BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 432
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          Date of Hearing:   May 8, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

            AB 432 (V. Manuel Perez) - As Introduced:  February 15, 2013 

          Policy Committee:                              Governmental  
          Organization Vote:                            17 - 0 

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  

          This bill 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.

           FISCAL EFFECT  

          Because exchange wagering has not been implemented by the state,  
          it is unknown how much the racing associations and racing fairs  
          will receive.  This bill requires a small redistribution of  
          those funds, 0.54% of whatever agreement is made in terms of  
          payment for the racing association. If the racing association  
          receives 25% of the gross income, and that income totals $10  
          million per year, the registering agency (likely the  
          Thoroughbred Breeders Association) would receive $13,500. 

           COMMENTS  

           1)Rationale  . 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 contends this bill simply clarifies that if  
            exchange wagering is implemented in the state, 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  








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            distribution as retained for other types of wagers in current  
            law (on-track, simulcasting, and advance deposit wagering).

           1)Exchange Wagering  . SB 1072 (Ron Calderon), Chapter 283,  
            Statutes of 2010, required the California Horse Racing Board  
            (CHRB) prescribe rules, regulations, and conditions under  
            which exchange wagering may be conducted in California. 

            Exchange wagering is a relatively new form of wagering that  
            was introduced in the United Kingdom in 2000.  Exchange  
            wagering account holders may buy, sell, or back 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. 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.

            To date, exchange wagering has not been implemented 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 in November 2012 by the  
            CHRB.  The CHRB has stated that this will delay the  
            implementation of exchange wagering in California for several  
            months.

           1)Related Legislation  . Currently, AB 1423 (Committee on GO)   
            removes the January 1, 2021 sunset date for the distribution  
            of the revenue collected through exchange wagering and instead  
            sunsets the provisions after the 10th annual distribution of  
            those funds. That bill is currently pending before this  
            committee. 

            SB 1072 (Ron Calderon), Chapter 283, Statutes of 2010,  
            authorized the California Horse Racing 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  
            other states. The bill stated that exchange wagering shall not  
            become operative until May 1, 2012.








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           Analysis Prepared by  :    Julie Salley-Gray / APPR. / (916)  
          319-2081