Youbet.com Subject of Virginia Licensing Lawsuit

Colonial Downs and Virginia horsemen have filed a lawsuit claiming Youbet.com is operating illegally without a license in the commonwealth, and want the advance deposit wagering company to pay back hundreds of thousands of dollars in lost source-market fees.

In a lawsuit filed Sept. 19 in a federal court in Virginia, Colonial Downs and the Virginia Horsemen’s Benevolent and Protective Association claimed to have exhausted other remedies in trying to get Youbet.com to comply with commonwealth regulations requiring both a license and agreement with horsemen and the racetrack on source-market fees.

"They haven't paid a dime, but they have been operating unlawfully in Virginia for at least 3 1/2 years," said Frank Petramalo, a Virginia attorney who is executive director of the Virginia HBPA. "They are unwilling to pay the same rates as the other companies are willing to pay."

Currently there are five ADW companies licensed in Virginia -- AmericaTab, EZ Play, TVG, TwinSpires.com, and XpressBet.com -- which Petramalo estimates will take in about $30 million to $35 million in handle this year, generating about $2.5 million in shared revenue by Colonial Downs and the Virginia HBPA.

Youbet.com, the lawsuit claims, handles about $10 million a year from Virginia bettors and hasn’t paid fees since launching operations in the commonwealth in 2003. The complaint, which cites no specific monetary damages, claims Youbet.com filed for a license in 2003 but never fulfilled certain requirements, including the execution of a signed signal agreement with Colonial Downs and Virginia horsemen.

Exhibits included with the complaint suggest Colonial Downs wants an 11% source-market fee, while Youbet has countered with a figure of 3%. "They offered us a pittance," Petramalo said.

Youbet.com officials through a spokesman declined to comment, saying they hadn't been served with the lawsuit and needed time to thoroughly review the complaint. The company has in the past said the Virginia law is unconstitutional.

Virginia statutes were amended this year to allow for a temporary license with binding arbitration, but Petramalo said Youbet.com has chosen not to comply. Petramalo estimates 12 states require ADW licensing of some kind, including California, where Youbet.com is headquartered.

"Colonial first started negotiating with our blessing," he said. "When that didn't succeed, we said, 'Let the horsemen try it.' Then the (Virginia Racing) Commission said, 'Let's try mediation,' and that went no place."

The lawsuit claims the Virginia attorney general is looking into criminal charges against Youbet.com

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