National Council of Legislators from Gaming States s1

NATIONAL COUNCIL OF LEGISLATORS FROM GAMING STATES

COMMITTEE ON PARI-MUTUELS

LAS VEGAS, NV

JANUARY 4, 2013

2:45 P.M. – 3:30 P.M.

The Committee on Pari-Mutuels of the National Council of Legislators from Gaming States (NCLGS) met at the Rio All Suites Hotel & Casino, on Friday, January 4, 2013, at 2:45 p.m.

Representative Joe Gibbons of Florida presided.

Other legislators present included:

Rep. James Buskey, AL

Rep. Kevin Ryan, CT

Rep. Helen Keeley, DE

Rep. Frank Artiles, FL

Sen. Maria Sachs, FL

Rep. Perry Thurston, FL

Rep. Jim Waldman, FL

Rep. Alan Williams, FL

Sen. Jeff Danielson, IA

Others present were:

Susan Nolan, Nolan Associates, NCLGS Executive Director

MINUTES

The Committee accepted the minutes of its last meeting on June 15, 2012, in New Orleans, Louisiana.

STATE AND FEDERAL PARI-MUTUEL INVOLVEMENT
Ed Martin, Executive Director, Association of Racing Commissioners International (RCI), said that, as he had noted earlier in the day, the New York Times has run a number of articles highlighting some very egregious situations in the horse industry, including Mexican drug cartel involvement, money laundering through horse sales, and the use of substances such as frog venom to improve a horse’s situation.

Mr. Martin said that there are a number of people lobbying Congress to get involved. He said that since he last spoke before the Committee, he was called before the U.S. Senate Commerce Committee to testify regarding the Udall-Whitfield bill, which would put determination of equine policy in the hands of a federal agency that does not include even one veterinarian. He said he testified that one problem with the bill was that it didn’t provide any funding mechanism to develop policy or finance the program. He said that a Member of Congress sternly lectured him in response about all the money states have from gaming and interstate simulcasts to improve and expand upon drug testing and policing of the pari-mutuel sport. Mr. Martin said that he did not expect the drumbeat for federal regulation of racing to lessen.

Mr. Martin said that for the first time, a major industry organization in thoroughbred racing—the Jockey Club—has endorsed the concept of federal regulation of racing. He said the Jockey Club also endorsed an interstate regulatory compact to create a vehicle for the states to advance uniformity and pool resources that the RCI worked on with the Council of State Governments (CSG). He said that as lawmakers look at other initiatives like interstate compacts for the regulation of Internet poker, they might want to consider tacking on approval of language for the interstate horseracing compact.

RCI UNIFORM DRUG POLICY, CONSOLIDATION OF TESTING LABS

Mr. Martin said that horse racing in the U.S. has the most aggressive drug testing. He said that the magnitude of testing performed on pari-mutuels dwarfs what is being done in any other sport. He said that the Partnership for Clean Competition, comprising groups such as the U.S. Olympic Committee, the National Football League, Major League Baseball, and the U.S. Anti-Doping Agency, tests 8,000 biological samples a year—while in 2011, the collected work of state racing commissions comprised 385,736 tests. Mr. Martin said that out of the 385,736 samples tested, 99.5 percent came back clear and that most overages were found to be therapeutic overages—legal substances that were administered by licensed professionals that would be considered normal for proper equine care.

Mr. Martin said that while pari-mutuels are tested at deeper levels than any other sport, the image of horse doping has persisted for many years. He said that—in the interest of achieving some degree of uniformity for the industry and its participants and clarifying in the public’s mind that the sport is not being permeated by horse dopers and cheaters—racing commissioners got together with the Racing Medication and Testing Consortium (RMTC) and resumed work on a project that had stalled.

Mr. Martin reported that the RCI and RMTC formed a scientific task force for the purpose of creating uniform thresholds and withdrawal times for an approved list of medications suggested by the American Association of Equine Practitioners (AAEP). He said that this included the most renowned experts that advise racing commissions across the country—veterinarians, chemists, and pharmacologists. He said they are attempting to modify model rules to finish the project over the next few months.

Mr. Martin said the group developed recommendations regarding when to determine that something is a violation for a particular drug, i.e., the amount that is a violation and the amount below that is not. He also said that a restricted administrative time frame would be developed, so that participants in the sport have a clear line of demarcation regarding when and when not to treat a horse.

Mr. Martin said that lack of certainty that occurs from commission to commission is driving some people to ask Congress for a common set of rules. He said that it is possible that some advocating for federal legislation could ask for a federal bill to force adoption of common rules by reference.

He said that the Task Force is going to ask state racing commissions to adopt its schedule of recommendations by reference. He said it is possible that state legislators and regulators will be approached by those asking for this. He said he believes that regulatory commissions can do this and that it is the proper thing to do—as it is an attempt to pool development of equine policy based on the recommendations of the most respected experts in the industry.

NEW PRODUCTS AND INITIATIVES, HOW PARI-MUTUELS CAN BEST SURVIVE

INSTANT RACING MACHINES

Larry Eliason, Executive Secretary of the South Dakota Commission on Gaming and RCI Board Member, said that instant racing machines are currently in play at four tracks in two states—Arkansas and Kentucky. He said that several years ago, the machines were in play in Wyoming but they were removed because the Wyoming attorney general ruled that they were not pari-mutuels.

Mr. Eliason said that in Arkansas, Oaklawn Park Race Track in 2010 brought in $1.97 million and that Southland Greyhound Park handled another $4.5 million. He said the two Arkansas tracks brought in almost $200 million.

Mr. Eliason reported that in Kentucky instant horse racing experienced some legal challenges but that eventually proponents of the machines, including the Kentucky attorney general and the Kentucky Racing Commission, prevailed. He said that the machines were first placed at Kentucky Downs and that the effect on the track was dramatic. He said the handle for the first month was $4.3 million and that by August 2012—one year later—the handle was $17 million a month. Mr. Eliason said that a six-day meet will pay $2.5 million. He said that the track president was quoted as saying that they anticipate bringing in $200 million next year. He said the track president was also quoted as saying that in a four-month span over ten of those months, the handle was over $201 million for the two tracks, and that before instant machines were installed, the track was in survival mode.

Mr. Eliason reported that instant racing machines have contributed a half of a million dollars to the Kentucky state general fund and hundreds of thousands to breeders’ incentives, and have helped to support higher education and drug research. He said that million-dollar purses, some of the highest purses in the country, are being offered in Ellis Park.

Mr. Eliason said that Kentucky Downs started with 220 machines and has added 150 more. He said that since the machines were installed, the racetrack has added 100 employees. He noted that the president of the track was quoted as saying that likely will add more.

EXCHANGE BETTING

Mr. Eliason reported that exchange betting was one of two types of new wagering approved by a legislature but not yet implemented. He said that exchange betting was one of these. He said that exchange betting was a system of wagering instituted in England in about 2000. He said that under it, a player might say, “I have $20 on a horse to be number one in the second race at seven to one odds—do you want to take up my bet?” Mr. Eliason said that Betfair is one of the biggest, best-known operators in the United States.

Mr. Eliason said that California had approved exchange wagering and that the California Horse Racing Board was in the process of developing administrative rules, which he understands are targeted for late 2013. He said that controversies relating to exchange wagering include:

·  They are not pari-mutuel wagers per se and no money goes into the pari-mutuel pool.

·  Tracks, horsemen, and owners don’t get their share of money.

·  Bets can be placed during the running of the race.

·  You can bet on a horse to lose as well as win—and that can promote fraud.

·  One economic study predicts that exchange wagering would cannibalize 17 percent of the existing market.

He said it is opined that growth of the younger demographic, the target of exchange betting, will offset cannibalization.

Mr. Eliason said that exchange betting was in progress in California and that owners of Santa Anita Park and Golden Gate Fields, and horsemen’s groups, had expressed opposition because of money apportionment and concerns of potential fraud. He said that Hollywood Park and Del Mar had expressed interest.

SINGLE POOL WAGERING

Mr. Eliason reported that New Jersey had passed single pool wagering, another new product not yet implemented. He said that single pool wagering is a patented mathematical distribution, whose rights are owned by Longitude. He said that essentially any bet is distributed among all the pools. He said that professional handicappers have expressed resistance because they don’t want their bets to be impaired as a result of pooling with less-informed bettors.

Mr. Eliason said that single pool betting is in a similar circumstance as that of exchange wagering—the legislation has passed and the New Jersey Racing Commission is promulgating rules. He said that the industry will probably take a wait-and-see attitude for a while to see how it plays out in the state.

Joe Rooney, Vice President of Palm Beach Kennel Club, said that his family has been in the racing industry for three generations, going back to the ’60s, and has been involved in standardbred, thoroughbred, and jai alai pari-mutuel sports. He said that during his time in the industry, the industry had started to decline. He said that once off-track betting came to New York, the Vermont racetrack declined. He said he was sure that the Kentucky tracks were in survival mode, and that those in Delaware prior to slot machines were all but done.

Mr. Rooney said that his family had tried many things, including tractor pulls and county fairs, which work well for the time they are run but do not generate additional money in the windows. He said that the best thing that tracks can do to survive is to add a product that people actually want. He said that most industries are allowed to evolve and offer products that consumers really desire, as a natural evolution of their business, but that it is hard to do for the pari-mutuel industry because of the nature of gambling and state oversight.

Mr. Rooney said that today’s gambler is interested in instant-winning, lower-skilled, quick electronic games. He said that the customer base is getting older and that it will not be replaced by a younger one. He said Palm Beach Kennel Club is a good example of this, and that it started out in 1933 with a short seasonal meet and then expanded a bit. He said with off-track betting and simulcast, the Club evolved into a year-round industry. He said that adding poker had added a whole new dimension to the clientele.

Mr. Rooney said that what needs to happen for pari-mutuels to continue to survive is they need another evolution into historic racing and slot machines. He said that 12 to 15 years ago, Yonkers Raceway, which his family bought in the 1970s, was contracted to become a shopping mall. He said that now it is one of the most successful pari-mutuel, slot machine generators in the country. He said that if not for this, the track would have been gone.

Mr. Rooney said that pari-mutuel racing is the most logical outlet for the next generation of gambling products as it is an outlet that already exists. He said that he can predict that without it, Florida tracks outside Broward or Dade County will soon go out of business. He said that pari-mutuels need to be allowed to evolve, that evolution, not the propping up of a dying industry, needs to happen.

ADJOURNMENT

There being no further business, the meeting adjourned at 3:30 p.m.

© National Council of Legislators from Gaming States (NCLGS)

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