BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 2414| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 2414 Author: John A. Perez (D) Amended: 8/31/10 in Senate Vote: 27 - Urgency PRIOR VOTES NOT RELEVANT SENATE GOV. ORGANIZATION COMMITTEE : 10-0, 8/31/10 AYES: Wright, Harman, Calderon, Denham, Florez, Negrete McLeod, Padilla, Price, Wyland NO VOTE RECORDED: Oropeza SUBJECT : Horse racing: exchange wagering SOURCE : Author DIGEST : This bill sunsets the exchange wagering provisions which are contained in SB 1072 (Calderon) on May 1, 2016. The bill is contingent only upon the enactment of SB 1072. ANALYSIS : . Exchange wagering . SB 1072 (Calderon) authorizes the California Horseracing Board (CHRB) to license entities to operate exchange wagering systems that accept "exchange wagers" from individuals residing either within or outside of this state on horse races run in California or in other states, so long as the process is conducted in compliance CONTINUED AB 2414 Page 2 with the federal Interstate Horseracing Act. Exchange wagering is defined as a means of parimutuel wagering in which two or more persons place identically opposing wagers on a horse race. It requires exchange wagering agreements to be entered into by the exchange wagering licensee, the applicable racing association or fair conducting live racing in the state, and the horsemen's organization representing the particular breed currently racing at the meet, and that provides for the contractual terms and conditions specifying the use of the racing signal and the compensation returned to the respective parties to the agreement, audit terms and conditions, and contractual remedies. Exchange wagering on horse racing is currently permitted in England, where it has been reported to have contributed to a double-digit increase in wagering handle as well as helping to appeal to a different segment of the betting public that generally did not gravitate to conventional parimutuel wagering opportunities. Similar legislation has been introduced and is moving through the New Jersey State Legislature as well. Wagering on horse races in California is conducted using the "parimutuel method" in which bettors are betting against each other, with no other entity having an interest or stake in the outcome of the race. In traditional parimutuel wagering, each bettor selects the horse(s) they choose to wager on an outcome (how those individual horses will finish in a race - Win, Place, and Show wagering) or the order of finish for multiple numbers of horses (exotic wagers such as exacta, trifecta, superfecta), and the amount which they desire to wager. The odds on any particular horse are determined by the total amount bet on the race by the individual bettors. The bets made are pooled together and the parimutuel operator is responsible for paying the winning bets from that pool. In parimutuel "exchange wagering" (which involves bettors betting against each other, with no other entity having an interest or stake in the outcome of the race), each bettor again selects a horse, an outcome, and the amount the CONTINUED AB 2414 Page 3 bettor desires to wager. Another bettor can match that wager, choosing to wager the opposite of the original wager. For example, if bettor "A" thinks a horse will win a race and would like to wager $2 to win on that horse at 1-1 odds, bettor "B" can match the wager for $2 at 1-1 odds if bettor B has the opinion that the horse will not win the race. When wagers are matched, they are pooled together and the parimutuel exchange wagering operator is responsible for paying the winning bettors out of the pool (just as is the case in all other forms of parimutuel wagering on horse races in California). Parimutuel exchange wagering is limited to win, place and show wagering. The racing industry derives revenue from traditional parimutuel wagering from a "takeout" or "commission" that is charged on every wager placed in the pool, and from parimutuel exchange wagering from a "commission" that is charged only on a bettor's net winnings on a particular race. In either case, those revenues are shared among the horse owners (purses), the race tracks and the provider of the parimutuel wagering service. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes TSM:DLW:do 8/31/10 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END **** CONTINUED