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CHRB Taking Longer Look at Exchange Wagering

Proposed rules kicked back to pari-mutuel committee, delaying license applications.

Love it or hate it, exchange wagering seems to be getting all the scrutiny it can handle from the California Horse Racing Board. Nearly two years after the concept was signed into law, the board decided to delay implementation during its meeting June 28.

By a 5-1 vote at Betfair Hollywood Park, the CHRB kicked back a series of 25 proposed regulations governing exchange wagering to its pari-mutuel wagering committee, where suggested changes in the new rules will be given further examination. It has been nearly 11 months since the CHRB announced its intent to promulgate the new rules that could have gone into effect by May 1. The proposed regulations completed a 45-day public comment period June 25.

Chairman Keith Brackpool told those with suggestions for tightening and clarifying the rules to submit their changes to CHRB staff within 10 days. The staff then will produce a rule-by-rule examination of the suggestions with recommendations for the pari-mutuel committee. Brackpool said he hoped that the process could be completed in time for the full board to reconsider at its Aug. 23 meeting at Del Mar.

The delay also tabled for now applications from the advance deposit wagering firms Betfair-TVG and to conduct exchange betting on their websites. The Los Alamitos Quarter Horse Racing Association sought approval to amend its current license to add exchange wagering to its format this summer as well.

The Thoroughbred Owners of California has announced it will not vote on exchange wagering until next year as it continues to weigh the benefits and risks of allowing a new form of betting into the state. Without horsemen's approval, exchange wagering cannot be offered at the state's major Thoroughbred tracks.

Board member Steve Beneto split from the majority, saying it would take years for the CHRB to produce rules that will meet with everyone's approval. He suggested Los Alamitos would make a good test case for exchange wagering.

"It seems like we're going backwards, not frontwards," Beneto said at the conclusion of the discussion. "I'm for passing these rules and modifying them as we go along. This is a starting point right now and I'm for getting on with it; these rules will fix themselves down the road."

Exchange, or proposition, betting allows customers to post odds and accept wagers from other customers on whether a horse will win or lose a race. The proposed rules define it as "a form of pari-mutuel wagering in which two or more persons place identically opposing wagers in a given market." It opens the door for several new types of wagers, such as betting on in-progress races.

Integrity questions and revenue splits between the ADW companies and horsemen have been the most common issues preventing a smooth transition.

"Yes, we believe that to put a system where you bet on a horse to lose is a system that has integrity issues," said Richard Specter, an attorney representing the racing associations that operate racing at Santa Anita Park and Golden Gate Fields.

Specter also objected to exchange wagering being considered pari-mutuel under the definition of the Interstate Horseracing Act of 1978 since such bets would not be part of a common pool subject to fluctuating odds. Rather, odds are set in advance regardless of the wagering.

Scott Daruty, also from the Los Angeles Turf Club and Pacific Racing Association, part of The Stronach Group, objected because exchange wagering under the proposed rules is limited to Internet bets.

"We believe that exchange wagering can be conducted on a cash basis," Daruty said. "We have ideas on how that can be done. We would potentially like to use this for on-track customers at Santa Anita. But all that is precluded by the rules limiting it to the Internet."

Other speakers objected to portions of the rules in large measure because they felt they were vague and open to varying intepretations.

On the other side was Betfair-TVG, whose general counsel, John Hindman, argued that the complaints had all been registered in a February hearing before a CHRB ad hoc committee on exchange wagering.

"I think that if you look at what the objections to the rules are really about, what you have is a track operator that is opposed to the idea of betting on a horse to lose," Hindman said in reference to The Stronach Group representatives. "The other objection is from a company (Twinspires) that is probably not ready to move forward."

Those appearing on behalf of Los Alamitos also urged immediate action from the board.

"We are in dire straits," said Dan Schiffer. "We are willing ... to be the testing ground for these rules and we believe they will work to all our benefit."

The proposed rules require approval from the state's Office of Administrative Law before they can go into effect.