BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Isadore Hall, III
Chair
2015 - 2016 Regular
Bill No: AB 2808 Hearing Date: 6/28/2016
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|Author: |Gipson |
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|Version: |4/13/2016 Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Arthur Terzakis |
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SUBJECT: Horse racing: exchange wagering: operative extension
DIGEST: This bill extends the January 1, 2017 sunset date of
Horse Racing Law's exchange wagering provisions by four years.
ANALYSIS:
Existing law:
1)Grants the California Horse Racing Board (CHRB) the authority
to regulate the various forms of horse racing authorized in
this state.
2)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.
3)Defines "exchange wagering" as a form of parimutuel wagering
in which two or more persons place identically opposing wagers
in a given market, provided that the entity offering exchange
wagering is licensed by the CHRB and has entered into an
exchange wagering agreement between the licensee, the
applicable racing association or fair conducting live racing,
and the horsemen's organization responsible for negotiated
purse agreements for the breed on which exchange wagers are
AB 2808 (Gipson) Page 2 of ?
accepted, as provided.
4)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.
5)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 Wagers (e.g., in person, telephone, or Internet).
6)Provides that only persons 18 years of age or older could
establish exchange wagering accounts and requires CHRB to
approve security policies and safeguards to ensure player
protections, age verification and location.
7)Directs the CHRB to adopt rules prohibiting any owner,
trainer, jockey, or stable employee from placing an exchange
wager on any horse owned, trained, or ridden by any of those
individuals.
8)Makes the exchange wagering provisions inoperative on May 1,
2016 and repeals them on January 1, 2017.
This bill extends the inoperative and repeal dates of Horse
Racing Law's exchange wagering provisions, to May 1, 2020 and
January 1, 2021, respectively.
Background
Exchange wagering made its debut more than a decade ago in
Britain, where most wagering is done through bookmakers on horse
racing. In England, exchange wagering has been reported to have
contributed to a double-digit increase in wagering handle as
well as helping to appeal to a different segment of the betting
AB 2808 (Gipson) Page 3 of ?
public that generally does not gravitate to conventional
parimutuel wagering opportunities. Exchange wagering was also
legalized by New Jersey's legislature in 2011 and the New Jersey
State Racing Commission issued its first horse racing exchange
wagering license on November 18, 2015 and in May 2016 Monmouth
Racetrack became the first track in the U.S. to offer exchange
wagering.
Wagering on horse races in California is conducted using the
"parimutuel 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 traditional parimutuel wagering, each
bettor selects the horse or horses they choose to wager on an
outcome (how those individual horses will finish in a race -
Win, Place, and Show wagering) or the order of finish for
multiple numbers of horses (exotic wagers such as exacta,
trifecta, superfecta), and the amount which they desire to
wager. The odds on any particular horse are determined by the
total amount bet on the race by the individual bettors. The
bets made are pooled together and the parimutuel operator is
responsible for paying the winning bets from that pool.
In parimutuel "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 parimutuel exchange wagering
operator is responsible for paying the winning bettors out of
the pool (just as is the case in all other forms of parimutuel
wagering on horse races in California.) Parimutuel exchange
wagering is limited to win, place and show wagering.
The racing industry derives revenue from traditional parimutuel
wagering from a "takeout" or "commission" that is charged on
every wager placed in the pool, and from parimutuel exchange
wagering from a "commission" that is charged only on a bettor's
net winnings on a particular race. In either case, those
revenues are shared among the horse owners (purses), the race
tracks and the provider of the parimutuel wagering service.
AB 2808 (Gipson) Page 4 of ?
Purpose of AB 2808. According to the author's office, 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. California's existing exchange wagering
provisions are scheduled to sunset on January 1, 2017. The
author's office states that 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.
Prior/Related Legislation
SB 1072 (Calderon, Chapter 283, Statutes of 2010) among other
things, authorized exchange wagering and granted the CHRB the
authority 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 provided that the process is
conducted in compliance with the federal Interstate Horse Racing
Act.
AB 2414 (John A. Perez, Chapter 299, Statutes of 2010) made the
exchange wagering provisions inoperative on May 1, 2016, and
repealed them on January 1, 2017.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
SUPPORT:
TVG/Betfair (source)
OPPOSITION:
California Thoroughbred Trainers
ARGUMENTS IN SUPPORT: Proponents state that AB 2808 merely
extends the sunset clause in current law in order to give the
horse racing industry more time to implement this new and
exciting form of wagering. Proponents note that the CHRB has
AB 2808 (Gipson) Page 5 of ?
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 instituted in
California, proponents believe it would not only increase the
wagering handle but purses and breeders awards for horsemen and
horsewomen.
ARGUMENTS IN OPPOSITION: Opponents point out that since
enactment of exchange wagering in California six years ago the
horse racing industry has not reached agreement on a plan to
implement this new form of wagering. Opponents contend that
implementation of exchange wagering will continue to stall
unless and until there is a business model that satisfies the
financial needs of horsemen and horsewomen. 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. Opponents believe there is no need to eliminate
the current sunset date on a failed enterprise.