BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 2215
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          AB 2215 (Fuentes)
          As Amended  May 28, 2010
          Majority vote 

          |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                      |     |                          |
          |     |                          |     |                          |
           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  

          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  

           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 (,  


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          TVG, and XpressBet) to provide ADW services to California  

          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  

           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 

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