Research And Design Of Transaction Mechanism To Establish A Horse-Race Betting Market In China

Gambling is the typical market for risk lovers in the modern financial system. With the development of a diversified financial economy, the gambling industry has grown enormously into a legitimate financial industry and has become a financing instrument on public goods of government. Classical financial theory is mainly based on the assumption that economic subjects are risk averters, while research on the gambling market starts from the assumption that all individuals are risk lovers. In China, there exist only two kinds of gambling product, namely, welfare lottery and sports lottery. These are not sufficient to compete with illegal lotteries, so it is important to establish a competitive gambling product to meet the needs of risk-loving consumers. The city of Wuhan has successfully held two horse racing festivals and several national competitions in the Orient horsing center. Furthermore, the universities in Wuhan built national research groups focusing on horse-race betting.At the same time, the first research and practice center of social responsibility of welfare lottery has established in Guangdong University of Finance & Economics. It intends to do research on the classification of gambling products. Unlike the forms of betting that are currently legal, horse racing must be based on commercial forms, as it operates much more efficiently under marketization. Therefore, horse racing is not only operate under the diverse economic and financial environment in China, but also can solve the problem of the non-regulated use of the current welfare fund and the illegal Lottery which led to a lager number of capital outflowsFirstly, the author defines the concept of horse-race betting, and then explains some of the theory and history behind it. The author then analyses interpretations of gambling behavior and the development of sports betting in China. Furthermore, the author compares horse-race betting with other forms of betting, including illegal ones, analyzing the clear comparative advantage of horse-race betting. Finally, according to experiences of horse-race betting in foreign countries and Hong Kong, the author designs a trading mechanism for opening a horse-race betting market in four aspects: form of issuance, types of bets, government regulatory policy and risk-warning mechanism. We expect that the development of horse-race betting can meet the demands of risk-lovers and improve the efficiency of the gambling market.