BILL ANALYSIS Ó
AB 432
Page 1
Date of Hearing: April 10, 2013
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Hall III, Isadore, Chair
AB 432 (V. Manuel Pérez) - As Introduced: February 15, 2013
SUBJECT : Horse racing: exchange wagering.
SUMMARY : Requires any racing association or racing fair
receiving distributions from any exchange provider's exchange
revenues to distribute a portion of that revenue to the official
registering agency, as specified.
EXISTING LAW :
1) Provides under Article IV, Section 19(b) of the Constitution
of the State of California, that the Legislature may provide for
the regulation of horse races and horse race meetings and
wagering on the results.
2) Provides that CHRB shall regulate the various forms of horse
racing authorized in this state.
3) Requires the CHRB to promulgate rules and regulations
governing the conditions under which exchange wagering may be
conducted, including requiring an annual audit of an exchange
wagering licensee. Also, would allow exchange wagers to be
submitted and accepted by licensed exchange wagering systems in
the same manner as is currently provided for Advanced Deposit
Wagering (e.g., in person, telephone, or Internet). States that
exchange wagering shall not become operative until May 1, 2012.
4) Defines "exchange wagering" as form of pari-mutuel wagering
in which two or more persons place identically opposing wagers
in a given market.
5) Defines "exchange wagering agreement" to mean a written
agreement by and among the applicable exchange wagering
licensee, the applicable racing association or racing fair
conducting live racing in this state and the horsemen's
organization responsible for negotiating purse agreements for
the breed on which exchange wagers are accepted, provided that
the terms and conditions for the permitted use of signal by the
exchange wagering licensee, and the compensation to the
applicable racing association or racing fair and the horsemen's
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organization include certain specified provisions.
6) Includes language (similar to ADW law) relative to
supporting the contracting rights of pari-mutuel clerks that
have been displaced due to the increased automation of the
wagering process, in addition to a specific distribution to the
existing jockey health and benefit welfare fund.
FISCAL EFFECT : Unknown.
COMMENTS :
Purpose of the bill : According to the author, when exchange
wagering was authorized by the Legislature in 2010, the enabling
legislation lacked clarity pertaining to the allotment of
exchange wagering revenues for California's Thoroughbred
breeders.
The author states, that this bill simply clarifies that should
exchange wagering be implemented in California under Business &
Professions Code Section 19617.2, California Thoroughbred
breeders will not see a reduction in breeder, owner and stallion
owner incentives. The intent of the bill is to ensure that each
official registering agency for a specific breed of horse
receives the same type of proportion distribution as retained
for other types of wagers in current law (on-track,
simulcasting, and ADW).
The California Thoroughbred Breeders Association (CTBA) has not
taken a formal position on the implementation of exchange
wagering in California.
Background : SB 1072 (Ron Calderon), Chapter 283, Statutes of
2010, added Business and Professions Code section 19604.5 to
provide that the CHRB shall prescribe rules, regulations, and
conditions under which exchange wagering may be conducted in
California. Exchange wagering is a relatively new form of
wagering which was introduced in the United Kingdom in 2000.
Exchange wagering account holders may buy, sell, or "back" and
"lay" the outcome of horse races in a manner much like day
trading on the stock exchange. The statute defines exchange
wagering as a form of pari-mutuel wagering in which two or more
persons place identically opposing wagers in a given market.
Out-of-state residents, who live in states that allow wagering
on California races, are also allowed to participate in exchange
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wagering.
After a lengthy rule-making process and review, in November
2012, the CHRB unanimously approved 25 rules regulating the
activity while also granting provisional licenses to operators
Betfair and Churchill Downs Incorporated.
Exchange wagering can only commence after a California racetrack
and the horsemen's organization at that racetrack reach an
agreement with one or more exchange wagering companies and the
agreement/operating plan is approved by the CHRB.
Status of Exchange Wagering in California : In March 2013, the
state's Office of Administrative Law (OAL) notified the CHRB
that they disapproved the proposed exchange wagering regulations
for failure to comply with specified standards and procedures of
the California Administrative Procedure Act (APA). The rejected
provisions were approved earlier this year by the CHRB. The
CHRB has stated that this will delay the implementation of
exchange wagering in California for several months. The OAL
cited problems with the manner in which the CHRB would assess
its licensing fee to conduct exchange wagering. OAL also cited
instances in the regulations that did not to comply with
government rule-making standards for clarity, consistency, and
administrative procedures. Rules for exchange wagering cannot
go into effect until approved by the OAL and sent to the
Secretary of State's office for final consideration.
Prior legislation : SB 1072 (Ron Calderon), Chapter 283,
Statutes of 2010. Authorized the California Horse Racing Board
(CHRB) to license entities to operate "exchange wagering"
systems, as defined that accept exchange wagers from individuals
residing either within or outside of this state on horse races
run in California or other states. The bill stated that exchange
wagering shall not become operative until May 1, 2012.
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 471 (Hertzberg), Chapter 198, Statutes of 2001. Allowed
customers to deposit funds into an account in order to wager
online and over the telephone (ADW). ADW wagers are commingled
into pools at the host track where the races are run, and within
the pari-mutuel wagering system regulated by CHRB. The bill
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established a process for the distribution of the revenue
received from ADW to mirror existing distributions for track
commissions, owner purses, and breeder incentive awards.
REGISTERED SUPPORT / OPPOSITION :
Support
California Thoroughbred Breeders Association
Opposition
None on file
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531