11/17/2016 8:41PM

California Horse Racing Board approves account-wagering licenses

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The California Horse Racing Board on Thursday approved the licenses for six account-wagering companies through the end of January after a two-hour discussion that failed to resolve a litany of concerns that commissioners said they had about the operations of the businesses.

The temporary approvals, which were issued at the tail end of a meeting at Del Mar that stretched beyond five hours, will allow some of the largest account-wagering companies in the U.S. to continue to take bets from state residents for the next two months. However, all of the companies, which included TVG, XpressBet, and twinspires.com, were seeking two-year operating permits.

More than any other state, California has taken a highly aggressive role in pressing account-wagering companies on their operations, in part because of an activist horse-ownership group, the Thoroughbred Owners of California. The board’s concerns ranged from the companies’ resistance to incorporating geolocation technology into their systems, to their records in creating California jobs, and to the perception that the companies do not contribute their fair share to the racing industry, through either statutory payments or charitable contributions.

Still, over the two hours of discussion, little progress appeared to have been made on those issues, with company officials employing a wide range of tactics in replying to the board’s concerns. In the end, Chuck Winner, the board’s chairman, told the companies that “what we’d really like is for you to take all of these things into consideration” before they reapply to the board in January.

“What we’re telling you is that we’re not willing to sit and wait anymore,” Madeline Auerbach, a CHRB board member, told the companies.

California is the largest account-wagering market in the U.S. The applicants on Thursday also included the New York Racing Association, which has recently implemented a strategy to expand its account-wagering operation beyond New York’s borders.

The geolocation technology that is being sought by the board would seek to identify bettors who are using their accounts to bet on live races while at the track. If the technology determined a bettor was at the track, then revenue splits that are required for ontrack bets should apply to the wagers, the CHRB and the TOC have argued. The splits for ontrack wagers are higher for tracks and horsemen than for offtrack bets.

The CHRB is in the process of drafting a regulation that would require the use of the technology, according to Rick Baedeker, the executive director of the CHRB, but approval of the regulation, if it comes at all, is still months away. New Jersey is currently the only state in the U.S. that requires geolocation technology.

Several account-wagering officials were resistant to the idea of being required by rule to use geolocation, with John Hindman, the legal counsel for TVG, telling the commission that his company believed the issue of ontrack use of wagering accounts should be resolved contractually in the agreements that account-wagering companies are required to reach with tracks and horsemen.

“This is a commercial issue rather than a regulatory one,” said Hindman.

The account-wagering companies were also challenged on their impact on the California labor force and its economy, both by the commission and by John Valenzuela, a representative of Pari-Mutuel Employees Guild – Local 280. Officials of the account-wagering companies all said they had been unable to reach an agreement on demands the union has made of the companies regarding jobs.

Also at the meeting, the board tackled another controversy, one over race dates in Northern California, with the approved schedule largely along the lines of this year’s schedule. But commissioners warned racetrack and fair representatives that they wanted the operators to cooperate better on devising the schedule for the 2018 calendar year. 

Under the 2017 schedule approved on Thursday, Golden Gate Fields will run from the beginning of the year until June 20, when racing will shift to the smattering of tracks that make up the Northern California fair circuit. It was the fair scheduling that proved controversial for some tracks and led to delays in setting the schedule. The schedule approved Thursday was recommended by the CHRB’s dates committee, which deliberated on the calendar on Wednesday.

“It was a puzzle that did not allow everyone to be satisfied with the result,” said Winner at the Thursday meeting. “There’s no question that some were not satisfied. For that we’re sorry.”

The biggest conflict appeared to be between Sonoma County Fair and Cal Expo, which both wanted race dates in July. The schedule approved on Thursday gave Cal Expo dates from July 12 to Aug. 1, with Sonoma racing from Aug. 2 to Aug. 22.

Rebecca Bartling, the chief executive of the Sonoma County Fair, told the board that she believed it was unfair to give Sonoma the August dates considering past allocations by the board and the fair’s investment in a turf course. She said she could not explain to local residents why the fair would now race in August instead of July.

“The only answer I have is that it must be political,” Bartling said.

Following arguments from Sonoma and Cal Expo, Jesse Choper, a CHRB board member, led a call by the commission to urge the fairs to hammer out an agreement on the 2018 schedule well before the board begins to deliberate over the schedule next year. At the same time, Auerbach said that the fairs should consider this year’s schedule a one-time compromise that should not be viewed as “precedent” for subsequent years.

After Golden Gate closes on June 20, racing will be conducted at Pleasanton from June 21 to July 11, followed by Cal Expo and Sonoma. Ferndale will run from Aug. 23 to Sept. 5, while Golden Gate runs from Aug. 23 to Sept. 19. Racing will return to Pleasanton from Sept. 20 to Oct. 3 and move to Fresno from Oct. 4-17 before returning to Golden Gate on Oct. 18, running through Dec. 19.

However, Sonoma may drop the last week of its race dates if the dates overlap with school schedules, which have yet to be set in the county. In that case, Ferndale would move its race meet up one week, the CHRB said.

Also at the meeting, the CHRB approved a motion to accept public comment for a 45-day period on a proposed rule that would give stewards slightly expanded powers to declare a horse a non-starter. Under the proposal, stewards would have the discretion to declare a horse a non-starter if it is delayed at the start “through no fault of its own,” such as an assistant starter failing to release a hold on the horse’s bridle when the gate opens.

Darrell McHargue, California’s chief state steward, said that the stewards have been operating as if the rule is in place for the last three or four years, and the new rule would simply align the language with practice.

One aspect of the rule that is expected to be discussed is whether the owner of the horse that is declared a non-starter can collect any part of the purse if the horse earns a purse share despite the delayed start, commissioners said. In addition, commissioners also expect to weigh whether bettors could collect payoffs if the non-starter finishes in a position that determines a parimutuel payoff.

Finally, the board also approved 2017 operating licenses for Santa Anita and Golden Gate, but only after conducting extended discussions over account-wagering agreements for the upcoming Santa Anita meet, which begins on Dec. 26 and, in the case of Golden Gate, over stabling issues in Northern California. Critical issues regarding both topics remain unresolved.

Santa Anita, for instance, still does not have any agreements with account-wagering companies for its meet, according to track officials. However, account-wagering agreements are often resolved at the last minute due to extended negotiations over signal rates and other contractual elements, which this year could include provision requiring ADW companies to pay additional fees based on an estimate of the amount of money bet through their operations ontrack, commission and track officials said.

Santa Anita is owned by The Stronach Group, which also owns and operates XpressBet.

Stabling issues in Northern California have been a topic of concern for years. The board said it intended to revisit the topic in the spring.