Illinois racetracks, horsemen reach account-wagering agreement

Illinois racetracks and horsemen’s groups reached an agreement Tuesday night that, if approved by the Illinois legislature before the end of January, would adequately fund the Illinois Racing Board and avert a catastrophic reduction of racing dates in 2014.

The agreement would extend Illinois’ account-wagering law, which is set to expire Jan. 31, 2014, through Jan. 31, 2017, and would fund the Illinois Racing Board through a surcharge of about .2 percent on winning wagers at racetracks, offtrack betting facilities, and bets placed online through account-wagering services. To become law, it must be passed by the legislature, which will convene at least once, in January, and perhaps also in December, before the Jan. 31 deadline.

The IRB derives all its operational funding through betting handle, and when the Illinois account-wagering law lapsed for several months in 2013 it left a gaping hole in the IRB’s revenue stream. With the law set to expire again in January, the IRB in September issued four possible 2014 racing schedules – contingent upon resolution of the funding issue – that ranged from the status quo to a radical reduction in dates that would have crippled the state’s racing industry. With Tuesday’s announced agreement, it appears the status quo prevails.

The drastic cuts, which would have pared Hawthorne’s racing season to a mere 15 days and basically ended Illinois harness racing, crept closer when the legislature’s three-day November session came and went without any action on account wagering. The legislature declined to take up the issue because the racing industry, lacking consensus before Tuesday, introduced competing amendments during the November session. Arlington, seeking to protect Twinspires.com, the account-wagering company owned by its parent company, Churchill Downs Inc., wanted to fund the IRB through an increase in the parimutuel tax paid by racetracks. The state’s other racetracks as well as the major Illinois horsemen’s groups brought forth legislation that would have changed the way account-wagering handle is divided, giving a greater share to purses, and raised IRB revenue through a .9 percent surcharge on account wagers.

Tuesday’s compromise will not change the way account-wagering handle is divided, but will introduce a surcharge on all winning account wagers. Until now, account wagers have been the only type of Illinois bet not subject to a surcharge: Winning bets at racetracks carry a 1 percent surcharge – though Arlington and Hawthorne have so far chosen not to apply the charge – while winning bets at offtrack betting parlors carry a 2.5 percent surcharge.

And while Tuesday’s agreement is good news for the Illinois racing industry as a whole, it could subject bettors in the state to further taxation on winning bets and their profits. The legislation that will be produced through Tuesday’s agreement also would allow tracks, if they choose, to levy an additional surcharge of up to .5 percent on winning ontrack and OTB wagers, a surcharge that is not related to funding the IRB. The voluntary surcharge would be split 50-50 between the track operator and the track’s purse fund.

Tuesday’s agreement permits Arlington, Hawthorne, and the Maywood/Balmoral harness-racing consortium, to each open two new offtrack betting parlors. The deal also addresses the Illinois Thoroughbred Horsemen’s Association’s demand that account-wagering companies provide the horsemen’s organization with a full accounting of online betting in the state – but only partially. Account-wagering companies operating in the state must present a full financial accounting to the ITHA upon request, but Twinspires, the state’s biggest online bet-taker, is exempt from the provision. Account-wagering companies already are subject to spot audits by the Illinois Racing Board.