Horse racing differs from most sports betting in the US because it predominantly uses pari-mutuel wagering where the house takes a fixed percentage of each wagering pool. Accordingly, the house is incentivized to encourage bettors to place larger bets, since their piece only grows.

True, but it detracts from the enjoyment of everyone else by reducing payouts if algo players come in. Why place a bet on a multi-race jackpot if you know you're going to share it with multiple algo bettors? Why stand in line at the kiosk or sports book to play for fun if you have to wait exceptionally long because an algo bettor is boxing a bunch of picks and taking a long time? The longshots won't pay as much either because an algo will signal a positive EV. They're less likely to buy drinks or racing forms too.

The algo bettors aren't using kiosks at the track. They're using dashboards and monitoring live video feeds. At least in my experience in the US.

Most of the serious younger bettors are feeding daily form PDFs into an LLM and getting analysis, and placing bets using custom apps, rarely using UIs from the larger ADWs (advanced deposit wagering company). Older bettors are using phone wagering for larger bets.

There is never a shortage of kiosks available for casual fans. Most tracks are either owned or partnered with ADWs that all have mobile apps, or sites for placing wagers, and casuals are encouraged to use those as they're more sticky after they leave the track.

Even if algo bettors are influencing the odds because they're throwing money around, the house doesn't care because its percentage cut is the same (parimutual), and the casuals aren't bothered because they can't even tell what's happening.

The totes are the ones analyzing fraud and abuse, and they don't care what tea leaves you read to place bets. They just care about avoiding government oversight and ensuring profits for the ADWs and tracks.

Source, formerly a SWE for an ADW

It doesn't, more efficient lines = better odds for punters. That is why Pinny/Asian books have better odds. The worst experience for gamblers is one with significant government intervention and/or limited professional involvement because there is no price discovery. Bookies don't just return that value to customers, in practice, they spend it on wildly expensive marketing, this means they have to offer lower payouts, and then spend inordinate amounts of time and money stopping professionals picking off their shitty lines.

The inefficiencies eventually get “found out” by the algo traders and they compete away the alpha. Eventually they start losing money because of the house’s edge.

The house loses if all the suckers are driven out, and it’s just algo, because then the algos leave.

So the suckers are the ones injecting liquidity into the market?

There is a professional gambler in Australia[0] who has the betting companies _compete_ for his business and offer him rebates on volume. His firm is double-digit percentage of the Australian betting market and employs ~hundreds of professional traders, developers etc. (it operates no diff to a hedge fund).

As an aside - it was his firm that was responsible for the recent "breaking" of the Texas lottery[1]

[0] https://en.wikipedia.org/wiki/Zeljko_Ranogajec

[1] https://www.houstonchronicle.com/news/investigations/article...

The opposite is true - the betting companies want algo traders to come and make the markets for them. They get reduced fees and bonuses for making the market.

This isn't true. Very few places in the US run their books this way, and those that do limit your bet so most large bettors are still using beards. If you bet with someone who is moderately capable, for example Pinny, they will limit you then use your bets to reverse-engineer your strategy. Asian books are the only place where you can get action and, now, certain syndicates have become so large and dominant that they open lines earlier just for them. If you are only betting on outcomes, it is very hard to beat a line set by syndicate.