BILL ANALYSIS Ó AB 432 Page 1 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 AB 432 Page 2 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. AB 432 Page 3 Analysis Prepared by : Julie Salley-Gray / APPR. / (916) 319-2081