BILL NUMBER: AB 1423 ENROLLED
BILL TEXT
PASSED THE SENATE SEPTEMBER 12, 2013
PASSED THE ASSEMBLY MAY 29, 2013
INTRODUCED BY Committee on Governmental Organization (Hall (Chair),
Nestande (Vice Chair), Chesbro, Cooley, Gray, Hagman, Jones,
Jones-Sawyer, Levine, Perea, V. Manuel Pérez, Salas, Torres, and
Waldron)
MARCH 21, 2013
An act to amend Sections 19604 and 19604.5 of the Business and
Professions Code, relating to horse racing.
LEGISLATIVE COUNSEL'S DIGEST
AB 1423, Committee on Governmental Organization. Horse racing:
advance deposit wagering and exchange wagering deductions.
Existing law authorizes advance deposit wagering to be conducted,
with the approval of the California Horse Racing Board, in accordance
with specified provisions of law. Existing law requires a certain
percentage of the amounts distributed for advance deposit wagering
for racing meetings, except for harness racing meetings, to be
deducted and distributed for the establishment and administration of
a defined contribution retirement plan for California-licensed
jockeys who retire on or after January 1, 2009, to supplement
trainer-administered pension plans for backstretch personnel, and for
distribution to a welfare fund established for horsemen and
backstretch personnel, as specified. Existing law also requires a
certain percentage of amounts distributed on advance deposit wagers
for harness racing meetings to be deducted and distributed to a
welfare fund established for the benefit of horsemen and backstretch
personnel, and for any amounts remaining to be utilized for the
benefit of horsemen pursuant to a written agreement between the
racing association that conducts the live harness race meeting and
the organization representing the horsemen, as specified.
This bill would require certain amounts generated at harness race
meetings that are held in trust by the California Exposition and
State Fair to be distributed to the harness racing horsemen who
participated in a certain racing meeting, and to the California
Exposition and State Fair, in accordance with specified percentages
and requirements.
Existing law authorizes exchange wagering, as defined, by an
entity licensed by the board, in accordance with specified provisions
of law. Existing law, until January 1, 2021, on an annual basis,
requires a certain amount of exchange revenues collected by exchange
wagering licensees to be distributed to provide health and welfare
benefits to jockeys and their dependents.
This bill would instead repeal those provisions on January 1
following the year in which the 10th annual distribution of those
funds is made.
By imposing new requirements on licensees under the Horse Racing
Law, a violation of which would be a crime, the bill would impose a
state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 19604 of the Business and Professions Code is
amended to read:
19604. The board may authorize any racing association, racing
fair, betting system, or multijurisdictional wagering hub to conduct
advance deposit wagering in accordance with this section. Racing
associations, racing fairs, and their respective horsemen's
organizations may form a partnership, joint venture, or any other
affiliation in order to further the purposes of this section.
(a) As used in this section, the following definitions apply:
(1) "Advance deposit wagering" (ADW) means a form of parimutuel
wagering in which a person residing within California or outside of
this state establishes an account with an ADW provider, and
subsequently issues wagering instructions concerning the funds in
this account, thereby authorizing the ADW provider holding the
account to place wagers on the account owner's behalf.
(2) "ADW provider" means a licensee, betting system, or
multijurisdictional wagering hub, located within California or
outside this state, that is authorized to conduct advance deposit
wagering pursuant to this section.
(3) "Betting system" means a business conducted exclusively in
this state that facilitates parimutuel wagering on races it
simulcasts and other races it offers in its wagering menu.
(4) "Breed of racing" means as follows:
(A) With respect to associations and fairs licensed by the board
to conduct thoroughbred, fair, or mixed breed race meetings, "breed
of racing" shall mean thoroughbred.
(B) With respect to associations licensed by the board to conduct
quarter horse race meetings, "breed of racing" shall mean quarter
horse.
(C) With respect to associations and fairs licensed by the board
to conduct standardbred race meetings, "breed of racing" shall mean
standardbred.
(5) "Contractual compensation" means the amount paid to an ADW
provider from advance deposit wagers originating in this state.
Contractual compensation includes, but is not limited to, hub fee
payments, and may include host fee payments, if any, for out-of-state
and out-of-country races. Contractual compensation is subject to the
following requirements:
(A) Excluding contractual compensation for host fee payments,
contractual compensation shall not exceed 6.5 percent of the amount
wagered.
(B) The host fee payments included within contractual compensation
shall not exceed 3.5 percent of the amount wagered. Notwithstanding
this provision, the host fee payment with respect to wagers on the
Kentucky Derby, Preakness Stakes, Belmont Stakes, and selected
Breeders' Cup Championship races may be negotiated by the ADW
provider, the racing associations accepting wagers on those races
pursuant to Section 19596.2, and the horsemen's organization.
(C) In order to ensure fair and consistent market access fee
distributions to associations, fairs, horsemen, and breeders, for
each breed of racing, the percentage of wagers paid as contractual
compensation to an ADW provider pursuant to the terms of a hub
agreement with a racing association or fair when that racing
association or fair is conducting live racing shall be the same as
the percentage of wagers paid as contractual compensation to that ADW
provider when that racing association or fair is not conducting live
racing.
(6) "Horsemen's organization" means, with respect to a particular
racing meeting, the organization recognized by the board as
responsible for negotiating purse agreements on behalf of horsemen
participating in that racing meeting.
(7) "Hub agreement" means a written agreement providing for
contractual compensation paid with respect to advance deposit wagers
placed by California residents on a particular breed of racing
conducted outside of California. In the event a hub agreement exceeds
a term of two years, then an ADW provider, one or more racing
associations or fairs that together conduct no fewer than five weeks
of live racing for the breed covered by the hub agreement, and the
horsemen's organization responsible for negotiating purse agreements
for the breed covered by the hub agreement shall be signatories to
the hub agreement. A hub agreement is required for an ADW provider to
receive contractual compensation for races conducted outside of
California.
(8) "Hub agreement arbitration" means an arbitration proceeding
pursuant to which the disputed provisions of the hub agreement
pertaining to the hub or host fees from wagers on races conducted
outside of California provided pursuant to paragraph (2) of
subdivision (b) are determined in accordance with the provisions of
this paragraph. If a hub agreement arbitration is requested, all of
the following shall apply:
(A) The ADW provider shall be permitted to accept advance deposit
wagers from California residents.
(B) The contractual compensation received by the ADW provider
shall be the contractual compensation specified in the hub agreement
that is the subject of the hub agreement arbitration.
(C) The difference between the contractual compensation specified
in subparagraph (B) and the contractual compensation determined to be
payable at the conclusion of the hub agreement arbitration shall be
calculated and paid within 15 days following the arbitrator's
decision and order. The hub agreement arbitration shall be held as
promptly as possible, but in no event more than 60 days following the
demand for that arbitration. The arbitrator shall issue a decision
no later than 15 days following the conclusion of the arbitration. A
single arbitrator jointly selected by the ADW provider and the party
requesting a hub agreement arbitration shall conduct the hub
agreement arbitration. However, if the parties cannot agree on the
arbitrator within seven days of issuance of the written demand for
arbitration, then the arbitrator shall be selected pursuant to the
Streamlined Arbitration Rules and Procedures of the Judicial
Arbitration and Mediation Services, or pursuant to the applicable
rules of its successor organization. In making the hub agreement
arbitration determination, the arbitrator shall be required to choose
between the contractual compensation of the hub agreement agreed to
by the ADW provider or whatever different terms for the hub agreement
were proposed by the party requesting the hub agreement arbitration.
The arbitrator shall not be permitted to impose new, different, or
compromised terms to the hub agreement. The arbitrator's decision
shall be final and binding on the parties. If an arbitration is
requested, either party may bring an action in state court to compel
a party to go into arbitration or to enforce the decision of the
arbitrator. The cost of the hub agreement arbitration, including the
cost of the arbitrator, shall be borne in equal shares by the parties
to the hub agreement and the party or parties requesting a hub
agreement arbitration. The hub agreement arbitration shall be
administered by the Judicial Arbitration and Mediation Services
pursuant to its Streamlined Arbitration Rules and Procedures or its
successor organization.
(9) "Incentive awards" means those payments provided for in
Sections 19617.2, 19617.7, 19617.8, 19617.9, and 19619. The amount
determined to be payable for incentive awards under this section
shall be payable to the applicable official registering agency and
thereafter distributed as provided in this chapter.
(10) "Licensee" means any racing association or fair licensed to
conduct a live racing meet in this state, or affiliation thereof,
authorized under this section.
(11) "Market access fee" means the amount of advance deposit
wagering handle remaining after the payment of winning wagers, and
after the payment of contractual compensation, if any, to an ADW
provider. Market access fees shall be distributed in accordance with
subdivision (f).
(12) "Multijurisdictional wagering hub" means a business conducted
in more than one jurisdiction that facilitates parimutuel wagering
on races it simulcasts and other races it offers in its wagering
menu.
(13) "Racing fair" means a fair authorized by the board to conduct
live racing.
(14) "Zone" means the zone of the state, as defined in Section
19530.5, except as modified by the provisions of subdivision (f) of
Section 19601. For these purposes, the central and southern zones
shall together be considered one zone.
(b) Wagers shall be accepted according to the procedures set forth
in this subdivision.
(1) No ADW provider shall accept wagers or wagering instructions
on races conducted in California from a resident of California unless
all of the following conditions are met:
(A) The ADW provider is licensed by the board.
(B) A written agreement allowing those wagers exists with the
racing association or fair conducting the races on which the wagers
are made.
(C) The agreement referenced in subparagraph (B) shall have been
approved in writing by the horsemen's organization responsible for
negotiating purse agreements for the breed on which the wagers are
made in accordance with the Interstate Horseracing Act (15 U.S.C.
Sec. 3001 et seq.), regardless of the location of the ADW provider,
whether in California or otherwise, including, without limitation,
any and all requirements contained therein with respect to written
consents and required written agreements of horsemen's groups to the
terms and conditions of the acceptance of those wagers and any
arrangements as to the exclusivity between the host racing
association or fair and the ADW provider. For purposes of this
subdivision, the substantive provisions of the Interstate Horseracing
Act shall be taken into account without regard to whether, by its
own terms, that act is applicable to advance deposit wagering on
races conducted in California accepted from residents of California.
(2) No ADW provider shall accept wagers or wagering instructions
on races conducted outside of California from a resident of
California unless all of the following conditions are met:
(A) The ADW provider is licensed by the board.
(B) There is a hub agreement between the ADW provider and one or
both of (i) one or more racing associations or fairs that together
conduct no fewer than five weeks of live racing on the breed on which
wagering is conducted during the calendar year during which the
wager is placed, and (ii) the horsemen's organization responsible for
negotiating purse agreements for the breed on which wagering is
conducted.
(C) If the parties referenced in clauses (i) and (ii) of
subparagraph (B) are both signatories to the hub agreement, then no
party shall have the right to request a hub agreement arbitration.
(D) If only the party or parties referenced in clause (i) of
subparagraph (B) is a signatory to the hub agreement, then the
signatories to the hub agreement shall, within five days of execution
of the hub agreement, provide a copy of the hub agreement to the
horsemen's organization responsible for negotiating purse agreements
for the breed on which wagering is conducted for each race conducted
outside of California on which California residents may place advance
deposit wagers. Before receipt of the hub agreement, the horsemen's
organization shall sign a nondisclosure agreement with the ADW
provider agreeing to hold confidential all terms of the hub
agreement. If the horsemen's organization wants to request a hub
agreement arbitration, it shall send written notice of its election
to the signatories to the hub agreement within 10 days after receipt
of the copy of the hub agreement, and shall provide its alternate
proposal to the hub and host fees specified in the hub agreement with
that written notice. If the horsemen's organization does not provide
that written notice within the 10-day period, then no party shall
have the right to request a hub agreement arbitration. If the
horsemen's organization does provide that written notice within the
10-day period, then the ADW provider shall have 10 days to elect in
writing to do one of the following:
(i) Abandon the hub agreement.
(ii) Accept the alternate proposal submitted by the horsemen's
organization.
(iii) Proceed with a hub agreement arbitration.
(E) If only the party referenced in clause (ii) of subparagraph
(B) is a signatory to the hub agreement, then the signatories to the
hub agreement shall, within five days of execution of the hub
agreement, provide written notice of the host and hub fees applicable
pursuant to the hub agreement for each race conducted outside of
California on which California residents may place advance deposit
wagers, which notice shall be provided to all racing associations and
fairs conducting live racing of the same breed covered by the hub
agreement. If any racing association or fair wants to request a hub
agreement arbitration, it shall send written notice of its election
to the signatories to the hub agreement within 10 days after receipt
of the notice of host and hub fees. It shall also provide its
alternate proposal to the hub and host fees specified in the hub
agreement with the notice of its election. If more than one racing
association or fair provides notice of their request for hub
agreement arbitration, those racing associations or fairs, or both,
shall have a period of five days to jointly agree upon which of their
alternate proposals shall be the official proposal for purposes of
the hub agreement arbitration. If one or more racing associations or
fairs that together conduct no fewer than five weeks of live racing
on the breed on which wagering is conducted during the calendar year
during which the wager is placed does not provide written notice of
their election to arbitrate within the 10-day period, then no party
shall have the right to request a hub agreement arbitration. If a
valid hub agreement arbitration request is made, then the ADW
provider shall have 10 days to elect in writing to do one of the
following:
(i) Abandon the hub agreement.
(ii) Accept the alternate proposal submitted by the racing
associations or fairs.
(iii) Proceed with a hub agreement arbitration.
The results of any hub agreement arbitration elected pursuant to
this subdivision shall be binding on all other associations and fairs
conducting live racing on that breed.
(F) The acceptance thereof is in compliance with the provisions of
the Interstate Horseracing Act (15 U.S.C. Sec. 3001 et seq.),
regardless of the location of the ADW provider, whether in California
or otherwise, including, without limitation, any and all
requirements contained therein with respect to written consents and
required written agreements of horsemen's groups to the terms and
conditions of the acceptance of the wagers and any arrangements as to
the exclusivity between the host racing association or fair and the
ADW provider.
(c) An advance deposit wager may be made only by the ADW provider
holding the account pursuant to wagering instructions issued by the
owner of the funds communicated by telephone call or through other
electronic media. The ADW provider shall ensure the identification of
the account's owner by using methods and technologies approved by
the board. Any ADW provider that accepts wagering instructions
concerning races conducted in California, or accepts wagering
instructions originating in California, shall provide a full
accounting and verification of the source of the wagers thereby made,
including the postal ZIP Code and breed of the source of the wagers,
in the form of a daily download of parimutuel data to a database
designated by the board. The daily download shall be delivered in a
timely basis using file formats specified by the database designated
by the board, and shall include any and all data necessary to
calculate and distribute moneys according to the rules and
regulations governing California parimutuel wagering. Any and all
reasonable costs associated with the creation, provision, and
transfer of this data shall be borne by the ADW provider.
(d) (1) (A) The board shall develop and adopt rules to license and
regulate all phases of operation of advance deposit wagering for ADW
providers operating in California, including advance deposit
wagering activity that takes place within a minisatellite wagering
facility. The board may recover any costs associated with the
licensing or regulation of advance deposit wagering activities in a
minisatellite wagering facility either directly from the ADW provider
or through an appropriate increase in the funding formula devised by
the board pursuant to paragraph (1) of subdivision (a) of Section
19616.51.
(B) The board shall not approve an application for an original or
renewal license as an ADW provider unless the entity, if requested in
writing by a bona fide labor organization no later than 90 days
before licensing, has entered into a contractual agreement with that
labor organization that provides all of the following:
(i) The labor organization has historically represented employees
who accept or process any form of wagering at the nearest horse
racing meeting located in California.
(ii) The agreement establishes the method by which the ADW
provider will agree to recognize and bargain in good faith with a
labor organization that has demonstrated majority status by
submitting authorization cards signed by those employees who accept
or process any form of wagering for which a California ADW license is
required.
(iii) The agreement requires the ADW provider to maintain its
neutrality concerning the choice of those employees who accept or
process any form of wagering for which a California ADW license is
required whether or not to authorize the labor organization to
represent them with regard to wages, hours, and other terms and
conditions of employment.
(iv) The agreement applies to those classifications of employees
who accept or process wagers for which a California ADW license is
required whether the facility is located within or outside of
California.
(C) (i) The agreement required by subparagraph (B) shall not be
conditioned by either party upon the other party agreeing to matters
outside the requirements of subparagraph (B).
(ii) The requirement in subparagraph (B) shall not apply to an ADW
provider that has entered into a collective bargaining agreement
with a bona fide labor organization that is the exclusive bargaining
representative of employees who accept or process parimutuel wagers
on races for which an ADW license is required whether the facility is
located within or outside of California.
(D) Permanent state or county employees and nonprofit
organizations that have historically performed certain services at
county, state, or district fairs may continue to provide those
services.
(E) Parimutuel clerks employed by racing associations or fairs or
employees of ADW providers who accept or process any form of wagers
who are laid off due to lack of work shall have preferential hiring
rights for new positions with their employer in occupations whose
duties include accepting or processing any form of wagers, or the
operation, repair, service, or maintenance of equipment that accepts
or processes any form of wagering at a racetrack, satellite wagering
facility, or ADW provider licensed by the board. The preferential
hiring rights established by this subdivision shall be conditioned
upon the employee meeting the minimum qualification requirements of
the new job.
(2) The board shall develop and adopt rules and regulations
requiring ADW providers to establish security access policies and
safeguards, including, but not limited to, the following:
(A) The ADW provider shall use board-approved methods to perform
location and age verification confirmation with respect to persons
establishing an advance deposit wagering account.
(B) The ADW provider shall use personal identification numbers
(PINs) or other technologies to assure that only the accountholder
has access to the advance deposit wagering account.
(C) The ADW provider shall provide for withdrawals from the
wagering account only by means of a check made payable to the
accountholder and sent to the address of the accountholder or by
means of an electronic transfer to an account held by the verified
accountholder or the accountholder may withdraw funds from the
wagering account at a facility approved by the board by presenting
verifiable account identification information.
(D) The ADW provider shall allow the board access to its premises
to visit, investigate, audit, and place expert accountants and other
persons it deems necessary for the purpose of ensuring that its rules
and regulations concerning credit authorization, account access, and
other security provisions are strictly complied with. To ensure that
the amounts retained from the parimutuel handle are distributed
under law, rules, or agreements, any ADW provider that accepts
wagering instructions concerning races conducted in California or
accepts wagering instructions originating in California shall provide
an independent "agreed-upon procedures" audit for each California
racing meeting, within 60 days of the conclusion of the race meeting.
The auditing firm to be used and the content and scope of the audit,
including host fee obligations, shall be set forth in the applicable
agreement. The ADW provider shall provide the board, horsemen's
organizations, and the host racing association with an annual
parimutuel audit of the financial transactions of the ADW provider
with respect to wagers authorized pursuant to this section, prepared
in accordance with generally accepted auditing standards and the
requirements of the board. Any and all reasonable costs associated
with those audits shall be borne by the ADW provider.
(3) The board shall prohibit advance deposit wagering advertising
that it determines to be deceptive to the public. The board shall
also require, by regulation, that every form of advertising contain a
statement that minors are not allowed to open or have access to
advance deposit wagering accounts.
(e) In order for a licensee, betting system, or
multijurisdictional wagering hub to be approved by the board as an
ADW provider, it shall meet both of the following requirements:
(1) All wagers thereby made shall be included in the appropriate
parimutuel pool under a contractual agreement with the applicable
host track.
(2) The amounts deducted from advance deposit wagers shall be in
accordance with the provisions of this chapter.
(f) After the payment of contractual compensation, the amounts
received as market access fees from advance deposit wagers, which
shall not be considered for purposes of Section 19616.51, shall be
distributed as follows:
(1) An amount equal to 0.0011 multiplied by the amount handled on
advance deposit wagers originating in California for each racing
meeting shall be distributed to the Center for Equine Health to
establish the Kenneth L. Maddy Fund for the benefit of the School of
Veterinary Medicine at the University of California at Davis.
(2) An amount equal to 0.0003 multiplied by the amount handled on
advance deposit wagers originating in California for each racing
meeting shall be distributed to the Public Employment Relations Board
to cover costs associated with audits conducted pursuant to Section
19526 and for purposes of reimbursing the State Mediation and
Conciliation Service for costs incurred pursuant to this section.
However, if that amount would exceed the costs of the Public
Employment Relations Board, the amount distributed to that board
shall be reduced, and that reduction shall be forwarded to an
organization designated by the racing association or fair described
in subdivision (a) for the purpose of augmenting a compulsive
gambling prevention program specifically addressing that problem.
(3) An amount equal to 0.00165 multiplied by the amount handled on
advance deposit wagers that originate in California for each racing
meeting shall be distributed as follows:
(A) One-half of the amount shall be distributed to supplement the
trainer-administered pension plans for backstretch personnel
established pursuant to Section 19613. Moneys distributed pursuant to
this subparagraph shall supplement, and not supplant, moneys
distributed to that fund pursuant to Section 19613 or any other
provision of law.
(B) One-half of the amount shall be distributed to the welfare
fund established for the benefit of horsemen and backstretch
personnel pursuant to subdivision (b) of Section 19641. Moneys
distributed pursuant to this subparagraph shall supplement, and not
supplant, moneys distributed to that fund pursuant to Section 19641
or any other provision of law.
(4) With respect to wagers on each breed of racing that originate
in California, an amount equal to 2 percent of the first two hundred
fifty million dollars ($250,000,000) of handle from all advance
deposit wagers originating from within California annually, an amount
equal to 1.5 percent of the next two hundred fifty million dollars
($250,000,000) of handle from all advance deposit wagers originating
from within California annually, an amount equal to 1 percent of the
next two hundred fifty million dollars ($250,000,000) of handle from
all advance deposit wagers originating from within California
annually, and an amount equal to 0.50 percent of handle from all
advance deposit wagers originating from within California in excess
of seven hundred fifty million dollars ($750,000,000) annually, shall
be distributed as satellite wagering commissions. Satellite wagering
facilities that were not operational in 2001, other than one each in
the Cities of Inglewood and San Mateo, and two additional facilities
each operated by the Alameda County Fair and the Los Angeles County
Fair and their partners and other than existing facilities that are
relocated, are not eligible for satellite wagering commission
distributions under this section. The satellite wagering facility
commissions calculated in accordance with this subdivision shall be
distributed to each satellite wagering facility and racing
association or fair in the zone in which the wager originated in the
same relative proportions that the satellite wagering facility or the
racing association or fair generated satellite commissions during
the previous calendar year. If there is a reduction in the satellite
wagering commissions pursuant to this section, the benefits therefrom
shall be distributed equitably as purses and commissions to all
associations and racing fairs generating advance deposit wagers in
proportion to the handle generated by those associations and racing
fairs. If a satellite wagering facility is permanently closed other
than for renovation or remodeling, or if a satellite wagering
facility is unwilling or unable to accept all of the
signals that are available to that
facility, the commissions otherwise provided for in this subdivision
that would be payable to that facility shall be proportionately
reduced to take into account the time that satellite wagering is no
longer conducted by that facility, or the payment of those
commissions shall be eliminated entirely if the facility is
permanently closed, and, in either case, the satellite wagering
commissions not paid shall be proportionately redistributed to the
other eligible satellite wagering facilities. For purposes of this
section, the purse funds distributed pursuant to Section 19605.72
shall be considered to be satellite wagering facility commissions
attributable to thoroughbred races at the locations described in that
section.
(5) After the distribution of the amounts set forth in paragraphs
(1) to (4), inclusive, the remaining market access fees from advance
deposit wagers originating in California shall be as follows:
(A) With respect to wagers on each breed of racing, the amount
remaining shall be distributed to the racing association or fair that
is conducting live racing on that breed during the calendar period
in the zone in which the wager originated. That amount shall be
allocated to that racing association or fair as commissions, to
horsemen participating in that racing meeting in the form of purses,
and as incentive awards, in the same relative proportion as they were
generated or earned during the prior calendar year at that racing
association or fair on races conducted or imported by that racing
association or fair after making all deductions required by
applicable law. Notwithstanding any other law, the distributions with
respect to each breed of racing set forth in this subparagraph may
be altered upon the approval of the board, in accordance with an
agreement signed by the respective associations, fairs, horsemen's
organizations, and breeders organizations receiving those
distributions.
(B) If the provisions of Section 19601.2 apply, then the amount
distributed to the applicable racing associations or fairs shall
first be divided between those racing associations or fairs in direct
proportion to the total amount wagered in the applicable zone on the
live races conducted by the respective association or fair.
Notwithstanding this requirement, when the provisions of subdivision
(b) of Section 19607.5 apply to the 2nd District Agricultural
Association in Stockton or the California Exposition and State Fair
in Sacramento, then the total amount distributed to the applicable
racing associations or fairs shall first be divided equally, with 50
percent distributed to applicable fairs and 50 percent distributed to
applicable associations.
(C) Notwithstanding any provisions of this section to the
contrary, with respect to wagers on out-of-state and out-of-country
thoroughbred races conducted after 6 p.m., Pacific time, 50 percent
of the amount remaining shall be distributed as commissions to
thoroughbred associations and racing fairs, as thoroughbred and fair
purses, and as incentive awards in accordance with subparagraph (A),
and the remaining 50 percent, together with the total amount
remaining from advance deposit wagering originating from California
out-of-state and out-of-country harness and quarter horse races
conducted after 6 p.m., Pacific time, shall be distributed as
commissions on a pro rata basis to the applicable licensed quarter
horse association and the applicable licensed harness association,
based upon the amount handled in state, both on- and off-track, on
each breed's own live races in the previous year by that association,
or its predecessor association. One-half of the amount thereby
received by each association shall be retained by that association as
a commission, and the other half of the money received shall be
distributed as purses to the horsemen participating in its current or
next scheduled licensed racing meeting.
(D) Notwithstanding any provisions of this section to the
contrary, with respect to wagers on out-of-state and out-of-country
nonthoroughbred races conducted before 6 p.m., Pacific time, 50
percent of the amount remaining shall be distributed as commissions
as provided in subparagraph (C) for licensed quarter horse and
harness associations, and the remaining 50 percent shall be
distributed as commissions to the applicable thoroughbred
associations or fairs, as thoroughbred and fair purses, and as
incentive awards in accordance with subparagraph (A).
(E) Notwithstanding any provision of this section to the contrary,
the distribution of market access fees pursuant to this subparagraph
may be altered upon the approval of the board, in accordance with an
agreement signed by all parties whose distributions would be
affected.
(g) A racing association, a fair, a satellite wagering facility,
or a minisatellite wagering facility may enter into an agreement with
an ADW provider to accept and facilitate the placement of any wager
from a patron at its facility that a California resident could make
through that ADW provider. Deductions from wagers made pursuant to
the agreement shall be distributed in accordance with the provisions
of this chapter governing wagers placed at that facility, except that
the board may authorize alternative distributions as agreed to by
the ADW provider, the operator of the facility accepting the wager,
the association or fair conducting that breed of racing in the zone
where the wager is placed, and the respective horsemen's
organization.
(h) Any issues concerning the interpretation or application of
this section shall be resolved by the board.
(i) Amounts distributed under this section shall be proportionally
reduced by an amount equal to 0.00295 multiplied by the amount
handled on advance deposit wagers originating in California for each
racing meeting, except for harness racing meetings, provided that the
amount of this reduction shall not exceed two million dollars
($2,000,000). The method used to calculate the reduction in
proportionate share shall be approved by the board. The amount
deducted shall be distributed as follows:
(1) Fifty percent of the money to the board to establish and to
administer jointly with the organization certified as the majority
representative of California-licensed jockeys pursuant to Section
19612.9, a defined contribution retirement plan for
California-licensed jockeys who retired from racing on or after
January 1, 2009.
(2) The remaining 50 percent of the money shall be distributed as
follows:
(A) Seventy percent shall be distributed to supplement the
trainer-administered pension plans for backstretch personnel
established pursuant to Section 19613. Moneys distributed pursuant to
this subparagraph shall supplement, and not supplant, moneys
distributed to that fund pursuant to Section 19613 or any other
provision of law.
(B) Thirty percent shall be distributed to the welfare fund
established for the benefit of horsemen and backstretch personnel
pursuant to subdivision (b) of Section 19641. Moneys distributed
pursuant to this subparagraph shall supplement, and not supplant,
moneys distributed to that fund pursuant to Section 19641 or any
other provision of law.
(j) Amounts distributed under this section shall be proportionally
reduced by an amount equal to 0.00295 multiplied by the amount
handled on advance deposit wagers originating in California for each
harness racing meeting, provided that the amount of this reduction
shall not exceed five hundred thousand dollars ($500,000). The method
used to calculate the reduction in proportionate share shall be
approved by the board. The amount deducted shall be distributed as
follows:
(1) First to the welfare fund established for the benefit of
horsemen and backstretch personnel, pursuant to subdivision (b) of
Section 19641, and administered by the organization representing the
horsemen participating in the race meeting, in the amount requested
by the welfare fund. Moneys distributed pursuant to this paragraph
shall supplement, and not supplant, moneys distributed to that fund
pursuant to Section 19641 or any other provision of law.
(2) The amount remaining, if any, shall be utilized for the
benefit of the horsemen as specified in a written agreement between
the racing association that conducts the live harness race meeting
and the organization representing the horsemen participating in the
race meeting.
(k) Notwithstanding subdivision (j), amounts generated that were
deducted from amounts handled on advance deposit wagering for harness
racing meetings pursuant to subdivision (i), as that section read
before the enactment of subdivision (j), that have been held in trust
by the California Exposition and State Fair shall be distributed as
follows:
(1) Fifty percent to the harness racing horsemen who participated
in the racing meeting that concluded June 16, 2012, in the form of
purses.
(2) Fifty percent to the California Exposition and State Fair in
the form of commissions.
SEC. 2. Section 19604.5 of the Business and Professions Code is
amended to read:
19604.5. (a) As used in this section, the following definitions
apply:
(1) "Back" means to wager on a selected outcome occurring in a
given market.
(2) "Board" means the California Horse Racing Board.
(3) "Corrective wager" means an exchange wager placed by the
exchange wagering licensee in a given market, under circumstances
approved by the board, in order to address the impact on that market
of the cancellation or voiding of a given matched wager or a given
part of a matched wager.
(4) "Exchange" means a system operated by an exchange wagering
licensee in which the exchange wagering licensee maintains one or
more markets in which persons may back or lay a selected outcome.
(5) "Exchange revenues" means all charges, fees, income, payments,
revenues, and deductions of any kind assessed or collected by, or
paid or delivered to, an exchange wagering licensee in connection
with the submission of any exchange wagers to the exchange wagering
licensee by residents of California and residents of jurisdictions
outside of California on the results of horse races conducted in
California, and by residents of California on the results of horse
races conducted outside of California.
(6) "Exchange wagers" means wagers submitted to an exchange
wagering licensee to be posted in a market on an exchange.
(7) "Exchange wagering" means a form of parimutuel wagering in
which two or more persons place identically opposing wagers in a
given market.
(8) "Exchange wagering account" means the account established with
an exchange wagering licensee by a person participating in exchange
wagering. An exchange wagering account may only be established or
maintained with an exchange wagering licensee by a natural person.
(9) "Exchange wagering agreement" means 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 the
signal by the exchange wagering licensee, and the compensation to the
applicable racing association or racing fair and the horsemen's
organization, include provisions for, but are not limited to, all of
the following:
(A) Calculation of any and all amounts earned and payable to the
applicable racing association or racing fair and horsemen's
organization.
(B) Audit rights and conditions.
(C) Duration terms.
(D) Contractual remedies.
(10) "Exchange wagering licensee" means a person located within or
outside of California that is authorized to offer exchange wagering
to residents of California pursuant to this section.
(11) "Identically opposing wagers" means wagers in which one or
more persons offer to lay a selected outcome at the same price at
which one or more persons offer to back that same outcome, with the
amount subject to the lay being proportionately commensurate to the
amount subject to the back.
(12) "Lay" means to wager on a selected outcome not occurring in a
given market.
(13) "Market" means, in relation to a given horse race or a given
set of horse races, a particular outcome that is subject to exchange
wagering as determined by an exchange wagering licensee.
(14) "Matched wager" means the wager that is formed when two or
more persons are confirmed by the exchange operator as having placed
identically opposing wagers in a given market on the exchange.
(15) "Net winnings" means the aggregate amounts payable to a
person as a result of that person's winning matched wagers in a pool
less the aggregate amount paid by that person as a result of that
person's losing matched wagers in that pool.
(16) "Parimutuel" means any system whereby wagers with respect to
the outcome of a horse race are placed with, or in, a wagering pool
conducted by an authorized person, and in which the participants are
wagering with each other and not against the person conducting the
wagering pool.
(17) "Person" means any individual, partnership, corporation,
limited liability company, or other association or organization.
(18) "Pool" means the total of all matched wagers in a given
market.
(19) "Price" means the odds for a given exchange wager.
(20) "Unmatched wager" means a wager or portion of a wager placed
in a given market within an exchange that does not become part of a
matched wager because there are not one or more available exchange
wagers in that market with which to form one or more identically
opposing wagers.
(21) "Zone" has the same meaning as defined in Section 19530.5, as
modified by subdivision (f) of Section 19601, except that for
purposes of this section the combined central and southern zones
shall be considered one "central/southern" zone.
(b) Notwithstanding any other law, rule, or regulation, exchange
wagering by residents of California and residents of jurisdictions
outside of California on the results of horse races conducted in
California, and by residents of California on the results of horse
races conducted outside of California, shall be lawful provided that
all of the following apply:
(1) Exchange wagering shall only be conducted by an exchange
wagering licensee pursuant to a valid exchange wagering license
issued by the board.
(2) No exchange wagering licensee shall accept exchange wagers on
races conducted in California from a resident of California or a
resident of a jurisdiction outside California, or conducted outside
California from a resident of California, unless an exchange wagering
agreement exists allowing these wagers.
(3) Exchange wagering shall be conducted pursuant to and in
compliance with the provisions of the Interstate Horseracing Act of
1978 (15 U.S.C. Sec. 3001 et seq.), as amended, this section, all
applicable federal laws, and rules and regulations promulgated by the
board pursuant to this section.
(4) An exchange wagering licensee may only offer exchange wagering
on thoroughbred horse races, whether these thoroughbred races are
conducted within or outside of this state, to persons whose primary
residence address is in the northern zone of this state if it has an
exchange wagering agreement with (A) the racing association or racing
fair located in the northern zone authorized by the board to conduct
a live thoroughbred racing meeting in accordance with the provisions
of Article 4 (commencing with Section 19480) at that time, or during
the calendar period, when the exchange wagering licensee is offering
exchange wagering to persons whose primary residence is in the
northern zone of this state, and (B) the horsemen's organization
responsible for negotiating purse agreements for a live thoroughbred
racing meeting.
(5) An exchange wagering licensee may only offer exchange wagering
on thoroughbred horse races, whether these thoroughbred races are
conducted within or outside of this state, to persons whose primary
residence address is in the central/southern zone of this state if it
has an exchange wagering agreement with (A) the racing association
or racing fair located in the central/southern zone authorized by the
board to conduct a live thoroughbred racing meeting in accordance
with the provisions of Article 4 (commencing with Section 19480) at
that time, or during the calendar period, when the exchange wagering
licensee is offering exchange wagering to persons whose primary
residence is in the central/southern zone of this state, and (B) the
horsemen's organization responsible for negotiating purse agreements
for a live thoroughbred racing meeting.
(6) An exchange wagering licensee may only offer exchange wagering
on quarter horse races, whether these quarter horse races are
conducted within or outside of this state, to persons whose primary
residence address is in this state if it has an exchange wagering
agreement with (A) the racing association or racing fair located in
the state authorized by the board to conduct a live quarter horse
racing meeting in accordance with the provisions of Article 4
(commencing with Section 19480) at that time, or during the calendar
period, when the exchange wagering licensee is offering exchange
wagering to persons whose primary residence is this state, and (B)
the horsemen's organization responsible for negotiating purse
agreements for the live quarter horse racing meeting.
(7) An exchange wagering licensee may only offer exchange wagering
on standardbred horse races, whether these standardbred horse races
are conducted within or outside of this state, to persons whose
primary residence address is in this state if it has an exchange
wagering agreement with (A) the racing association or racing fair
located in the state authorized by the board to conduct a live
standardbred racing meeting in accordance with the provisions of
Article 4 (commencing with Section 19480) at that time, or during the
calendar period, when the exchange wagering licensee is offering
exchange wagering to persons whose primary residence is this state,
and (B) the horsemen's organization responsible for negotiating purse
agreements for the live standardbred racing meeting.
(8) Exchange wagers are submitted to, and accepted by, an exchange
wagering licensee in person, by direct telephone call, or by
communication through other electronic media.
(c) A person shall not be permitted to open an exchange wagering
account, or place an exchange wager, except in accordance with
federal law, this section, and rules and regulations promulgated by
the board. Only natural persons with valid exchange wagering accounts
may place wagers through an exchange. To establish an exchange
wagering account, a person shall be at least 18 years of age and a
resident of California or of another jurisdiction within which the
placement of exchange wagers would not be unlawful under United
States federal law or the law of that jurisdiction.
(d) The board shall approve, as part of the exchange wagering
licensee's application for an exchange wagering license, security
policies and safeguards to ensure player protection and integrity,
including, but not limited to, provisions governing the acceptance of
electronic applications for persons establishing exchange wagering
accounts, location and age verification confirmation for persons
establishing exchange wagering accounts, the use of identifying
factors to ensure security of individual accounts, and the
requirements for management of funds in exchange wagering accounts.
An exchange wagering licensee may not accept a wager, or series of
wagers, if the results of the wager or wagers would create a
liability for the exchange wagering accountholder that is in excess
of the funds on deposit in the exchange wagering account of that
holder.
(e) Notwithstanding any other law, rule, or regulation:
(1) The board shall have full power to prescribe rules,
regulations, and conditions under which exchange wagering may be
conducted in California consistent with this section, including the
manner in which exchange wagers may be accepted and the requirements
for any person to participate in exchange wagering.
(2) Before promulgating rules, regulations, and conditions under
which exchange wagering may be conducted in California, the board
shall consider studies or comments submitted by interested parties on
the impact of exchange wagering on parimutuel betting and the
economics of the California horse racing industry to assist the board
in developing rules, regulations, and conditions for exchange
wagering that are in the best interest of the public and the
California horse racing industry. The board may set a timeframe for
comments and studies to be submitted by interested parties and for
the board to consider the studies and comments so as to allow
sufficient time, in the discretion of the board, to allow for the
promulgation of rules, regulations, and conditions for exchange
wagering and the issuance of licenses for exchange wagering before
May 1, 2012.
(3) Notwithstanding paragraph (1), the board shall adopt the
following rules:
(A) An owner, authorized agent, trainer, jockey, jockey's agent,
driver, or stable employee shall not place an exchange wager to lay
any entrant in a horse race that is owned in whole or part by that
owner or the owner represented by that authorized agent, trained by
that trainer or stable employee, ridden by that jockey or the jockey
represented by that jockey's agent, or driven by that driver.
(B) No exchange wagers shall be placed on a market after the
conclusion of a live race. Exchange wagering on previously run races
is prohibited.
(C) The exchange wagering licensee shall provide a person with
information on the race, including the track where the race will take
place and the names of the participating horses, before the person
may place an exchange wager.
(D) The exchange wagering licensee shall require the person making
the exchange wager to select the specific race and horse for the
wager. The use of automatic, quick-pick, or similar features to aid
in the placing of a wager shall be prohibited.
(E) The results of a wager shall not be displayed through the use
of video or mechanical reels or other slot machine or casino game
themes, including, but not limited to, dice games, wheel games, card
games, and lotto.
(4) The board shall have full power to prescribe rules,
regulations, and conditions under which all exchange wagering
licenses are issued or renewed in California, including requiring an
annual audit of the exchange wagering licensee's books and records
pertaining to exchange wagering, and to revoke, suspend, or refuse to
renew a license pursuant to the authority granted to the board in
this chapter.
(5) The board may reasonably require licensure or registration of
officers or directors of any exchange wagering licensee.
(6) The board may recover any costs associated with the licensing
or regulation of exchange wagering from the exchange wagering
licensee by imposing an assessment on the exchange wagering licensee
in an amount that does not exceed the reasonable costs associated
with the licensing or regulation of exchange wagering. Funds received
pursuant to this subdivision shall be deposited in the Horse Racing
Fund, to be available upon appropriation by the Legislature for the
sole purpose of regulating exchange wagering.
(f) (1) The board shall not approve an application for an original
or renewal license as an exchange wagering licensee unless the
entity, if requested in writing by a bona fide labor organization no
later than 90 days before licensing, has entered into a contractual
agreement with that labor organization that provides all of the
following:
(A) The labor organization has historically represented employees
who accept or process any form of wagering at the nearest horse
racing meeting located in California.
(B) The agreement establishes the method by which the exchange
wagering licensee will agree to recognize and bargain in good faith
with a labor organization that has demonstrated majority status by
submitting authorization cards signed by those employees who accept
or process any form of wagering for which a California exchange
wagering license is required.
(C) The agreement requires the exchange wagering licensee to
maintain its neutrality concerning the choice of those employees who
accept or process any form of wagering for which a California
exchange wagering license is required and whether or not to authorize
the labor organization to represent them with regard to wages,
hours, and other terms and conditions of employment.
(D) The agreement applies to those classifications of employees
who accept or process wagers for which a California exchange wagering
license is required, whether the facility is located within or
outside of California.
(2) (A) The agreement required by paragraph (1) shall not be
conditioned by either party upon the other party agreeing to matters
outside the requirements of paragraph (1).
(B) The requirement in paragraph (1) shall not apply to an
exchange wagering licensee that has entered into a collective
bargaining agreement with a bona fide labor organization that is the
exclusive bargaining representative of employees who accept or
process parimutuel wagers on races for which an exchange wagering
license is required, whether the facility is located within or
outside of California.
(3) Permanent state or county employees and nonprofit
organizations that have historically performed certain services at
county, state, or district fairs may continue to provide those
services.
(4) Parimutuel clerks employed by racing associations or fairs or
employees of exchange wagering licensees who accept or process any
form of wagers who are laid off due to lack of work shall have
preferential hiring rights for new positions with their employer in
occupations whose duties include accepting or processing any form of
wagers, or the operation, repair, service, or maintenance of
equipment that accepts or processes any form of wagering at a
racetrack, satellite wagering facility, or exchange wagering licensee
licensed by the board. The preferential hiring rights established by
this paragraph shall be conditioned upon the employee meeting the
minimum qualification requirements of the new job.
(g) Notwithstanding any other law, rule, or regulation, an
exchange wagering licensee shall not be required to include any pools
of exchange wagers in the wagering pools at the racing association
or racing fair conducting the races, nor shall an exchange wagering
licensee be required to
retain, withhold, or take out any amounts from any exchange wagers,
except as expressly set forth in the applicable exchange wagering
agreement.
(h) Subject to the approval of the board, an exchange wagering
licensee shall be permitted to collect exchange revenues in the
manner and amounts determined by the exchange wagering licensee,
including, but not limited to, assessing a surcharge on any person's
net winnings.
(i) Notwithstanding any other law, rule, or regulation, the board
shall require all of the following:
(1) Each exchange wagering licensee shall distribute all moneys in
each pool, net of any fees, charges, or deductions of any kind
assessed or collected by the exchange wagering licensee in connection
with matched wagers in that pool, at the conclusion of the race or
races associated with that pool.
(2) Each exchange wagering licensee shall distribute the portions
of the exchange wagering licensee's exchange revenues as may be
required pursuant to the exchange wagering agreement pursuant to
paragraphs (2) to (7), inclusive, of subdivision (b).
(3) Fifty percent of the amounts received by a racing association
or racing fair from exchange wagering shall be paid to horsemen
participating in the meetings conducted by that racing association or
racing fair in the form of purses. The allocation of amounts
received by a racing association or racing fair from exchange
wagering between that racing association or racing fair and the
horsemen participating in the meetings conducted by that racing
association or racing fair may be modified by a written agreement
between those entities.
(4) In addition to payments set forth in paragraphs (1) and (2),
each exchange wagering licensee shall distribute, on an annual basis,
for the purposes specified in Section 19612.9, an amount equal to
the greater of (A) one hundred thousand dollars ($100,000), or (B) an
amount equal to 0.001 multiplied by the total amount of exchange
revenues collected by the exchange wagering licensee in that calendar
year. The distribution shall be made at the direction of the board
pursuant to Section 19612.9. This paragraph shall become inoperative
on January 1 immediately following the year in which the 10th annual
distribution of funds is made pursuant to Section 19612.9, and, as of
that date, is repealed.
(j) An exchange wagering licensee may cancel or allow to be
canceled any unmatched wagers, without cause, at any time.
(k) The board may prescribe rules governing when an exchange
wagering licensee may cancel or void a matched wager or part of a
matched wager, and the actions that an exchange wagering licensee may
take when all or part of a matched wager is canceled or voided. The
rules may include, but are not limited to, permitting the exchange
wagering licensee to place corrective wagers under circumstances
approved in the rules adopted by the board. Exchange wagers placed on
a market after the start of a race shall be lawful if authorized by
the board, racing association, or racing fair conducting the races,
and the horsemen's organization responsible for negotiating purse
agreements for the breed on which the exchange wager is made.
(l) The provisions of this section shall be deemed to be
severable, and if any phrase, clause, sentence, or provision of this
section is declared to be unconstitutional or the applicability
thereof to any person is held invalid, the remainder of this section
shall not thereby be deemed to be unconstitutional or invalid.
(m) The board shall promulgate administrative rules and
regulations to effectuate the purposes of this section.
(n) No exchange wagering licensee may accept exchange wagers
pursuant to this section before May 1, 2012.
SEC. 3. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.