Prices are high and consignors are happy, but will the other shoe drop?

Through Keeneland-green tinted glasses, racing looks pretty good. Prices at the Keeneland July sale were great, particularly if you were one of the lucky ones consigning a yearling that passed through the sale ring. Average price rose to $621,015, with the third session averaging $855,444. There were 24 yearlings that sold for $1-million or more, the most since 1985. Five sires averaged seven figures.

Some of this fervor can be attributed to the coming record syndication price of Fusaichi Pegasus, who provides the model on how to reward an owner's expensive purchase at a selected sale with performance on the track and stud value. Some of the mania-er, enthusiasm-can be attributed to the overall health of the world economy, some to the health of racing today.

It seems, though, that we have seen this movie before. And we know how it ends. The average yearling price at Keeneland July peaked in 1984 at $544,681 and declined steadily, to $233,325, by 1994, a drop of 57%.

While purses today have a greater relationship to yearling prices than in the 1980s, the opportunity is not that much greater. Average earnings per runner in 1999 was $14,732; in 1984, it was $7,784. In 1999, only 144 horses-about as many horses as sold at the Keeneland July sale-earned more than $300,000.

When the inevitable downturn in the worldwide economy comes, prices paid for yearlings at public auction will decline. If history is a gauge, the decline will take prices well below the heights of 2000.

There is a natural rhythm to the economic cycles in both racing and the economy at large. After all the problems through the 1980s and into the early '90s, these are the good old days.

You cannot fully enjoy them unless you've known the bad times. But you do have to enjoy them while you can.

Racing stymied

The future of racing as one looks out from within the Beltway of Washington, D.C., is not as rosy. On the evening of July 18, while yearlings were selling for the highest average ever in this country, the United States House of Representatives failed to pass the Internet Gambling Prohibition Act, which contained language that ratifies existing interstate gambling via closed-loop systems.

After the House failed to pass the bill with the required two-thirds majority, the New York Times reported in its opening sentence: In a defeat for horse-racing interests and the casino industry ...".

There was little in the article that supported the contention that the failure to pass the bill harms horse racing. The point it could have made but did not was that racing could use some official document that formally legalizes its practice of interstate wagering.

That is an important issue to racing because more than 81% of total wagering in North America today is placed through an interstate wagering system. You can imagine what havoc the federal government would wreak if it ruled one day that such wagers were not legal.

As odd as that sounds, there are some in the U.S. attorney general's office who think interstate pari-mutuel wagering violates the Wire Act, a federal law that prohibits the transmission of bets or information assisting in the placing of bets on any sporting contest in interstate or foreign commerce. The attorney general's office interprets that to include legitimate businesses, notably those involved in interstate pari-mutuel wagering.

The deputy attorneys general forgot to read the second paragraph of Section 1084 (b): "Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting or sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a state where betting on that sporting event or contest is legal into a state in which such betting is legal."

The question is whether racing needs special language in an Internet Gambling Prohibition Act or if it can live without it. While the sport can live without special language, when it comes to regulations it is always prudent to play it safe.

What many in the sport were really hoping, though, was that racing would be one of the few legal gambling activities on the Internet sanctioned by the United States government. That would be an advantage reminiscent of the good old days-the 1940s and '50s, not the '80s.