown from 3.4 trillion won ($3.22 billion) in 2005 to 11 trillion won in 2011, exceeding the size of the official horse-racing market of 7.7 billion won last year.
Since direct control over the underground market is limited, many developed countries try to absorb the underground market by vitalizing the official market. Off-track betting sites and online sales enhance approachability.
Korea has also introduced off-track betting. However, the off-track betting locations have created controversy, as the speculative nature of sports betting is more highlighted than the positive function. The expansion of the underground horse-racing market encourages negative perception. The positive function of horse racing as entertainment and leisure should be promoted. Then, off-track betting sites will help the local economy and become a high-end cultural space for local residents. In the end, the government and the racing operators need to make efforts to seek understanding of residents.
The government should also offer a portion of profit from off-track betting to the region. In some cases, the government should be willing to change the tax rate and distribution rules. The Korea Racing Authority needs to examine the past operations and pursue management innovation to clear the distrust and concerns of local residents. With efforts of every involved entity, we may someday see a grandfather throwing a birthday party for his grandson at a race track.
*Kim Han-ho, Professor of economics at Seoul National University