California Inches Closer to Account Wagering

3 December 2001

The California Horse Racing Board took a major step Friday by adopting regulations that give the go-ahead for account wagering in the state.

The board voted to move forward with an Advance Deposit Wagering (ADW) system in the state. The passed regulations now go before the Office of Administrative Law for administrative review, a process that generally takes 30 days. If the CHRB approves companies to provide the service, and the AOL gives the regulations the thumbs up, racing fans could be betting with the system as early as Feb. 1, 2002.

The ADW system is pari-mutuel based and enables accounts holders residing within or outside California to establish an account and then authorizes a board-approved licensee, betting system, California hub, or out-of-state hub, by telephone or other electronic media, to place wagers on the account holder’s behalf.

The board will begin to accept and approve applications for operators to run the program and is expected to grant approval to the first batch of operators at its next meeting on Jan. 24.

Despite the move forward, the chairman of the board, Alan Landsburg wasn't enthusiastic about California permitting race betting over the Internet.

"This is not the salvation of racing. This is simply a step along the way," he said. "If business greed begins to raise its ugly head and threatens the good that this program can bring to the industry, that greed will not be greeted with a friendly shake from this commissioner."

When reached by IGN for further comment on the move and the direction the board would be taking in the next couple of months to approve operators and what kind of timeline the process would take, Landsburg said he had no other comments to make.

To operate an ADW system, applicants must post a $500,000 bond or other financial security, which protects the betting pools and customers. They also must provide information demonstrating their financial resources to operate such a system, establish security access policies and safeguards, protect the confidentiality of account information, and ensure that persons under 18 and other people prohibited from wagering at racetracks cannot open accounts.

The regulations the board agreed to pass came after the California legislature agreed to make account wagering legal in the state.

Left out of the regulations are procedures regarding the number and location of races on which account holders may place wagers; whether individual racetracks will accept wagers from a single account wagering system or multiple systems; whether those systems will charge fees for each wagering transaction; and details on how the simulcasts of the races will be delivered to homes. These matters will be addressed in the application process, according to board officials.

The regulations require the wagers to be included in the respective pools at each racetrack and that all wagering transactions be recorded and retained for 180 days. There would be no surcharge for any wager, but the law allows for transactional fees. The payoff would be the same as an on-track mutual. Deposits would be made in cash or by credit card, check, electronic fund transfer or other traditional means of deposit or payment.

However, in their own best interests, account holders would be able to instruct operators not to accept deposits by credit card and would be limited to wager only with the funds that already are in the account. They'd be allowed one additional deposit per racing day.

The decision to allow bettors to opt out of using their credit card is designed to help prevent problem gamblers from getting in over their head and give bettors an added sense of security.

Landsburg said the decision to include the credit card clause was important to give the regulation some legitimacy.

"Basically, we are protecting people from themselves by allowing them to opt out of credit card deposits," he said in a statement in September as the board was looking at different regulations. "We also are limiting them to wager only with the funds that already are in the account and just one additional deposit or refill per racing day. There will be a 24-hour cooling-off period before they can wager with additional deposits or change their option not to use credit cards."

Magna Entertainment is expected to be one of the leading companies for a license to bring account wagering to the Internet. The firm owns a handful of California tracks, as well as in other states, and has laid the foundation for the development of media sports wagering operations, including telephone account, interactive television and Internet-based wagering.

Jack Liebau, Magna's director of California operations was traveling on Monday and couldn't be reached for comment.