California bill would raise takeout on exotics

Legislation that would increase the takeout on exotic wagers in California and authorize exchange betting in the state has been introduced in the state Assembly.

The bill, AB 2414, would increase the takeout on two-horse exotic wagers by 2 percent, from the current 20.68 percent to 22.68 percent, and increase the takeout on bets requiring three or more horses by 3 percent, from 20.68 to 23.68 percent. Takeout for win, place and show bets are not part of the legislation and would remain at the current level of 15.43 percent. If the legislation is passed, the higher takeouts would go into effect on Dec. 26.

The legislation, sponsored by Assembly speaker John Perez, Democrat from Los Angeles, states that additional revenue from the bill must go toward increasing overnight purses at California tracks.

Del Mar’s president, Craig Fravel, said the bill could lead to an additional $25 million to $30 million in purses annually.

The bill has the support of the Thoroughbred Owners of California, which has seen a decline in horses racing in California in recent years in part because of a migration of lower-class horses to some East Coast tracks where purses are enhanced by slot machine revenue.

“It should be positive when people realize what it will do,” said president Arnold Zetcher, president of Thoroughbred Owners of California. “It’s a raise for trainers and jockeys and a positive step forward. It’s clearly substantial and we think it can make a difference.

“The takeout in California is one of the lowest in the country.”

The proposed increases would leave two-horse bets in California with a higher takeout than some other racing states and provinces. The takeout for two-horse bets is 18.5 percent in New York, and 20.5 percent in Illinois, Louisiana and Ontario. Under the proposed increases, California’s takeout for more complex exotic bets would still be lower than other jurisdictions. The takeout for bets with three or more horses is 25 percent in Illinois and Louisiana, 26 percent in New York, and ranges from 25 to 27 percent in Ontario.

New York has a two-tiered structure for the pick six, with a takeout of 16 percent on non-carryover days and 26 percent for carryovers.

Jeff Platt, the president of the grass-roots Horseplayers Association of North America, said his organization opposes an increase in takeout and predicts it will lead to a decline in business.

“My first reaction is it leaves a bad taste in my mouth,” he said in a phone interview over the weekend. “They’ll see a drop in handle and total revenue because of it.”

While Platt admits that many bettors may not be aware of the takeout rates in various states, he said they feel it after a few days of betting.

“What they do notice is after several trips to simulcasting their wallets are empty,” he said. “If they have to go to the ATM too much, they bet less.”

Zetcher acknowledged that some bettors will be upset by the higher takeout “I understand what the other side’s position might be,” he sid.

Fravel said it was unclear whether the bill would pass during the current legislative session, scheduled to end on Aug. 31.

The provision to allow exchange betting leaves the rules and regulations of that type of wagering to the California Horse Racing Board to determine, particularly how to divide revenue among the tracks, horsemen and system operator. Exchange wagering, conducted on the Internet, allows bettors to post odds on a horse and take bets directly from other players.

The leading exchange betting company in the world is Betfair, which acquired the TVG account wagering service and television network last year. Betfair is a proponent of the proposed legislation in the California Assembly.