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Controversy erupts over proposed horse racing changes

Different factions within California’s horse racing industry are battling over late changes to a bill intended to revitalize the sport.

AB 2414, authored by Speaker John Perez, D-Los Angeles, has been moving through the legislative process since February, with unanimous support within the industry. But when the bill was amended last Friday to authorize a complex type of betting called exchange wagering, the industry divided into a bitter camps with opposing lobbying and advertising campaigns. 

On one side is a coalition that includes the Thoroughbred Owners Association, the prominent Hollywood Park race track, and a British company called Betfair which is a leading provider of the technology that allows exchange wagering. They’re supportive of the changes, and say these late amendments were vetted in several open meetings held by the California Horse Racing Board.

Arrayed against them is a coalition led by Magna Entertainment, owner of the popular Santa Anita and Golden Gate Fields horse tracks. They’re joined by Churchill Downs, the famed home of the Kentucky Derby, and the Jockey’s guild. Through California Strategies, Magna has launched a campaign to stop the bill, which they say was radically changed at the last minute, without warning. 

“We are trying to do something that’s helpful for the racetrack industry,” said Terry McGann, founder and principal at California Strategies. “But it’s impossible to support such a radical idea late in the session when it hasn’t been vetted.” 

Everyone involved agrees on a few things. Horse racing has been suffering from an aging fan base, as well as competition with Indian casinos other forms of gambling. As originally written, AB 2414 did two things that most people agreed on. It changed the formulas used to paying out bets in a way designed to increase the purse size, giving a larger portion to owners, trainers and jockeys. 

It also provides incentives to help bring the prestigious Breeders’ Cup Championships to California more often. This two-day event changes venues each year. The 2009 races were held in California — ironically, at Magna’s Santa Anita Track. Some in the industry hope to make California the Cup’s permanent home. 

The executive director of the Board, Kirk Breed, said that the exchange-betting concepts within the bill had been presented during at least three board meetings over the last several months, including the most recent meeting on August 19. 

“All of these items have been bought up,” Breed said. “All of the stakeholders were involved.”

That includes Magna Entertainment, he said, now the key opponent of the bill. It has taken out newspaper ads calling the bill, “A loser you can bet on.” It calls the bill “a last-minute backroom deal,” and is accompanied by a photo showing the backsides of several horses and jockeys during a race. Attempts to reach Magna representatives on Tuesday were unsuccessful. 

“They were involved in all those discussions all throughout the process,” said Stephen Burn, the chief American-based executive of Betfair, a British company that is a key supporter of the bill. 

Not so, said Robert Hartman, general manager of Golden Gate Fields, who countered that there was never the idea raised of putting exchange wagering into the bill.

“I was at the meeting August 19 meeting,” Hartman said. “There was never a conversation regarding exchange wagering. In the past there was some discussion on the topic. But there has never been any lengthy exchange regarding to specifics of exchange wagering.” 

He pointed to a review of the Aug. 19 meeting put out two days later, which doesn’t mention discussions of exchange wagering. Hartman said his company is wary of the exchange wagering, because in the two countries where it has been tried, the Great Britain and Australia, jobs have been lost in the track industry. 

“This was a clean bill until a week ago,” Hartman said. “I’m not exactly sure what happened, but we feel blindsided.”

Betfair bought TVG, an American company which provides gaming technology, in January 2009. It brought Burn over from the British operation in February to run TVG. 

Even prior to the amendments, the bill would have opened up some forms of more “exotic” betting. This would include multi-race bets that can lower odds but increase overall payouts. 

But exchange wagering takes this to another level. Rather than betting against the house at preset odds, players can offer up many different types of bets—betting against certain horses, or that that a horse will finish third from last. The house, via software, finds other bettors to take the other sides of these wagers. People can stake out positions and even sell them to others bettors prior to a race. 

But exchange wagering isn’t as exotic as some of its detractors make it out to be, according to George Wiley, a Democratic Caucus consultant who has worked on the bill. 

“When you bet one a horse to win, aren’t you betting on six other horses to lose?” Wiley asked rhetorically. 

The bill, he noted, only authorizes tracks to engage in exchange wagering. It doesn’t obligate them to do so, nor does in anoint any particular technology provider. 

Betfair has been heavily involved in the British version of exchange betting. Everyone seems to agree that the practice increased horse-race betting in Great Britain, and brought in younger bettors — a key problem in horse racing, which is suffering from an aging fan base. 

In fact, according to a Republican caucus analysis opposing the bill, between 1998, when exchange wagering was first allowed, and 2008, “purse revenues” went up 54 percent. Track attendance went up 10 percent, the number of horses in competition increased 19 percent, and the number of races jumped 26 percent. 

But Republicans have a number of other problems with the bill, most notably that it “seeks to implement a major policy initiative with only one week left in the legislative session….This bill is the antithesis of transparency and open government.” 

They also object to portions of that require “exchange wager licensees to enter into agreements with labor unions to provide collective bargaining.” The analysis goes on to say the bill would create 15 new public sector union jobs, which it calls a “buy-off” to “big labor.” 

There are other, generally less controversial portions of the bill. It also has provisions that would increase the payout to winning bettors, something seen as a key incentive to bringing more people to the track. 

“I think people recognize that there is a bit of a crisis in the California horse racing industry,” Betfair’s Burn said. “We need to find a way to increase purse size.” 

 AB 2414, authored by Speaker John Perez, D-Los Angeles, has been moving through the legislative process since February, with unanimous support within the industry. But when the bill was amended last Friday to authorize a complex type of betting called exchange wagering, the industry divided into a bitter camps with opposing lobbying and advertising campaigns. 

On one side is a coalition that includes the Thoroughbred Owners Association, the prominent Hollywood Park race track, the Jockey’s Guild, and a British company called Betfair which is a leading provider of the technology that allows exchange wagering. They’re supportive of the changes, and say these late amendments were vetted in several open meetings held by the California Horse Racing Board.


Arrayed against them is a coalition led by Magna Entertainment, owner of the popular Santa Anita and Golden Gate Fields horse tracks. They’re joined by Churchill Downs, the famed home of the Kentucky Derby. Through California Strategies Advocacy (CSA), Magna has launched a campaign to stop the bill, which they say was radically changed at the last minute, without warning.

“We are trying to do something that’s helpful for the racetrack industry,” said Terry McGann, principal at CSA. “But it’s impossible to support such a radical idea late in the session when it hasn’t been vetted.”

Everyone involved agrees on a few things. Horse racing has been suffering from an aging fan base, as well as competition with Indian casinos other forms of gambling. As originally written, AB 2414 did two things that most people agreed on. It changed the formulas used to paying out bets in a way designed to increase the purse size, giving a larger portion to owners, trainers and jockeys. 

It also provides incentives to help bring the prestigious Breeders’ Cup Championships to California more often. This two-day event changes venues each year. The 2009 races were held in California — ironically, at Magna’s Santa Anita Track. Some in the industry hope to make California the Cup’s permanent home. 

The executive director of the Board, Kirk Breed, said that the exchange-betting concepts within the bill had been presented during at least three board meetings over the last several months, including the most recent meeting on August 19. 

“All of these items have been bought up,” Breed said. “All of the stakeholders were involved.”

That includes Magna Entertainment, he said, now the key opponent of the bill. It has taken out newspaper ads calling the bill, “A loser you can bet on.” It calls the bill “a last-minute backroom deal,” and is accompanied by a photo showing the backsides of several horses and jockeys during a race. Attempts to reach Magna representatives on Tuesday were unsuccessful. 

“They were involved in all those discussions all throughout the process,” said Stephen Burn, the chief American-based executive of Betfair, a British company that is a key supporter of the bill. 

Not so, said Robert Hartman, general manager of Golden Gate Fields, who countered that there was never the idea raised of putting exchange wagering into the bill.

“I was at the meeting August 19 meeting,” Hartman said. “There was never a conversation regarding exchange wagering. In the past there was some discussion on the topic. But there has never been any lengthy exchange regarding to specifics of exchange wagering.” 

He pointed to a review of the Aug. 19 meeting put out two days later, which doesn’t mention discussions of exchange wagering. Hartman said his company is wary of the exchange wagering, because in the two countries where it has been tried, the Great Britain and Australia, jobs have been lost in the track industry. 

“This was a clean bill until a week ago,” Hartman said. “I’m not exactly sure what happened, but we feel blindsided.”

Betfair bought TVG, an American company which provides gaming technology, in January 2009. It brought Burn over from the British operation in February to run TVG. 

Even prior to the amendments, the bill would have opened up some forms of more “exotic” betting. This would include multi-race bets that can lower odds but increase overall payouts. 

But exchange wagering takes this to another level. Rather than betting against the house at preset odds, players can offer up many different types of bets—betting against certain horses, or that that a horse will finish third from last. The house, via software, finds other bettors to take the other sides of these wagers. People can stake out positions and even sell them to others bettors prior to a race. 

But exchange wagering isn’t as exotic as some of its detractors make it out to be, according to George Wiley, a Democratic Caucus consultant who has worked on the bill. 

“When you bet one a horse to win, aren’t you betting on six other horses to lose?” Wiley asked rhetorically. 

The bill, he noted, only authorizes tracks to engage in exchange wagering. It doesn’t obligate them to do so, nor does in anoint any particular technology provider. 

Betfair has been heavily involved in the British version of exchange betting. Everyone seems to agree that the practice increased horse-race betting in Great Britain, and brought in younger bettors — a key problem in horse racing, which is su
ffering from an aging fan base. 

In fact, according to a Republican caucus analysis opposing the bill, between 1998, when exchange wagering was first allowed, and 2008, “purse revenues” went up 54 percent. Track attendance went up 10 percent, the number of horses in competition increased 19 percent, and the number of races jumped 26 percent. 

But Republicans have a number of other problems with the bill, most notably that it “seeks to implement a major policy initiative with only one week left in the legislative session….This bill is the antithesis of transparency and open government.” 

They also object to portions of that require “exchange wager licensees to enter into agreements with labor unions to provide collective bargaining.” The analysis goes on to say the bill would create 15 new public sector union jobs, which it calls a “buy-off” to “big labor.” 

There are other, generally less controversial portions of the bill. It also has provisions that would increase the payout to winning bettors, something seen as a key incentive to bringing more people to the track. 

“I think people recognize that there is a bit of a crisis in the California horse racing industry,” Betfair’s Burn said. “We need to find a way to increase purse size.” 


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