BILL ANALYSIS
AB 2215
Page 1
ASSEMBLY THIRD READING
AB 2215 (Fuentes)
As Amended May 28, 2010
Majority vote
GOVERNMENTAL ORGANIZATION 21-0 APPROPRIATIONS 17-0
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|Ayes:|Coto, Anderson, |Ayes:|Fuentes, Conway, Ammiano, |
| |Blakeslee, Chesbro, Cook, | |Bradford, Charles |
| |Bradford, Evans, | |Calderon, Coto, Davis, |
| |Galgiani, Hall, | |Monning, Ruskin, Harkey, |
| |Hernandez, Hill, | |Miller, Nielsen, Norby, |
| |Charles Calderon, Ma, | |Skinner, Solorio, |
| |Mendoza, Nestande, V. | |Torlakson, Torrico |
| |Manuel Perez, Portantino, | | |
| |Silva, Torres, Torrico, | | |
| |Tran | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : The intent of this bill is to allow mini-satellite
wagering facilities established under existing law, to use a
modified version of the current Advance Deposit Wagering (ADW)
infrastructure for processing wagers on horse racing.
Specifically, this bill :
1)Provides if the California Horse Racing Board (CHRB)
determines that it is appropriate to allow ADW at
mini-satellite wagering facilities, the CHRB may evaluate the
feasibility of allowing ADW at mini-satellite wagering
facilities and may undertake a study to determine the
appropriate licensing fee sufficient to cover the costs to the
Board for regulation and oversight of ADW activities at
mini-satellite wagering facilities.
EXISTING LAW :
1)Provides for the California Horse Racing Board (CHRB) to
regulate the various forms of horse racing authorized in this
state.
2)Authorizes and defines "Advance Deposit Wagering (ADW)" as a
form of pari-mutuel wagering in which a person "establishes an
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account with a board-approved betting system or wagering hub
where the account owner provides "wagering instructions"
authorizing the entity holding the account to place wagers on
the owner's behalf."
3)Provides that a racing association, a fair, or a satellite
wagering facility may enter into an agreement with an ADW
provider to accept and facilitate the placement of any wager
from a patron at its facility that a California resident could
make through that ADW provider, as defined.
4)Authorizes CHRB to permit licensed racing associations and
fairs to operate satellite-wagering facilities on their
grounds, as specified.
5)Provides that CHRB may approve an additional 15 mini-satellite
wagering sites in the northern, central, and southern racing
zones, as defined.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, there are no significant costs related to this
legislation.
COMMENTS :
Background :
Advance Deposit Wagering : The California horse racing industry
entered into a new era in 2002 with the advent of ADW [AB 471
(Hertzberg), Chapter 198, Statutes of 2001], which allows
customers to deposit funds into an account in order to wager
online and over the telephone. These wagers are commingled into
pools at the host track where the races are run, and within the
pari-mutuel wagering system regulated by CHRB.
ADW was authorized at a time when California racetracks were
beginning to experience declining attendance and handle figures.
The industry believed that making the product easier to access
not only would expose and market horse racing to potential
customers, but also would make it more convenient for the
existing patrons to wager more often. In general, industry
stakeholders agree that ADW has become an important element to
the financial stability of California's horse racing industry.
Currently, the CHRB has approved three companies (Youbet.com,
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TVG, and XpressBet) to provide ADW services to California
customers.
ADW constitutes about $600 million in handle for the horse
racing business. It has become an important segment of the
industry - in fact, it is the only segment that has been
growing.
Wagering at a satellite or mini-satellite : California has
allowed off-track betting in satellite wagering facilities
located at fairs and racing associations throughout the state
for 25 years. In 2007, AB 241 (Price) was enacted to authorize
the creation of 15 additional "mini-satellites" in each racing
zone for a total of 45. The stated intent of this legislation
was to make the sport of horse racing more accessible to
potential California bettors and to increase the handle - the
amount wagered on horse races.
Currently, there are 34 satellite wagering facilities in
California located at live racetracks, fairgrounds and Indian
casinos. Furthermore, 64 additional wagering facilities are
authorized pursuant to SB 241 of 2007 - 44 mini-satellite
facilities (one has been established already) and all fairs that
currently are not operating satellite wagering facilities may do
so either on or off the fairgrounds (within the boundaries of
the fair district). Currently, no satellite wagering facility
can be established within a 20 mile radius of an existing
satellite wagering facility or racetrack without the consent of
the existing wagering facility.
California's first and only mini-satellite facility opened in
July 2009 at the Commerce Casino, a Southern California Card
Club. The facility is currently averaging more than $80,000 in
horse racing wagers per day. It is unclear why there has not
been a broader interest in these facilities. Some speculate
that the 2% commission that is retained by the mini-satellite is
not enticing enough for business owners.
Overall though, California's simulcasting network has seen a
steady decline in the last decade since the approval of ADW.
That drop-off has been accelerated with the recession.
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Purpose of the bill : According to the author, ADW has operated
in California since 2002, and it has been proving to be an
efficient and accountable system employing current technologies
to process wagers on horse racing in California. Unfortunately
though, former customers of California's simulcast network
prefer to stay home to do their daily wagering. California's
racing industry thought that AB 241 (Price), Chapter 594,
Statutes of 2007 would help reverse the customer shift but to
date various obstacles, mostly financial have proved otherwise.
One of the challenges the industry faces relating to the
implementation of mini-satellites (sports bars, restaurants, and
card clubs) is the ability to process wagers in an economically
efficient manner because these facilities generally produce
lower wagering figures than established "brick and mortar"
facilities. Mini-satellite facilities though must bear the same
fixed costs associated with the traditional simulcast model. In
essence, the cost to facilitate a wager is the same no mater
where the wager takes place. Due to this inequality,
California's mini-satellite system has been slow to develop.
This bill is intended to establish another distribution method
for wagering on horse racing by allowing mini-satellite
facilities, to access the current ADW infrastructure. This
measure will make the operation of mini-satellites more viable
from a financial perspective while allowing California's racing
industry to market their product to new and existing patrons.
AB 2215 will assist to make satellite wagering more attractive
to the customer while reducing the migration of daily wagering
from brick and mortar locations to Internet wagering.
Related legislation : SB 1439 (Price) of 2010 modifies
provisions of the Horse Racing Law relative to the authorization
of "mini-satellite" wagering facilities by shrinking the
protective zone for existing satellite wagering facilities, as
specified, from a 20 mile radius to 15 miles. That bill is
currently pending on the Senate Floor.
Prior legislation : AB 765 (Evans), Chapter 613, Statutes of
2007. Reauthorized horse racing's ADW law, which was set to
"sunset" on January 1, 2008, as specified.
AB 241 (Price), Chapter 594, Statutes of 2007. Authorized all
fairs to operate a satellite wagering facility off of the fair
grounds. Authorized the establishment of up to 45
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mini-satellite wagering sites to be operated by private industry
throughout California.
AB 1286 (Richardson), Chapter 202, Statutes of 2007. Authorized
the Alameda County Fair and the Los Angeles County Fair to
operate 2 additional satellite-wagering facilities off the
fairgrounds, with certain approval and conditions, as specified.
AB 401 (J. Horton), Chapter 556, Statutes of 2003. Permits the
California Exposition and State Fair, with the approval of CDFA
and CHRB, to operate a satellite wagering facility within the
boundaries of the fair in addition to any facility otherwise
authorized under current law.
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531
FN: 0004687