by Bob Carson

Editor’s Note: The USTA website is pleased to present freelance writer Bob Carson and his popular “Outside the Box” features. This monthly series is a menu of outlandish proposals presented with a wink — but the purpose behind them is serious. The views contained in this column are that of the author alone, and do not necessarily represent the opinions or views of the United States Trotting Association.

“Not in New York and not on my watch. Our investigation has found that, unlike traditional fantasy sports, daily fantasy sports companies are engaged in illegal gambling under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling, and misleading New York consumers.” — New York Attorney General Eric Schneiderman

Bob Carson

Why do recent versions of fantasy sports play, such as Draft Kings and Fanduel, appear to be in line for a smack down or a protracted legal war? Three of the key phrases in the New York cease and desist order against these recent online gambling entities are “instant gratification,” “not a game of skill” and “problem gamblers.”

Armies of lawyers are sharpening their pencils in state prosecutor’s offices and in the Draft King offices. In the event that daily fantasy sports mania comes to a screeching halt, products that are NOT instantly gratifying, DO NOT encourage problem gambling, and are DEFINITIVELY based on skill, may be created to fill the Draft King void.

Maybe we can build a few new ones in harness racing.

This idea won’t cost you a penny and won’t hurt you one bit. Your world, where horses race and people wager on the outcome, will remain basically untouched. This concept is a stand-alone, on the table for startup entrepreneurs, who are preferably young, modern and business savvy.

An entrepreneur does not need to know a pacer from a petunia, a stakes race from steak tartar, or an overlay from an overcoat. Knowledge of technology, legislation, banking, markets, algorithms, the law and advertising will be much more useful. Startup costs would be minimal. The downside is not very deep. The upside is high for both the innovator and our tiny, traditional choir. The concept is a mix between a traditional stock market investment, Draft Kings and a Calcutta tournament.

Let’s say that 3,000 yearlings are sold at Harrisburg and Lexington in 2016. The purchase prices on these horses range from $1,000 to $350,000. Only these horses, bought at public auction, will be in the marketplace that will be created.

After the last hammer falls at Harrisburg, the “stock” market will be open for three weeks. Shares will be available on any yearling sold at these sales. The cost per share will be 0.1 percent of the sale price.

For example, let us say that you really like the look and pedigree of Lexington Select Hip No. 208 (Magic Moments) that was consigned by Diamond Creek Farms and sold for $30,000. You decide to enter the “stock market” and buy a share of this young horse. You are not buying into the yearling; you are investing on the potential earnings that Hip No. 208 will generate on the racetrack during the next year.

Using my calculator, well, the calculator is a stretch for my technological chops so I just speak into my magical phone and ask Siri, “What is zero point one percent of $30,000?”

Siri replies sweetly, “‘Zero point one percent of $30,000 is $30.”

Bless her cyber heart, she not only tells me the answer, she shows the calculation on the phone screen. Siri always makes me feel better about my High School GPA which, coincidently, was in the neighborhood of 0.1.

You send in your $30 and receive a certificate that reads: Race Year-2016, One share ($30), Hip No. 208, Lexington Sale, (Magic Moments) pacing filly, purchase price $30,000, Surrender date–Nov. 7, 2017.

Now what exactly have you bought? What are your investment earnings or losses based on? The answer is that the payoff will be determined by total 2-year-old earnings accumulated by Nov. 1, 2017.

If the horse you invested in does not earn significant money as a 2-year-old, your certificate will hold zero value and expire. It is a one year market. Homebred or horses not sold in the earmarked auctions will be disregarded when determining our winners.

The amount paid to investors will be determined by the total amount in the 2016 stock market, the distribution of funds will be predetermined by the operators of the market.

The entrepreneurs could devise a model where hundreds of “stockholders” could receive modest return on investment. The benefit of this model would be that many winning players would return and could become a recruiting army for subsequent yearly markets. On the other hand, the company may go with a market where only one horse receives payment. A successful investor in a market like this would win a jaw dropping, life changing amount.

An argument can be made for each model. Data will eventually show which business model is preferable.

In the beginning, it is likely that most players in this revolutionary marketplace will be existing harness horse fans, but it is difficult to predict because there are millions of people who like to invest in low cost, high yield financial products. It is entirely possible that sharp entrepreneurs in our game will spread the word; they may fan out and find fellow investors to join or use their expertise. We may get investors from outside of our choir, new blood that will follow their investments via races and updates from our stock market with 3,000 individual listings.

It is important to have a great graphic program that makes it simple and fun to follow your “stock.” Is your investment up or down this week? Is your investment performing on the racetrack this week? Was I smart to buy five shares of the highest priced yearling ($350,000) at a cost of $1,750? Or was I really smart to invest a mere $3 for one share of that $3,000 yearling that is tearing up the Grand Circuit? Maybe I should have purchased 10 of those $30 shares ($30,000 yearlings) for $300.

The harness “stock” market company has several selling points:

1. An investment market moves players out of the “gambling” arena. This would be of great value in potential litigation. A strong argument can be made that the selection of a yearling based on pedigree takes the sticky wicket of “cannot be a game of chance” that hampers some sports startups.

2. Market manipulation is virtually impossible because the investments are made very early, over a short window of time, and are locked in for a year; there is no “inside” information on a wobbly yearling.

3. Breeders and racetracks that are struggling fiscally could be incorporated into the market, either with upfront payments or a percentage of the entire market pool. If the “stock” market catches on and mega millions are in the annual stock consignments, the increased revenue would be most welcome.

4. Side markets for breeding farms, or individual stallions, could be eventually implemented; and also bonus money for breeding farms that produced “in the money” finishers.

5. Operators could return nearly all of the invested money to investors in this stock market; the interest on funds deposited in escrow could serve as their profit.

6. Players who know little about harness horse racing would be more than welcome and, unlike complex investments, they have an opportunity in our new marketplace. Learning about racing pedigrees is not rocket science. Watching their harness stock perform would be an improvement over watching a hedge fund icon.

7. People invested in our market would pay attention to our sport. This would be the greatest benefit of all. When summer rolls around and “their” stock hits the track, they may just watch the weekly data that will be posted on the market website. But hopefully, and this is the dream, stockholders will go deeper and immerse themselves in the intricacies of our sport. New fans will discover us.

A final consideration is the test question. Would you invest money in this market?

In my case, the answer is an unequivocal yes. Looking over the sales results, seeing to whom and for what price your hot prospects and dark horses are sold is a fun exercise for many of us. Alas, the theoretical exercise only lasts a few minutes and we go forward, soon forgetting the yearlings we felt were promising.

The opportunity to pay closer attention, to test our yearling selections for a relatively modest amount would weld our beliefs to the real world. Locking our stock selections onto our radar screens would be intriguing; we would have a portfolio of 2-year-old horses to track and root for during training, qualifying and racing.

This would be so much more fun than previous investments, which to me, are like playing poker blindfolded (seriously, for those of you invested in the Enron Platinum Millennium Limited Commodities Fund, do you have any idea where your money is? Or should I say, where your money was?)

Hey, a plunge into this yearling stock market would only be an improvement, and we could watch our money go around.