How will the NFT transition capture the Horse-racing Market?
The existing racehorse market is about $3 billion annually. The question is how much of that is easily convertible to the NFT world. The racehorse world is in a period of transition across several fronts.
After the 2018 Santa Anita scandal there has been an industry wide effort to reform various aspects of the sport to make it safer for the horses and modernise generally. This process is still ongoing and has by no means found consensus solutions, so this suggests that the industry is ready for change.
The next element is about the impact of the virus on the sport — horse racing went through a shutdown just like every other sport in early 2020, but has emerged as the only betting sport that has still kept going. It’s inherent characteristics meant it wasn’t subject to many of the restrictions other sports have and this allowed it to take a lot of the limelight and investment left over from other betting sports. The online betting industry is already quite mature and this has allowed for integration with the ease of investment, at least at the betting level.
This led to a third dynamic — a backup of investment. The sport is unable to actually handle the amount of money trying to come in and has smashed trading records (example). The virus brought about a much greater willingness to spend money online, and although online betting was already well established, actually making large upfront investments in horses was not something that tended to happen online before. Inspecting the horses and relying on first hand accounts either in person or through trusted agents was always a large part of the industry.
Now, however, this is much less of a factor. People not only have a greater willingness to spend large amounts of money online, but actually many investors have large amounts of cash they want to invest. Many of these people made cash windfalls in the cryptocurrency bull run during 2020–21 and so this backlog of investment correlates with crypto investors looking for opportunities to diversify their portfolios.
This has led to a perfect storm and a red hot racehorse market in 2021. Competition for horses is intense and sellers are scrambling to adapt supply for the next few years already. In fact the investment has been so large it is already considered to have made a permanent change to the industry.
The investment backup due to increased online trading means that there is simply not enough capacity in the industry to handle the amount of money trying to come in. It is important to point out that this investment is entirely independent of anything like NFT or blockchain technology — at this stage.
NFTs can deliver this by allowing people to actually have much more security than before. This is because using a blockchain ledger, with all the new levels of security that it affords in other industries, solves most problems of having to rely heavily on an agent in the past to determine racehorse quality. While it is still necessary to work with accredited traders and trainers, a new level of security inherent in NFT’s allows a much greater trading velocity and leverages the ‘trustless’ quality of blockchain trading more fully than many other iterations.
So we know that the market is ready for new investment. To what extent this investment can be fully captured in an NFT market remains to be seen, but it’s clear that it can allow much greater trading velocity and industry development.
The purpose of NFTs is to liberate value that usually occurs too early on in the process of creating anything to be quantified and actually become tradable. This can be combined with a royalty function, tracing back value through an unlimited number of trades back to the creator, and doing so with a tiny fraction of the time consuming process usually involved in the process. More speculatively, it also bakes in trust to the culture of an industry and this means that when it comes to the laborious process of racehorse trading, investors will be much more prepared to spend their money.