Gaming company skips funding for problem gambling efforts

An ongoing review of the state’s charitable gaming laws has sparked concerns over Ainsworth, a company operating nearly half of the historical horse racing terminals that avoids paying money to fund problem gambling services.

While the company’s operation remains compliant with state law, Mark Dell’Orfano, an assistant attorney general at the New Hampshire Department of Justice and member of the state’s gaming commission, worried that it could be problematic within the state’s taxation framework.

“The reason why is because you have one of the market leaders paying almost nothing, and you have some rather small players paying pretty much all of it,” said Dell’Orfano. “If this were a lot of money, we would start facing court challenges over this breakage model.”

In New Hampshire, the Council on Problem Gambling, operating under the administrative umbrella of the state’s Lottery Commission, provides education and assistance to those struggling with gambling addiction. Their funding largely comes from “breakage,” which is similar to the rounding down of payouts to the nearest dime in traditional horse race betting.

For instance, if a bet yields $6.13 in potential winnings, the payout would be rounded down to $6.10, with the remaining 3 cents constituting breakage.

Over the past 12 months, $177,530 has been collected to support problem gambling services. However, the allocated budget for these services amounts to $250,000. When breakage falls short of meeting the budgetary needs, the Lottery Commission steps in to cover the deficit, said John Conforti, the chief compliance officer.

Ainsworth, with 888 terminals, did not generate any breakage, while Exacta, Castle Hill Gaming, and Parimax, with 900, 52, and 49 terminals, respectively, generated $68,055, $92,629, and $13,206.

These companies employ different math models to generate breakage that best suits them, taking advantage of a state law that exempts wagers under one dollar from breakage.

Ainsworth divides wagers of $1 or more into smaller increments. For example, if a $1 wager is placed, it is split into four 25-cent portions.

The money that would typically constitute breakage is instead returned to the prize pool, providing machines that Ainsworth operates with a competitive edge.

The breakage doesn’t go to the game operator, charity or the state in terms of taxes, said Conforti.

“It’s just this lost money. If you can recapture that lost money through programming and put it in the prize pool, it makes your prizes more attractive and makes it far more attractive product and you get more play off of that,” Conforti said.

With this information, the study committee is working with the Lottery Commission to develop a fair methodology that evens the playing field for companies offering software for historical horse racing machines. This initiative comes as many operators gravitate towards Ainsworth or Exacta due to their minimal breakage rates.

At the same time, committee members expressed the need for more clarity on how the allocated funds will be utilized to tackle problem gambling.

“I would like to know what they need for funding like in a year so that we really have like a goal set,” said Giovanna Bonilla, a committee member representing charities involved in the charitable gaming business model. “We’re not just throwing money out to them, that maybe they frankly, don’t need that much.”