Aspects of ADW Hashed Out in Kentucky

A Nov. 19 discussion of proposed regulations for advance deposit wagering in Kentucky drew calls for disclosure of revenue and concerns over the impact ADW is having on purses in the state.

A Kentucky Horse Racing Commission committee that studies wagering issues continued to look at aspects of the proposed regulations, which will go before the full KHRC at its December meeting. Parameters dealing with cost will be reviewed by the state’s racetracks, which must submit comments by Nov. 29.

The language requires ADW providers that take bets on Kentucky signals to submit to an independent review that could cost $20,000 to $150,000, depending on the size of the company.

ADW providers said the cost is of major concern and could keep companies from taking signals from Kentucky racetracks. KHRC member Ned Bonnie, a member of the wagering committee, told TwinSpires.com vice president Brad Blackwell he wants more information on the Churchill Downs Inc.-owned company’s profit margin before he can assess whether the cost is extreme.

“I want to know what your revenue stream is,” Bonnie said. “There have been substantial complaints that we as a commission have not looked at cost. I understand your position, but I want to see numbers. I want to see why it’s unaffordable.”

Bonnie went a step further, saying the KHRC must lead the way in demanding transparency from ADW providers. He said the racing commission hasn’t been proactive enough.

“We want to see that horsemen aren’t put out of business by reason of the leverage ADWs can put on horsemen,” Bonnie said. “Some ADWs are owned by racetracks, which makes for an unfair fight. I want to see if the contracts are in the best interest of racing. It’s a very important aspect (of regulation) that has been neglected for years.”

Kentucky Thoroughbred Association executive director David Switzer noted one negative impact ADW is having on Kentucky purses—reductions in the amount of money in the Kentucky Thoroughbred Development Fund, which provides purse supplements for Kentucky-registered runners.

The KDTF could total $5-6 million this year, down from $12 million in 2007, Switzer said. By statute, the KTDF gets a small percentage of money wagered in-state at tracks and a handful of off-track betting parlors.

For instance, the KTDF earns revenue from wagers made through the windows at Churchill Downs, but nothing from a bet made through TwinSpires.com even if the customer is at Churchill.

Switzer noted horsemen were sued by the defunct TrackNet Media Group in part for attempting to get revenue information from the entity, which sold simulcast signals.

“We have no idea where wagers are being made,” Switzer said. “How can we get full disclosure on ADWs?”

Blackwell said ADW providers aren’t party to agreements between racetracks and horsemen’s groups for signals and related fees, and therefore wouldn’t be the entity to provide the information to the KHRC. He also said ADW companies already are highly regulated by all the states in which they do business as well as under the Unlawful Internet Gambling Enforcement Act, which deals with use of credit for online betting.

No jurisdiction, Blackwell said, requires an ADW to get a license to take signals from any state. As for the cost associated with the independent review—it could be required on an annual basis—Blackwell said it could damage Kentucky racing overall.

“It could discourage ADWs from taking Kentucky racing,” he said. “That could cut off the stream of handle for Kentucky racing. The cost would be solely associated with Kentucky racing, and we don’t want Churchill Downs and Kentucky racing to be associated (with the negativity).”

Blackwell in his comments also indicated racetracks now get more for their signals from ADW providers than they do from “bricks-and-mortar” outlets such as racetracks and OTB parlors. “Customers may go to bricks-and-mortar facilities that pay much less for that signal,” he said.

TwinSpires.com has its betting hub in Oregon, where many ADW providers are licensed. Kentucky has a statute in place governing wagering hubs, but no further action has been taken.

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