BILL ANALYSIS Ó
AB 2808
Page 1
ASSEMBLY THIRD READING
AB
2808 (Gipson)
As Amended April 13, 2016
Majority vote
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Governmental |17-0 |Gray, Bigelow, Bonta, | |
|Organization | |Cooley, Cooper, Daly, | |
| | |Gallagher, Eduardo | |
| | |Garcia, Gipson, | |
| | | | |
| | | | |
| | |Jones-Sawyer, Levine, | |
| | |Linder, Maienschein, | |
| | |Salas, Steinorth, | |
| | |Waldron, Wilk | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |20-0 |Gonzalez, Bigelow, | |
| | |Bloom, Bonilla, | |
| | |Bonta, Calderon, | |
| | |Chang, Daly, Eggman, | |
| | |Gallagher, Eduardo | |
| | |Garcia, Roger | |
| | |Hernández, Holden, | |
| | |Jones, Obernolte, | |
AB 2808
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| | |Quirk, Santiago, | |
| | |Wagner, Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: This bill extends the sunset date on exchange wagering
provisions in Horse Racing Law from January 1, 2017, to January
1, 2021.
EXISTING LAW:
1)Provides that California Horse Racing Board (CHRB) shall
regulate the various forms of horse racing authorized in this
state.
2)Provides that CHRB shall have all powers necessary to carry
out the purposes of the Horse Racing Law, such as adopting
rules and regulations to protect the public, allocating dates
for and controlling horse racing and pari-mutuel wagering, and
enforcing all rules and regulations.
3)Provides that "pari-mutuel wagering" is a form of wagering in
which bettors either purchase tickets of various
denominations, or issue wagering instructions leading to the
placement of wagers, on the outcome of one or more horse
races. When the outcome of the race or races has been
declared official, the association distributes the total
wagers comprising each pool, less the amounts retained for
purposes specified in this chapter, to winning bettors.
4)Provides that CHRB may authorize any racing association,
racing fair, betting system, or multijurisdictional wagering
hub to conduct Advance Deposit Wagering (ADW), as specified.
Permits racing associations, racing fairs, and their
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respective horsemen's organizations to form a partnership,
joint venture, or any other affiliation, as specified.
5)Authorizes exchange wagering, as provided, and authorizes the
CHRB to recover any costs associated with the licensing or
regulation of exchange wagering 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.
6)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 in a specified manner.
7)Makes these exchange wagering provisions inoperative on May 1,
2016, and repeals them on January 1, 2017.
FISCAL EFFECT: According to the Assembly Appropriations
Committee analysis:
1) Ongoing administrative costs associated with exchange
wagering, offset by license fees. Current regulations state
that a total $500,000 must be assessed in the first fiscal year
to operate exchange wagering.
2)Because exchange wagering has not yet been fully implemented,
the fiscal impact is unknown. However, exchange wagering may
result in substantial fiscal costs. Specifically:
a) The revenue impact of exchange wagering depends on
whether or not this new form of wagering brings in
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additional wagers rather than replacing the existing forms
of wagering. While supporters argue that exchange wagering
will bring in additional bettors and reinvigorate the
industry, opponents have argued that this new form of
betting will simply "cannibalize" traditional wagering.
b) The fiscal impact of allowing exchange wagering to take
place depends on whether this new form of betting replaces
or augments traditional wagers. This is because exchange
wagering licensees are not required by law to contribute to
the traditional takeout, which is used to support CHRB
operations and maintain the horseracing industry. The
traditional takeout supports track maintenance and safety,
workers compensation, retirement, and health insurance for
jockeys and backstretch workers, equine research through
the Kenneth L. Maddy Equine Analytical Chemistry Laboratory
at the University of California, Davis. If exchange
wagering does indeed cannibalize traditional forms of
betting, then these programs will see a reduction in funds.
COMMENTS:
Purpose of the bill. According to the author, this bill seeks
to extend a sunset date in current law that allows for exchange
wagering on horse races in California. To date, exchange
wagering has not been implemented by any racing association in
California. Exchange wagering cannot be conducted unless the
horsemen who participate at the live race meet grant consent.
The current law sunsets on January 1, 2017. This bill is
necessary to ensure that more time is provided for current
negotiations so that the original vision of exchange wagering
might be realized in California to provide the industry with a
tool to increase track commissions, purses, and breeder's
awards.
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Background. SB 1072 (Calderon), Chapter 283, Statutes of 2010,
authorized the 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 in other states, so long as the process is
conducted in compliance with the federal Interstate Horseracing
Act. "Exchange wagering" is defined as a means of pari-mutuel
wagering in which two or more persons place identically opposing
wagers on a horse race. The bill required exchange wagering
agreements to be entered into by the exchange wagering licensee,
the applicable racing association or fair conducting live racing
in the state, and the horsemen's organization representing the
particular breed currently racing at the meet.
Wagering on horse races in California is conducted using the
"pari-mutuel method" in which bettors are betting against each
other, with no other entity having an interest or stake in the
outcome of the race.
In pari-mutuel "exchange wagering" (which involves bettors
betting against each other, with no other entity having an
interest or stake in the outcome of the race), each bettor again
selects a horse, an outcome, and the amount the bettor desires
to wager. Another bettor can match that wager, choosing to
wager the opposite of the original wager. For example, if
bettor "A" thinks a horse will win a race and would like to
wager $2 to win on that horse at 1-1 odds, bettor "B" can match
the wager for $2 at 1-1 odds if bettor B has the opinion that
the horse will not win the race. When wagers are matched, they
are pooled together and the pari-mutuel exchange wagering
operator is responsible for paying the winning bettors out of
the pool (just as is the case in all other forms of pari-mutuel
wagering on horse races in California.) Pari-mutuel exchange
wagering is limited to win, place and show wagering.
The effort in California to launch an exchange wagering platform
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has been stymied by disagreements among the exchange wagering
provider, horsemen, and racetracks over the amount of money the
racing industry would receive from the operation's revenue.
Supporters of exchange wagering contend that the practice will
reinvigorate interest in racing by offering players a new way to
wager on the game, at a price to the player of approximately 5%
of winnings, compared to existing takeout rates in the
pari-mutuel pools remain around 20%. The service has proved
very popular in Britain and Ireland, where bookmaking was an
established part of horserace betting markets hundreds of years
prior to the advent of exchange wagering. Exchanges typically
return 95% of money bet to players, compared to the 80% return
commonly offered by U.S. pari-mutuels systems.
Exchange wagering in New Jersey: The New Jersey State Racing
Commission issued its first horse racing exchange wagering
license on November 18, 2015 but horseplayers will not be able
to match bets on the exchange until Spring 2016 at the earliest,
according to published reports. In addition, the first-ever
licensed betting exchange in the United States will be limited
to New Jersey resident-at least initially.
In support: Betfair US TVG Network, the sponsor of this bill,
states this bill would merely extend the "sunset" clause in
current law for four more years and give the horse racing
industry more time to implement this new and exciting form of
wagering. The CHRB has adopted regulations for exchange
wagering in California but the respective parties have not
agreed to a business arrangement for implementation. If
exchange wagering were to be authorized in California,
proponents believe it would not only increase the wagering
handle but purses and breeders awards for horsemen and
horsewoman.
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In opposition: The California Thoroughbred Trainers (CTT) of
California writes, it has now been six years since exchange
wagering was authorized in California and the industry still has
not agreed on a plan to implement this new form of wagering.
The implementation of exchange wagering will continue to stall
unless and until there is a business model that satisfies the
financial needs of horsemen. Other issues raised include the
various business models available, the potential for
cannibalization of the existing wagering dollar, and whether
exchange wagering would compromise the integrity of horse racing
in California. At this point, the CTT states that there is no
need to eliminate the current sunset date on what clearly is a
failed enterprise.
Prior legislation: AB 2414 (John A. Perez), Chapter 299,
Statutes of 2010. Added a sunset date of May 1, 2016, to a
provision contained in SB 1072 (Ron Calderon), Chapter 283,
Statutes of 2010, relating to exchange wagering on horse racing.
SB 1072 (Calderon), Chapter 283, Statutes of 2010. Among other
things, the bill 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 and makes it explicit that exchange wagering shall not
become operative until May 1, 2012.
Analysis Prepared by:
Eric Johnson / G.O. / (916) 319-2531 FN:
0003112
AB 2808
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