BILL ANALYSIS Ó
Bill No: AB
1423
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
AB 1423 Author: Committee on Governmental Organization
As Introduced: March 21, 2013
Hearing Date: June 25, 2013
Consultant: Art Terzakis
SUBJECT
Horse Racing: advance deposit wagering and exchange
wagering
DESCRIPTION
AB 1423 corrects an oversight in existing Horse Racing Law
governing the distribution of funds from advanced deposit
wagering for harness racing by the California Exposition
and State Fair (Cal Expo) and adds clarity with respect to
the time-frame for distribution of exchange wagering
revenues that provide health and welfare benefits to
jockeys and their dependents. Specifically, this measure:
1)Specifies that funds generated that were deducted from
amounts handled on advance deposit wagering at harness
race meetings that are held in trust by Cal Expo shall be
distributed in the following manner: 50% to the harness
racing horsemen who participated in the meeting
concluding June 16, 2012, in the form of purses and 50%
to Cal Expo, in the form of commissions.
2)Deletes the January 1, 2021 sunset date for the
distribution of the revenue collected through exchange
wagering for health and welfare benefits to jockeys and
instead sunsets the provisions after the 10th annual
distribution of those funds.
3)Also, makes minor technical and code maintenance changes.
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EXISTING LAW
Article IV, Section 19(b) of the Constitution of the State
of California stipulates that the Legislature may provide
for the regulation of horse races and horse race meetings
and wagering on the results.
Existing Horse Racing Law provides that the California
Horse Racing Board (CHRB) shall regulate the various forms
of horse racing authorized in this state and authorizes
advance deposit wagering to be conducted, with the approval
of the CHRB, 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.
Existing law directs the CHRB to promulgate rules and
regulations governing the conditions under which exchange
wagering may be conducted and allows exchange wagers to be
submitted and accepted by licensed exchange wagering
systems in the same manner as is currently provided for
under Advanced Deposit Wagering (ADW) Law. The law provides
that no exchange wagering licensee may accept wagers prior
to May 1, 2012 and defines "exchange wagering" as a form of
parimutuel wagering in which two or more persons place
identically opposing wagers in a given market. In
addition, existing law, until January 1, 2021, on an annual
basis, requires that a specific amount of exchange wagering
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revenues, collected by exchange wagering licensees, be
distributed to provide health and welfare benefits to
jockeys and their dependents.
BACKGROUND
Purpose of AB 1423: According to the author's office, this
measure is intended to correct an oversight in previous
legislation. Specifically, it provides that money
generated at harness racing meetings which are being held
in trust by Cal Expo must be distributed in accordance with
specified percentages to the harness horsemen who ran
horses at the 2012 race meeting and to Cal Expo.
The funds are currently being held in escrow because the
defined distribution from ADW wagers on harness races
requires the money be paid to an organization that does not
have any association with California's harness industry.
The original ADW statute called for the distribution to be
made to the Jockeys' Guild Welfare Fund even though harness
drivers are not a beneficiary of that fund. This measure
corrects this distribution error by mandating that the
monies stay within the harness racing industry and be split
50/50 between purses and commissions. By requiring the
distribution of the previously escrowed funds, this measure
is expected to result in immediate financial assistance to
the horsemen and horsewomen that participated in the prior
race meeting while also providing a benefit to Cal Expo, as
the former operator.
Additionally, this measure is intended to ensure that
distributions from exchange wagering revenues will continue
for a period of 10 years after the implementation of
exchange wagering to provide health and welfare benefits to
jockeys and their dependents, as intended in previous
legislation.
Staff Comments: Cal Expo is the only racetrack in the
State that conducts harness racing. This year Cal Expo
entered into an agreement with a private operator to
continue the tradition of harness racing at the facility.
The industry is hopeful that the new operator will be
financially successful and secure the long-range future of
the sport in California.
"Exchange wagering" is a form of gambling in which two or
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more persons place directly opposing wagers on the outcome
of horse races and "sporting events." Typically, exchange
wagering allows a better to "back" or wager on a selected
horse to win, with another bettor "laying" or wagering on
that same horse not to win. A back and a lay become
matched when a bettor lays at the same price at which
another bettor backs that same outcome, with the amount
subject to the lay being proportionately commensurate to
the amount subject to the back. Exchange wagering allows
the bettor to name his/her own odds in the hopes of luring
a match. While the potential for positive industry effects
is present with exchange wagering, so too is the prospect
for disaster. Some within the industry believe that
exchange wagering may cannibalize traditional parimutuel
wagering and actually leave less money in the system for
those responsible for putting on the show (e.g., owners,
breeders and racetracks), thus placing the future of horse
racing in jeopardy.
As noted above, existing law requires the CHRB to
promulgate administrative rules and regulations to
effectuate exchange wagering. At its November 2012 regular
meeting the CHRB adopted the proposed addition of Article
27 (Exchange Wagering), which comprises 25 regulations
governing the conduct of exchange wagering in California.
The exchange wagering rulemaking file was submitted to the
Office of Administrative Law (OAL) on January 31, 2013.
Two months later (March 31, 2013) OAL disapproved the file.
Of the 25 regulations submitted, the OAL cited necessity,
clarity or consistency issues with eight regulations, as
well as certain procedures of the Administrative Procedures
Act (APA). The CHRB has 120 days from the date of the
disapproval to correct and resubmit the rulemaking file.
PRIOR/RELATED LEGISLATION
AB 432 (V. Manuel Perez), 2013-14 Session. Would require
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 in a manner, as specified in
current law. (Pending in Senate Appropriations Committee)
SB 1072 (Calderon), Chapter 283, Statutes of 2010. Made
the following substantive changes and additions to
California's Horse Racing Law: (1) required thoroughbred
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racing associations and fairs to deduct an additional
amount of the total handle on exotic wagering for purse
augmentation; (2) authorized the CHRB to license entities
to operate "exchange wagering" systems; (3) required each
exchange wagering licensee to annually distribute a
specified amount of exchange wagering revenue to the
existing jockey health and benefit welfare fund; (4)
authorized the thoroughbred racing industry to use monies
from horse racing wagering pools to promote the Breeders'
Cup; (5) extended the sunset, from January 1, 2011 to
January 1, 2014, on provisions that authorize racing
associations and fairs that conduct thoroughbred racing to
pay to the owners' organization a certain portion of the
purses for a statewide marketing program, as specified, to
increase interest in horse racing; and (6) provided that an
amount not to exceed 0.05% of the total amount handled by
each satellite wagering facility shall be distributed to
the nonprofit organization designated by the CHRB for the
purpose of maintaining a database of horse racing
information, as defined.
AB 2414 (Perez), Chapter 299, Statutes of 2010. Sunset the
exchange wagering provisions of SB 1072 (Calderon) on May
1, 2016.
AB 765 (Evans), Chapter 613, Statutes of 2007. Among
other things, reauthorized horse racing's Advance Deposit
Wagering Law, which was due to "sunset" on January 1, 2008.
In addition, provided that a fair, combination of fairs,
or an association conducting racing at a fair, may, with
CHRB approval, deduct an additional 1% from its handle, to
be used for maintenance and improvements at a fair's
racetrack enclosure, as specified.
AB 471 (Hertzberg), Chapter 198, Statutes of 2001.
Authorized the CHRB to permit any racing association,
racing fair, betting system or multijurisdictional wagering
hub to conduct advanced deposit wagering whereby a
California resident could deposit funds into an account in
order to wager via the Internet, phone or other media.
SUPPORT: As of June 21, 2013:
California Exposition and State Fair
Golden Bear Racing
Jockeys' Guild
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OPPOSE: None on file as of June 21, 2013.
FISCAL COMMITTEE: Senate Appropriations Committee
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