Anne M. Eberhardt

CHRB Approves Exchange Wagering

California moved closer toward becoming the first state to offer exchange wagering.

California Nov. 15 moved a step closer toward becoming the first United States racing jurisdiction to offer exchange wagering.

The California Horse Racing Board unanimously approved the betting platform that allows individual players to buy and sell, "back" or "lay" wagers. CHRB staff members suggested they would not anticipate exchange wagering to be available for California residents until the second half of 2013.

In 2010 California lawmakers allowed for such wagers, and in August 2011 the CHRB published notice of its intent to promulgate exchange wagering rules. On Nov. 15 the board approved rules that would allow exchange wagers by state residents on California horse races.

Rules also could allow out-of-state residents, who live in states where it is determined to be legal, to wager on California races.

Internet technology has facilitated such account wagers, which began in England in 2000 with the launch of Betfair. The CHRB's approval of the rule will go to the state's Office of Administration Law, where it could face legal challenges. If no challenges occur, the OAL could give final approval in about two months.

Despite some of that uncertainty, the CHRB approved Betfair U.S. for a provisional license to conduct exchange wagering in the state. The license would not become effective until the OAL finalizes exchange wagering rules. TVG agreed to immediately pay the CHRB up to $530,000. That payment would allow the CHRB to begin to put new exchange wagering oversight measures in place, including new software, personnel, and training of the personnel.

Churchill Downs Inc. also was approved for a provisional license pending its agreement to contribute up to half of the $530,000 for oversight and pending finalized OAL rules. At the Nov. 15 CHRB meeting, CDI raised concerns about how a proposed $1.4 million licensing fee would be spent. 

The payment is the total estimated cost to pay for oversight and could be lowered if other companies apply for licensing. The fee also could be considered a down payment on the eventual license fee.

Stephen Burn, chief executive officer of Betfair U.S., said the company wants to expedite the process as much as possible. Betfair U.S., which owns advance deposit wagering provider Television Games Network, said it has invested $10 million in a new betting exchange in California.

In its license application TVG indicated it had reached agreements with Standardbred track Cal-Expo and Quarter Horse track Los Alamitos, as well as the respective horsemen's groups, and would be ready to launch in March. But CHRB staff members said because of needed oversight measures, exchange wagering wouldn't be available until the second half of 2013.

Betting exchange providers are required to reach agreements with the tracks and horsemen involved before offering races on their exchange platforms. Neither Betfair nor CDI have reached agreements with any Thoroughbred tracks and horsemen.

The Stronach Group, owner of Santa Anita Park and Golden Gate Fields, has opposed exchange wagering because of integrity concerns and a model it says does not return enough money to tracks and horsemen, especially considering the potential to poach pari-mutuel handle. Del Mar and Betfair Hollywood Park officials have expressed interest in offering exchange wagering.

The Thoroughbred Owners of California and the California Thoroughbred Trainers have raised concerns similar to Santa Anita regarding the business model and integrity.

Also Nov. 15 the CHRB approved ADW licenses for CDI's, TVG, and Noting all of the changes going on in pari-mutuel wagering, the CHRB reduced those ADW licenses from two-year deals to one-year deals.