BILL ANALYSIS
Bill No: AB
2215
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
AB 2215 Author: Fuentes
As Amended: June 24, 2010
Hearing Date: June 29, 2010
Consultant: Art Terzakis
SUBJECT
Horse Racing: advance deposit wagering: minisatellite
facilities
DESCRIPTION
AB 2215 makes the following substantives changes to the
California Horse Racing Law pertaining to advance deposit
wagering (ADW) and minisatellite facilities:
1. Requires the California Horse Racing Board (CHRB) to
develop and adopt rules to license and regulate advance
deposit wagering activity that takes place within a
minisatellite wagering facility and also permits the CHRB
to recover any costs associated with the licensing or
regulation.
2. Makes a conforming change to authorize a minisatellite
wagering facility to enter into an agreement with an ADW
provider to accept and facilitate the placement of any
wager at its facility that a California resident could
make through that ADW provider.
EXISTING LAW
Existing law provides for the California Horse Racing Board
(CHRB) which regulates the various forms of horse racing
authorized in this state.
Existing law authorizes and defines "Advance Deposit
Wagering" (ADW) as a form of pari-mutuel wagering in which
a person establishes an account with a board-approved
betting system or wagering hub where the account owner
AB 2215 (Fuentes) continued
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provides wagering instructions authorizing the entity
holding the account to place wagers on the owner's behalf.
Existing law provides that a racing association, a fair, or
a satellite 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,
as defined.
Existing law authorizes the CHRB to permit licensed racing
associations and fairs to operate satellite-wagering
facilities on their grounds, as specified.
Existing law provides that the CHRB may approve an
additional 15 mini-satellite wagering sites (total of 45)
in the northern, central, and southern racing zones, as
defined.
BACKGROUND
Purpose of AB 2215: The author's office notes that ADW has
operated in California since 2002 and has proven to be an
efficient and accountable system employing current
technologies to process wagers on horse racing in
California. Unfortunately, former customers of
California's simulcast network prefer to stay home to
conduct their daily wagering. California's racing industry
believed that AB 241 (Price) of 2007, which authorized 45
minisatellites, would help reverse the customer shift but
to date various obstacles - mostly financial - have proven
otherwise.
One of the challenges the industry faces relative to the
implementation of minisatellites in various venues (e.g.,
sports bars, restaurants, and card clubs) is the ability to
process wagers in an economically efficient manner because
these facilities generally produce lower wagering figures
than established "brick and mortar" facilities.
Minisatellite facilities though must bear the same fixed
costs associated with the traditional simulcast model. In
essence, the cost to facilitate a wager is the same no
matter where the wager takes place. Due to this
inequality, the State's minisatellite system has been slow
to develop.
AB 2215 is intended to establish another distribution
AB 2215 (Fuentes) continued
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method for wagering on horse racing by allowing
minisatellite facilities, to access the current ADW
infrastructure. Proponents believe AB 2215 will help
make the operation of minisatellites more viable from a
financial perspective while allowing California's racing
industry to market their product to new and existing
patrons. AB 2215 is also expected to make satellite
wagering more attractive to the customer while reducing the
migration of daily wagering from brick and mortar locations
to Internet wagering.
Advance Deposit Wagering: The California horse racing
industry entered into a new era in 2002 with the advent of
ADW [AB 471 (Hertzberg), Chapter 198, Statutes of 2001],
which allowed customers to deposit funds into 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.
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 make it more
convenient for the existing patrons to wager more often.
In general, industry stakeholders agree that ADW has become
an important element to the financial stability of
California's horse racing industry.
Currently, the CHRB has approved three companies
(Youbet.com, TVG, and XpressBet) to provide ADW services to
California customers. ADW constitutes about $600 million
in handle for the horse racing business. It has become an
important segment of the industry; in fact, it is the only
segment that has been growing.
Wagering at Satellite or MiniSatellite Facilities: In
2007, AB 241 (Price) was enacted to authorize the creation
of 15 additional "mini-satellites" in each racing zone.
The stated intent of AB 241 was to make the sport of horse
racing more accessible to potential California bettors and
to increase the handle - the amount wagered on horse races.
Currently, there are 34 satellite wagering facilities in
California located at live race tracks, fairgrounds and
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Page 4
Indian casinos. Furthermore, 64 additional wagering
facilities are authorized - 44 mini-satellite facilities
(one has been established already inside the Commerce
Casino, a Southern California Card Club) and all fairs that
currently are not operating satellite wagering facilities
may do so either on or off the fairgrounds (within the
boundaries of the fair district). Currently, no satellite
wagering facility can be established within a 20 mile
radius of an existing satellite wagering facility or
racetrack without the consent of the existing wagering
facility.
California's first and only minisatellite facility to date
opened in July 2009 at the Commerce Casino, a southern
California Card Club. The facility is currently averaging
more than $80,000 in horse racing wagers per day. It is
unclear why there has not been a broader interest in these
facilities. Some speculate that the 2% commission that is
retained by the minisatellite is not enticing enough for
business owners.
Overall though, California's simulcasting network has seen
a steady decline in the last decade since the approval of
ADW. That drop-off has been accelerated with the
recession.
PRIOR/RELATED LEGISLATION
AB 241 (Price) Chapter 594, Statutes of 2007. Authorized
all fairs to operate a satellite wagering facility off of
the fair grounds. Also, authorized the establishment of up
to 45 "minisatellite" wagering sites to be operated by
private industry throughout California.
AB 765 (Evans) Chapter 613, Statutes of 2007. Among other
things, reauthorized horse racing's ADW law, which was set
to "sunset" on January 1, 2008, as specified.
AB 1286 (Richardson) Chapter 202, Statutes of 2007 .
Allowed the Alameda County Fair and the Los Angeles County
Fair (Fairplex) to obtain authorization to operate new
satellite wagering facilities off of their fair grounds
under certain conditions.
SB 677 (Murray) 2005-06 Session. Would have authorized the
establishment of seven additional satellite wagering
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facilities around the state. (Died Assembly Inactive File)
SB 1096 (Dutton) Chapter 1096, Statutes of 2005.
Authorized the National Orange Show (San Bernardino County)
to operate a second satellite-wagering operation within its
fair district boundaries.
AB 401 (J. Horton) Chapter 556, Statutes of 2003.
Permitted CalExpo, with the approval of the Department of
food and Agriculture and CHRB, to operate a satellite
wagering facility within the boundaries of CalExpo in
addition to any facility otherwise authorized under current
law.
SUPPORT: Thoroughbred Owners of California
OPPOSE: None on file as of June 25, 2010.
FISCAL COMMITTEE: Senate Appropriations Committee