BILL ANALYSIS
AB 1289
Page 1
Date of Hearing: April 18, 2007
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Alberto Torrico, Chairman
AB 1289 (Price) - As Amended: April 9, 2007
SUBJECT: Advance deposit wagering: out-of-state providers.
SUMMARY : Extends the sunset provision relating to Advance
Deposit Wagering (ADW) from January 1, 2008 to January 1, 2011.
Adds a requirement that employees who operate and administer ADW
on a daily basis shall work in California. Specifically, this
bill :
1)Provides in order for a licensee, betting system, or
multijurisdictional wagering hub to be approved by the
California Horse Racing Board (CHRB) to conduct ADW, its
employees who operate and administer the advance deposit
wagering on a daily basis shall work in California.
2)Removes from a definition, and from all provisions related to
the authorization of ADW, the reference to a
multijurisdictional wagering hub located outside of the state.
3)Requires the rules adopted by CHRB to include a requirement
that employees represented in the same or similar
classifications be employed at a ratio of one employee for
every $20,000 in wagers handled by those licensees, betting
systems, and multijurisdictional hubs.
4)Adds that an amount equal to 0.00395 multiplied by the amount
handled on ADW wagers originating in California for each
racing meeting shall be distributed to CHRB to establish and
to administer jointly with the organization certified as the
majority representative of California licensed jockeys, as
defined. The funds shall be used for a retirement plan for
California licensed jockeys who retired from racing on or
after January 1, 2003, and who, as of the date of their
retirement, had ridden in a minimum of 1,250 pari-mutuel races
conducted in California.
5)Extends the sunset provision relating to ADW from January 1,
2008 to January 1, 2011.
EXISTING LAW :
AB 1289
Page 2
1)Provides that CHRB regulate the various forms of horse racing
authorized in this state.
2)Empowers CHRB to adopt regulations necessary for the
protection of the public and control of horse racing and
pari-mutuel wagering.
3)Authorizes ADW to be conducted, with the approval of the CHRB.
4)Requires CHRB to adopt rules to license and regulate all
phases of operation of advance deposit wagering for licensees,
betting systems, and multijurisdictional hubs located in
California.
5)Defines ADW, as a form of pari-mutuel wagering in which a
person residing within California or outside of the state
establishes an account with a licensee, board-approved betting
system, or multijurisdictional wagering hub located within
California or outside of the state.
6)Provides that in order for a licensee, betting system, or
multijurisdictional wagering hub to be approved by the board
to conduct advance deposit wagering, it must meet certain
requirements.
7)Specifies how the amount received as a market access fee from
advance deposit wagers shall be distributed.
8)Provides that any disputes concerning the interpretation or
application of ADW law shall be resolved by CHRB.
9)Provides for up to $450,000 from the unclaimed refunds to be
distributed to horsemens' organization for purposes of
negotiating agreement with a jockeys' organization, as
specified, for health and welfare benefits for jockeys.
FISCAL EFFECT : Unknown.
COMMENTS :
Background . The California horse racing industry entered into a
new era in 2002 with the advent of ADW (Hertzberg, Chapter 198,
Statutes of 2001), which allows customers to deposit funds into
AB 1289
Page 3
an account in order to wager online and over the telephone.
These wagers are commingled into pools at the host track where
the races are run, and within the pari-mutuel wagering system
regulated by the CHRB.
Currently, the CHRB has approved three companies (Youbet.com,
TVG, and ExpressBet) to provide ADW services to California
customers. In order to obtain licenses, the applicants posted a
$500,000 bond and provided financial information demonstrating
their financial resources to operate such a system; provided
contracts with racetracks and horsemen; established security
access policies and safeguards; agreed to protect the
confidentiality of account information; ensured that persons
under 18 will not be permitted to open accounts; and agreed to
include in their promotional literature information for a
recognized problem gambling support organization.
ADW was authorized at a time when California racetracks were
beginning to experience declining attendance and handle figures.
The industry believed that making the product easier to access
not only would expose and market horse racing to potential
customers, but also would make it more convenient for the
existing patrons to wager more often. One of the ongoing
questions about ADW is whether it generates new handle or
cannibalizes the money that would usually go to existing
wagering venues. No conclusive assessment has been reached by
the industry relating to cannibalization.
The statute the authorizes ADW in California "sunsets" on
January 1, 2008.
Attendance declines . There has been a general decline in the
number of people attending and wagering at live horse racetracks
in California due to a number of factors, including increased
competition from other forms of gaming, unwillingness of
customers to travel a significant distance to racetracks and the
availability of off-track wagering. The declining attendance at
live horse racing events has prompted racetracks to rely on
revenues from in-state and out-of-state satellite wagering and
account wagering.
Purpose of the bill . According to the sponsor, the Service
Employees International Union (SEIU), one of the primary
intentions of the Legislature in enacting Assembly Bill 471 was
to provide jobs with good wages and benefits to California
AB 1289
Page 4
residents. More jobs for residents of California could be
created by the establishment of a live telephone call center for
advance deposit wagering in the state.
SEIU states that live telephone call centers for wagering on
horse racing have operated successfully in the States of New
York and Pennsylvania and have resulted in an increase in the
amount wagered and have benefited the horse racing industry in
their respective states.
In the past, ADW service providers stated that existing
agreements between multijurisdictional wagering hubs and betting
systems and California's racetracks do not provide sufficient
revenues to make live telephone call centers in California
financially feasible. Since the current statute, which allows
ADW "sunsets" at the end of this year, legislation can now be
passed that addresses this declaration.
The bill also contains a provision that requires that a
specified amount (0.00395) of the ADW handle be used to
establish and administer a defined contribution retirement plan
for California jockeys, as specified. The generated funds would
be for California licensed jockeys who retired from racing on or
after January 1, 2003, and who, as of the date of their
retirement, had ridden in a minimum of 1,250 pari-mutuel races
conducted in California.
Prior legislation .
AB 509 (J. Horton), Chapter 235, Statutes of 2004, provides that
a thoroughbred or fair association may import out-of-country
thoroughbred races under specified conditions.
AB 471 (Hertzberg), Chapter 198, Statutes of 2001, allows a
California resident to wager on races (including most
out-of-state racetracks) using the phone, Internet or other
electronic media.
Related legislation . AB 813 (Portantino) of 2007, removes the
"sunset" provision for ADW in California. (Assembly G.O.
Committee)
REGISTERED SUPPORT / OPPOSITION :
Support
AB 1289
Page 5
Service Employees International Union
Opposition
None on file
Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531