10/11/2007 11:00PM

Youbet, Breeders' Cup in dispute

EmailBreeders' Cup Ltd. and Youbet.com are locked in a dispute over a simulcasting contract that is putting the availability of Breeders' Cup races on the account-wagering platform in jeopardy, officials for both companies said Friday.

Greg Avioli, the president of Breeders' Cup, said that Youbet has yet to pay Breeders' Cup a portion of the fees generated on its wagering for last year's event at Churchill Downs, and will not be allowed to sign a contract until the fees are paid. In addition, Youbet has asked the California Horse Racing Board for its help in interpreting a part of California racing law that Youbet believes caps signal rates at 3.5 percent for wagers made by California bettors, an interpretation that Breeders' Cup strongly disputes.

"There is absolutely nothing in the law that says that," Avioli said. "It's as if someone said that they interpreted a 55-mile-per-hour speed limit as meaning that they were able to go 90 miles per hour."

Avioli said that all other major account-wagering providers that do business in California had already signed contracts with Breeders' Cup, and that no other account-wagering provider had ever claimed that the California law prevented Breeders' Cup from charging a rate higher than 3.5 percent.

Lonny Powell, a vice president of Youbet, said on Friday afternoon that he believed Youbet and Breeders' Cup would eventually reach an agreement. He acknowledged that Youbet had paid Breeders' Cup a host fee higher than 3.5 percent in the past, but had brought up the issue last year because of the company's concerns that a higher host fee would violate California's racing law.

Powell acknowledged that Youbet owes money to Breeders' Cup and he hoped they could settle that debt with the new agreement this year.

Richard Shapiro, the executive director of the California racing board who was said by both companies to be working on a resolution, did not return phone calls on Friday.

Breeders' Cup charges all simulcasting outlets 50 percent of the net revenue from wagering, a rate that fluctuates based on the takeout of the host track but is typically approximately 10 percent of handle. The Breeders' Cup is scheduled for Oct. 26 and 27 at Monmouth Park this year.

Youbet.com is one of the largest account-wagering providers in the country, and last year the company's customers bet $4 million on the eight races of the Breeders' Cup, according to Youbet financial statements.

Avioli said it was his hope that a deal would eventually be reached between the two companies, but said that Youbet would have to sign a standard contract and pay off its outstanding balance.

"We want the broadest distribution possible for the Breeders' Cup, in all cases," Avioli said. "It's our hope that Youbet will reach agreement with us on these issues."

Separately, Ken Kirchner, a simulcasting consultant for Breeders' Cup, said on Friday that the Youbet-owned offshore rebate shop International Racing Group will likely be prevented from taking wagers on the Breeders' Cup races because of a federal investigation involving the company. In addition, Breeders' Cup has failed to sign a contract with Racing and Gaming Services, an offshore rebate shop with a small but high-rolling roster of gamblers, because of concerns over the investigation.

"We don't know the breadth and the depth of the federal investigation, so for now we're being very cautious," Kirchner said.

Youbet acknowledged on Tuesday night that agents from U.S. Immigration and Customs Enforcement served a search warrant at the company's Woodland Hills, Calif., headquarters and seized records related to clients of International Racing Group, a rebate shop in Curacao that Youbet purchased in 2005. Youbet said in a statement that the company does not believe it is a target of the investigation.