Calif. Account Wagering Law Extended by Governor

Advance deposit wagering, which in five years has grown to represent about 13.4 % of total handle through the California pari-mutuel system, was reauthorized by Gov. Arnold Schwarzenegger Oct. 13.

The original measure approving ADW in California, which took effect in 2002, is set to expire Dec. 31. The reauthorization law, which makes a number of refinements and clarifications to the original, eliminates the sunset provision, extending the legislation indefinitely.

It was signed as part of a separate horse racing bill by Democratic Assemblywoman Noreen Evans. That bill was amended by both houses of the Legislature Sept. 11-12 after an earlier ADW extension measure stalled in committee -- due in great part to objections by the state horsemen's representative, the Thoroughbred Owners of California.

Drew Couto, president of the TOC, said Oct. 16 that he is "quite pleased" with the version signed by the governor one day before the state deadline.

"It's the next step in the evolution of advance deposit wagering and ADW law," he said.

The TOC has criticized account wagering, contending that providers are reaping big profits while not paying a fair share toward purses, especially on out-of-state wagers on California races. It argued for a stronger role in setting hub agreements -- contractual compensation paid on account wagers -- during months of negotiations over the original replacement bill authored by Assemblyman Anthony Portantino.

Licensed ADW providers handled nearly $588 million from Californians during fiscal year 2006-07, which represented 13.4% of about $4.38 billion generated through the California pari-mutuel wagering system during that same 12 months, according to the CHRB.

Under the new provisions, ADW law requires the consent of TOC before an account wagering provider and racetrack association can conduct wagering on races held in the state, according to the legislative analyst's office. It also provides a process for hub fee agreements and a 60-day arbitration of disputes. It makes it explicit that a hub agreement is required for an ADW  provider to receive contractual compensation for races conducted outside of California. The bill was co-authored by 11 legislators, including Portantino, a Democrat from Pasadena.

"It was a very tough negotiation right up to the deadline," said Trent Hager, Portantino's chief of staff. "The betting was no better than 50-50 that the deal was going to come together."

The bill includes a provision requiring ADW companies to have an agreement with labor representation, if requested, before being licensed or renewed. It also provides funding to help increase revenue into existing welfare and pension funds for backstretch workers and horsemen. It requires that a specified percentage of ADW wagers -- not to exceed $1 million annually -- be used to establish and administer a contribution pension plan for California licensed jockeys who retire from racing on or after Jan. 1, 2009.

Three ADW companies have been licensed in the state since 2002 -- TVG, XpressBet and Youbet.com -- with a fourth, Churchill Downs' wagering platform Twinspires.com, set to gain approval possibly as soon as Oct. 18 from the California Horse Racing Board.

"ADW continues to be a work in progress," said John Harris, CHRB vice chairman. "I feel it holds much promise to revitalize interest in racing as it offers a convenient product with an audience of millions. We need to make it easy and accessible. I was glad to see the horsemen’s consent language inserted into this version. I am hopeful the overall ADW handle will continue to grow and all the stakeholders can do well because of it."

The Evans portion of the bill provides that a state racing fair may, with CHRB approval, deduct an additional 1% from its handle, to be used for maintenance and improvements at a fair's racetrack facility. According to the Senate Appropriations Committee, if all eligible fairs contributed to the fund, annual revenue would be about $1.5 million.