AB 1405 Horse racing: marketing organization. BILL NUMBER: AB 1405 AMENDED 09/03/99 BILL TEXT AMENDED IN SENATE SEPTEMBER 3, 1999 INTRODUCED BY {- Committee on Governmental Organization (Wesson (Chair), Battin (Vice Chair), Baugh, Cardoza, Granlund, Longville, Margett, Vincent, Wiggins, and Wright) -} {+ Assembly Member Wesson +} {+ (Principal coauthor: Assembly Member Granlund) +} FEBRUARY 26, 1999 An act to amend {- Section 19605.73 of -} {+ Sections 19411, 19590, and 19595 of, and to add Section 19604 to, +} the Business and Professions Code, relating to horse racing. LEGISLATIVE COUNSEL'S DIGEST AB 1405, as amended, {- Committee on Governmental Organization -} {+ Wesson +} . Horse racing: {- marketing organization -} {+ advance deposit wagering +} . {+ (1) Existing law permits any racing association in this state, with the approval of the California Horse Racing Board, to accept out-of-state wagers on a race or races conducted by or disseminated by that association and to transmit live audiovisual signals of the race or races to locations out of state. Existing federal law, the Federal Interstate Wire Act, generally prohibits the transmission in interstate commerce of wagers using a wire communication facility, but allows for the transmission of wagering information as specified. This bill would authorize any racing association or fair to accept advance deposit wagers, or to allow these wagers through a betting system or multijurisdictional wagering hub, during the calendar period of its live racing meeting upon approval by the board, and to form partnerships, joint ventures, or any other affiliation to further this purpose. The bill would provide that an advance deposit wager is a method of making a parimutuel wager in which a person in California or elsewhere establishes an account with a licensee, betting system, or multijurisdictional wagering hub, and subsequently issues wagering instructions concerning the funds in this account, thereby authorizing the entity holding the account to place wagers on the account owner's behalf. The bill would provide that wagering instructions may be communicated by telephone call or through other electronic media, and that the entity holding the account shall ensure the identification of the account's owner by utilizing methods and technologies approved by the board. The bill would require entities holding advance wagering accounts to provide a full accounting of deposits and wagers, as specified, and after the payment of winning wagers and the deduction of contractual compensation and a host fee, where applicable, to pay the remaining amount to various racing entities in California, with specified percentages based on handle to be dedicated to the establishment of the Kenneth L. Maddy Building Fund and the augmentation of compulsive gambling prevention programs, and the remaining funds to be distributed as commissions, purses, and incentive awards, as specified. The bill would require the board to develop and adopt rules to regulate and license advance deposit wagering operations, and would require that entities conducting advance deposit wagering conducted in California enter into contractual agreements with labor organizations, as specified. (2) Existing law defines "parimutuel wagering" as wagering where bettors purchase tickets, and provides that lawful parimutuel wagering shall only be conducted within the inclosure of a licensee. This bill would provide that the term "parimutuel wagering" includes the issuance of wagering instructions leading to the placement of wagers, and that wagering instructions concerning funds held in an advance deposit wagering account shall be deemed to be issued within the licensee's inclosure, in accordance with (1). +} {- Existing law authorizes racing associations, fairs, and organizations responsible for contracting with racing associations and fairs to form a private statewide marketing organization to market and promote thoroughbred and fair horse racing. Existing law requires this marketing organization to submit an annual statewide marketing and promotion plan, as specified, to the California Horse Racing Board. This bill would require the marketing organization to also submit this annual report to the appropriate policy committees in each house of the Legislature. -} Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no. {- SECTION 1. Section 19605.73 of the Business and -} {+ SECTION 1. Section 19411 of the Business and Professions Code is amended to read: +} 19411. "Parimutuel wagering" is a form of wagering {- on the outcome of horseraces -} in which {- those who wager -} {+ bettors either +} purchase tickets of various denominations {+ , or issue wagering instructions leading to the placement of wagers, +} on {- a horse or horses in -} {+ the outcome of +} one or more {+ horse +} races. When the outcome of the race or races has been declared official, the association distributes the total wagers comprising each pool, less the amounts retained for license fees, purses, commissions, breakage, and breeder and stallion awards, to {- holders of -} winning {- tickets on the winning horse or horses -} {+ bettors +} . {+ SEC. 2. Section 19590 of the Business and Professions Code is amended to read: +} 19590. The board shall adopt rules governing, permitting, and regulating mutuel wagering on horse races under the system known as the parimutuel method of wagering. Such wagering shall be conducted only by a person licensed under this chapter to conduct a horse racing meeting, and only within the inclosure and on the dates for which horse racing has been authorized by the board. {+ Wagering instructions concerning funds held in an advance deposit wagering account shall be deemed to be issued within the licensee's inclosure. +} {+ SEC. 3. Section 19595 of the Business and Professions Code is amended to read: +} 19595. Any form of wagering or betting on the result of a horse race other than that permitted by this chapter is illegal. Also illegal is any wagering or betting on horse races outside an inclosure where the conduct of horse racing is licensed by the board. {+ Wagering instructions concerning funds held in an advance deposit wagering account shall be deemed to be issued within the licensee's inclosure. +} {+ SEC. 4. Section 19604 is added to the Business and Professions Code, to read: 19604. (a) Notwithstanding any other provision of law, in addition to parimutuel wagering otherwise authorized by this chapter, advance deposit wagering may be conducted upon approval of the board. The board may authorize any racing association or fair, during the calendar period it is licensed by the board to conduct a live racing meeting in accordance with the provisions of Article 4 (commencing with Section 19480), to accept advance deposit wagers or to allow these wagers through a betting system or a multijurisdictional wagering hub. Racing associations and racing fairs may form a partnership, joint venture, or any other affiliation in order to further the purposes of this section. (b) As used in this section, "advance deposit wagering" means a form of parimutuel wagering in which a person residing within California or outside of this state establishes an account with a licensee, a board-approved betting system, or a board-approved multijurisdictional wagering hub located within California or outside of this state, and subsequently issues wagering instructions concerning the funds in this account, thereby authorizing the entity holding the account to place wagers on the account owner's behalf, as authorized by this chapter. An advance deposit wager may be made only by the entity holding the account pursuant to wagering instructions issued by the owner of the funds communicated by telephone call or through other electronic media. The licensee, a betting system, or a multijurisdictional wagering hub shall ensure the identification of the account's owner by utilizing methods and technologies approved by the board. Further, at the request of the board, any licensee, betting system, or multijurisdictional wagering hub located in California, and any betting system or multijurisdictional wagering hub located outside of this state that accepts wagering instructions concerning races conducted in California or accepts wagering instructions from California residents, shall provide a full accounting and verification of the source of the wagers thereby made, including the zone and breed, in the form of a daily download of parimutuel data to a database designated by the board. Additionally, when the board approves a licensee, a betting system, or a multijurisdictional wagering hub, whether located within California or outside of this state, to accept advance deposit wagering instructions on any race or races from California residents, the licensee, betting system, or multijurisdictional wagering hub may be compensated pursuant to a contractual agreement with a California licensee, in an amount not to exceed 6.5 percent of the amount handled on a race or races conducted in California, and in the case of a race or races conducted in another jurisdiction, may be compensated in an amount not to exceed 6.5 percent, plus a fee to be paid to the host racing association not to exceed 3.5 percent, of the amount handled on that race or races. The amount remaining after the payment of winning wagers and after payment of the contractual compensation and host fee, if any, shall be distributed as a market access fee in accordance with subdivision (g). As used in this section, "market access fee" means the contractual fee paid by a betting system or multijurisdictional wagering hub to the California licensee for access to the California market for wagering purposes. As used in this section, "licensee" means any racing association or fair described in subdivision (a). (c) The board shall develop and adopt rules to license and regulate all phases of operation of advance deposit wagering for licensees, betting systems, and multijurisdictional wagering hubs located in California. Betting systems and multijurisdictional wagering hubs located and operating in California shall be approved by the board prior to establishing advance deposit wagering accounts or accepting wagering instructions concerning those accounts and shall enter into a written contractual agreement with the bona fide labor organization that has historically represented the same or similar classifications of employees at the nearest horse racing meeting. Permanent state or county employees and nonprofit organizations that have historically performed certain services at county, state, or district fairs may continue to provide those services, notwithstanding this requirement. (d) As used in this section, a "multijurisdictional wagering hub" is a business conducted in more than one jurisdiction that facilitates parimutuel wagering on races it simulcasts and other races it offers in its wagering menu. (e) As used in this section, a "betting system" is a business conducted exclusively in this state that facilitates parimutuel wagering on races it simulcasts and other races it offers in its wagering menu. (f) In order for a licensee, betting system, or multijurisdictional wagering hub to be approved by the board to conduct advance deposit wagering, it shall meet both of the following requirements: (1) All wagers thereby made shall be included in the appropriate parimutuel pool of the host racing association or fair under a contractual agreement with the applicable California licensee, in accordance with the provisions of this chapter. (2) The amounts deducted from advance deposit wagers shall be in accordance with the provisions of this chapter. (g) The amount received as a market access fee from advance deposit wagers shall be distributed as follows: (1) An amount equal to .0011 percent of the amount handled shall be distributed to the California Center for Equine Health to establish the Kenneth L. Maddy Building Fund for the benefit of the School of Veterinary Medicine at the University of California at Davis. (2) An amount equal to .0003 percent of the amount handled shall be distributed to an organization designated by the racing association or fair described in subdivision (a) for the purpose of augmenting a compulsive gambling prevention program specifically addressing that problem. (3) With respect to wagers on each breed of racing that originate in California, an amount equal to 2 percent of the first two hundred fifty million dollars ($250,000,000) of handle from all advance deposit wagers originating from within California annually, an amount equal to 1.5 percent of the next two hundred fifty million dollars ($250,000,000) of handle from all advance deposit wagers originating from within California annually, and an amount equal to 1 percent of handle from all advance deposit wagers originating from within California in excess of five hundred million dollars ($500,000,000) annually, shall be distributed as satellite wagering commissions. The satellite wagering facility commissions calculated in accordance with this subdivision shall be distributed to each satellite wagering facility and racing association or fair in the zone in which the wager originated in the same relative proportions that the satellite wagering facility or the racing association or fair generated satellite commissions during the previous calendar year. For purposes of this section, the purse funds distributed pursuant to Section 19605.72 shall be considered to be satellite wagering facility commissions attributable to thoroughbred races at the locations described in that section. (4) With respect to wagers on each breed of racing that originate in California, after the payment of contractual obligations to the licensee, the betting system, or the multijurisdictional wagering hub, and the distribution of the amounts set forth in paragraphs (1), (2), and (3), the amount remaining shall be distributed to the racing association or fair which is conducting live racing on that breed during the calendar period in the zone in which the wager originated, and this amount shall be allocated to that racing association or fair as commissions, to horsemen participating in that racing meeting in the form of purses, and as incentive awards, in the same relative proportion as they were generated or earned during the prior calendar year at that racing association or fair on races conducted or imported by that racing association or fair after making all deductions required by applicable law. Purse funds generated pursuant to this section may be utilized to pay 50 percent of the total costs and fees incurred due to the implementation of advance deposit wagering. "Incentive awards" shall be those payments provided for in Sections 19617.2, 19617.7, 19617.8, 19617.9, and 19619. The amount determined to be payable for incentive awards shall be payable to the applicable official registering agency and thereafter distributed as provided in this chapter. If the provisions of Section 19601.2 apply, then the amount distributed to the applicable racing associations or fairs from advance deposit wagering shall first be divided between those racing associations or fairs in direct proportion to the total amount wagered in the applicable zone on the live races conducted by the respective association or fair. Notwithstanding this requirement, when the provisions of subdivision (b) of Section 19607.5 apply to the 2nd District Agricultural Association in Stockton or the California Exposition and State Fair in Sacramento, then the total amount distributed to the applicable racing associations or fairs shall first be divided equally, with 50 percent distributed to applicable fairs and 50 percent distributed to applicable associations. For purposes of this subdivision, the zones of the state shall be as defined in Section 19530.5, except as modified by the provisions of subdivision (f) of Section 19601, and the combined central and southern zones shall be considered one zone. Notwithstanding any provision of this section to the contrary, the distribution of the market access fee, other than the distributions specified in paragraph (1) or (2), may be altered upon the approval of the board, in accordance with an agreement signed by all parties receiving a distribution under paragraphs (3) and (4). (h) Notwithstanding any provisions of this section to the contrary, all funds derived from advance deposit wagering which originate from California on out-of-state and out-of-country thoroughbred races conducted after 6:30 p.m., Pacific Time, shall be distributed in accordance with this subdivision. With respect to these wagers, 50 percent of the amount remaining after the payment of contractual obligations to the multijurisdictional wagering hub, betting system, or licensee and the amounts set forth in paragraphs (1), (2), and (3) of subdivision (g) shall be distributed as commissions to thoroughbred associations and racing fairs, as thoroughbred and fair purses, and as incentive awards in accordance with subdivision (g), and the remaining 50 percent shall be distributed as commissions to the applicable quarter horse association, to be distributed as follows: (1) One-half of the amount received shall be distributed as a commission to the following racing associations as indicated: (A) Los Alamitos Quarter Horse Association, 55.5 percent. (B) Los Alamitos Harness Association, 25.5 percent. (C) The Harness Association conducting racing at Cal-Expo Racing Facility in Sacramento, 19 percent. (2) One-half of the amount received shall be distributed as purses to the following horsemen as indicated: (A) Los Alamitos Quarter Horse Horsemen, 55.5 percent. (B) Los Alamitos Harness Horsemen, 25.5 percent. (C) The Harness Association conducting racing at Cal-Expo Racing Facility in Sacramento, 19 percent. (i) Notwithstanding any provisions of this section to the contrary, all funds derived from advance deposit wagering which originate from California on out-of-state and out-of-country nonthoroughbred races conducted before 6:30 p.m., Pacific Time, shall be distributed in accordance with this subdivision. With respect to these wagers, 50 percent of the amount remaining after the payment of contractual obligations to the multijurisdictional wagering hub, betting system, or licensee and the amounts set forth in paragraphs (1), (2), and (3) of subdivision (g) shall be distributed as commissions to nonthoroughbred associations, as nonthoroughbred purses, and as incentive awards in accordance with subdivision (g), and the remaining 50 percent shall be distributed as commissions to the applicable thoroughbred associations or fairs, as thoroughbred and fair purses, and as incentive awards in accordance with subdivision (g). (j) A racing association, a fair, or a satellite wagering facility may accept and facilitate the placement of any wager from a patron at its facility that a California resident could make through a betting system or multijurisdictional wagering hub duly offering advance deposit wagering in this state, and the facility accepting the wager shall receive a 2 percent commission on that wager in lieu of any distribution for satellite commissions pursuant to subdivision (g). (k) Any disputes concerning the interpretation or application of this section shall be resolved by the board. +} {- Professions Code is amended to read: 19605.73. (a) Racing associations, fairs, and the organization responsible for contracting with racing associations and fairs with respect to the conduct of racing meetings, may form a private, statewide marketing organization to market and promote thoroughbred and fair horse racing. The organization shall consist of the following members: two members, one from the northern zone and one from the combined central and southern zones, appointed by the thoroughbred racetracks; two members, one from the northern zone and one from the combined central and southern zones, appointed by the owners' organization responsible for contracting with associations and fairs with respect to the conduct of racing meetings; and two members, one from the northern zone and one from the combined central and southern zones, appointed by the organization representing racing and satellite fairs. (b) The marketing organization formed pursuant to subdivision (a) shall annually submit to the appropriate policy committees in each house of the Legislature and to the board a statewide marketing and promotion plan for thoroughbred and fair horse racing that encompasses all geographical zones in the state, and which includes the manner in which funds were expended in the implementation of the plan for the previous calendar year. The plan shall be implemented as determined by the organization. The organization shall receive input from all interested industry participants and may utilize outside consultants in developing the annual marketing plan. (c) In addition to the distributions specified in subdivisions (a) and (b) of Section 19605.7, and in Sections 19605.71 and 19605.72, for thoroughbred and fair meetings only, from the amount that would normally be available for commissions and purses, an amount equal to 0.4 percent of the total amount handled by each satellite wagering facility shall be distributed to the statewide marketing organization formed pursuant to subdivision (a) for the promotion of thoroughbred and fair horse racing. Any of the promotion funds that are not expended in the year in which they are collected may be expended in the following year. If promotion funds expended in any one year exceed the amount collected for that year, the funds expended in the following year shall be reduced by the excess amount. (d) This section shall become inoperative on July 1, 2002, and, as of January 1, 2003, is repealed, unless a later enacted statute that is enacted before January 1, 2003, deletes or extends the dates on which it becomes inoperative and is repealed. Any moneys held by the organization shall, in the event this section is repealed, be distributed to the organization formed pursuant to Section 19608.2, for purposes of that section. -} Searching keywords: (statusam) (authorGovernmental Organization (Wesson (Chair),) (HooA)