Is it too late to reverse the troubling trend of CAW entities?
Over a decade ago, I voiced my longstanding concerns about what I called “the cartels”— the term I assigned to computer-assisted wagering entities (CAWs), which first raised danger flags for me when one or more began operating at the Meadowlands.
In my most recent Hoof Beats column, I again raised concerns about major industry missteps. And then, almost on cue, a bettor from Colorado filed a lawsuit in the United States District Court for the Eastern District of New York seeking class certification on behalf of a vast number of allegedly injured Thoroughbred bettors. The foundation of that lawsuit is the current CAW model and its alleged damage to the small, individual bettor. Importantly, that alleged damage is not unique to the Thoroughbred industry — many harness tracks have warmly embraced CAWs to artificially bolster handle numbers while disregarding the potential harm to the sport and its remaining loyal fan base.
Broadly stated, the complaint alleges that the named defendants — Thoroughbred racetrack operators, tote companies and others — collaborated with CAW syndicates to distort betting pools. According to the suit, insider groups were allowed to win at the expense of ordinary bettors through speed, pricing, and data advantages, forming unlawful Racketeer Influenced and Corrupt Organizations (RICO) enterprises and generating guaranteed profits from wagering edges that disadvantage small bettors. The suit seeks treble damages under the RICO Act, restitution of improperly diverted or advantaged pool funds, and injunctive relief to prevent this conduct in the future.
The activities complained of were known only to a select few and thus were virtually hidden from the small bettors — often referred to as “minnows.” The effects of the cartels’ clandestine behavior first became noticeable when minnows observed inexplicable “late drops” in odds after the bell. What they couldn’t see — but what the lawsuit alleges — is that host track operators empowered CAWs to use advanced algorithms and computer systems to analyze real-time betting patterns, identify overlays, and execute thousands of bets in one to two seconds using their unique advantages. Tote companies, also named in the suit, often required about 13 seconds after the bell to calculate and post final odds because of this last-second flood of CAW wagering. A common example: a minnow sees a horse at 5-1, only to watch the odds flash to 5-2 just after the first eighth of a mile.
The complaint further alleges that track operators knowingly facilitated these advantages, enabling CAWs to act as “whales” devouring the minnows, who had unknowingly been seeding the pools for the whales to exploit. This is due in part to CAWs receiving almost immediate access to real-time wagering data from constantly shifting pools, allowing their computer systems to place precision bets unavailable to ordinary players. The small bettor simply has no meaningful opportunity to participate on equal footing.
Compounding this, some tracks reduce the takeout rates they charge CAWs compared to what they charge others and provide them with rebates far higher than those available to the general wagering public. The resulting reduction in wagering revenue harms horsepeople, who, under the Interstate Horse Racing Act and contractual provisions, have a defined stake in those rates.
The suit also alleges that at least two major Thoroughbred track operators hold some ownership interest in certain CAWs. While the complaint does not yet elaborate on the precise nature of these interests, the very possibility is troubling. Whether those interests involve management of CAW wagers or something more substantive will become clearer as litigation proceeds. Regardless, tracks should not be enhancing CAW profitability by discounting the rates charged to them relative to other signal purchasers.
The cumulative benefits afforded to CAWs virtually guarantee that they cannot — indeed, the operative word is cannot — lose money. Their profit comes at the direct expense of the minnows and may present, over the long term, an existential threat to racing handle. The minnows, after all, represent the majority of individuals who sustain interest in our sport. Why would we do anything to disadvantage those who remain willing to wager on our industry? What will be left of the game if CAWs siphon off the money and then simply migrate elsewhere the moment another venture provides similar benefits?
Recent data reveal the staggering scale of CAW-generated handle. While we certainly recognize the need to bolster wagering in the face of competition from sports betting and internet gaming, we must ask whether we should be subjecting our broader fan base to whales operating under the current CAW model. The tracks may appreciate the short-term value of CAW wagering, but they have done so with little regard for the growing damage the model is inflicting on the industry.
Some argue that any curtailment of CAW activity would cause irreparable harm to the sport. I do not share that concern. I am far more worried about the mounting damage being done to the sport and to its broader fan base. And I am not alone: Legislators are beginning to voice their own concerns and recognize the need to prevent further deterioration of racing’s overall health. In response, some tracks have recently restricted CAW betting during the final three minutes before the bell, and there is ongoing discussion about limiting total CAW wagering to a fixed percentage of each projected betting pool.
Whatever the eventual outcome of this newly filed class action lawsuit, the discovery phase is likely to reveal much more about how the cartels operate, their relationships with track management, and the true extent of their impact on ordinary bettors — and, by extension, the industry as a whole. Ideally, these revelations will serve as a guide for legislatures, regulators and track partners to implement long-overdue reforms. Truthfully, the industry should have taken up these efforts more than a decade ago. Hopefully, it is not too late.
This column appears in the January 2026 issue of Hoof Beats, the official magazine of the USTA. To learn more, or to become a subscriber to harness racing’s premier monthly publication, click here.