BILL ANALYSIS Ó
AB 432
Page 1
ASSEMBLY THIRD READING
AB 432 (V. Manuel Pérez)
As Introduced February 15, 2013
Majority vote
GOVERNMENTAL ORGANIZATION 17-0APPROPRIATIONS 17-0
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|Ayes:|Hall, Nestande, Bigelow, |Ayes:|Gatto, Harkey, Bigelow, |
| |Chesbro, Cooley, Gray, | |Bocanegra, Bradford, Ian |
| |Hagman, | |Calderon, Campos, |
| |Roger Hernández, Jones, | |Donnelly, Eggman, Gomez, |
| |Jones-Sawyer, Levine, | |Hall, Ammiano, Linder, |
| |Medina, Perea, V. Manuel | |Pan, Quirk, Wagner, Weber |
| |Pérez, Salas, Torres, | | |
| |Waldron | | |
| | | | |
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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 California Horse Racing Board (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, allows 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.
AB 432
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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 organization include certain specified provisions.
6)Includes language (similar to Advanced Deposit Wagering (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 : According to the Assembly Appropriations
Committee, 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 :
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 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
AB 432
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breed of horse receives the same type of proportion distribution
as retained for other types of wagers in current law (on-track,
simulcasting, and advance deposit wagering).
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
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 and/or 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.
AB 432
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Prior legislation : SB 1072 (Ron Calderon), Chapter 283,
Statutes of 2010. Authorized the 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
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.
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531
FN: 0000632