California Shuts out Racing Pools

The California Horse Racing Board has sent cease and desist letters to operators of out-of-state betting hubs informing them that racing pools are illegal in California.

The letters were prompted by the California attorney general's recent determination that the hubs are facilitating illegal Internet gambling. Prior to sending the letters, the board was advised by the attorney general's office to stop sending simulcast signals to account wagering providers who intended to use them to conduct pool wagering.

The attorney general's interpretation of California law is that individuals cannot bet under the name of a company for tax purposes, thereby making pool betting illegal in the state. The board voted unanimously June 30 that racing associations in that state may not accept partnership bets on any California race made by an out-of-state-multi-jurisdictional wagering hub.

The new policy will have a particularly strong impact on operators based in Oregon, where a high volume of bets are routed, and none will be more adversely affected than AmeriTab, which operates Oregon's largest pool betting hub. The Ohio-based company established a hub to facilitate pool betting in October 2004 in conjunction with the Breeders Cup, for which it pooled bets for nearly 700 individual bettors through various Internet sites The system is especially popular for bets like the Pick-6, in which relatively small wagers are pooled to create huge jackpots.

The company operates one of six hubs regulated and licensed in Oregon, where the CHRB says a "significant portion" of pool betting is handled.

The legality of the pool betting has been questioned in Oregon as well, but regulators in that state have allowed it to continue. Regardless of Oregon law, however, the CHRB says it has the right to control pool betting.

"If they want to do it in Oregon on races in other states, that is their decision," a spokesman for the board said. "They may not be licensed in California, but they have our approval to accept bets on California racing. If they don't comply with the letter we can always decide to not grant them approval on any of our racing."

AmericaTab intends to comply.

"As an account wagering provider, we're not licensed in California, but we do take California racing," AmericaTab GM Todd Bowker explained. "We don't want to lose the California product. If they prefer we don't do pools on the California product, then we won't."

The company operates nine Internet wagering sites, including www.Winticket.com, BrisBET.com, www.MyRaceBet.com, Watchandwager.com and others. Oregon regulators said the company routed more than $120 million through the state's hub system in 2004.

It combined money from 681 investors to come up with 21,600 betting combinations to win the Breeders' Cup Pick-6 in 2004. On. Nov. 28, it wagered $61,500 in partnership bets from hundreds of investors to win the Pick-6 at California's Hollywood Park.

AmericaTab has put together players' partnerships six times, four of which have targeted $1 million-plus Pick-6 pools at California's Santa Anita and Hollywood Park tracks. The pool bets caught the eye of California regulators last fall, when two large Pick-6 partnerships (through AmericaTab) won more than $400,000 on separate weekends.

Ingrid Fermin, executive director of the CHRB, said that once the attorney general's office determined the bets were illegal (and that the individual bettor was at a disadvantage), the board had to take action.

"Advance deposit wagering accounts are for personal use only, and account holders must be natural persons over the age of 18," Fermin said said. "Thus, an artificial person, such as a hub, cannot hold an advance deposit wagering account, particularly when the account is for the hub's commercial purposes."

Oregon was the first U.S. state to legalize account wagering, which enables bettors to open accounts with third parties to bet on simulcast horse and dog races. The authorization was an attempt to boost the state's racing industry and compete with offshore betting. The Oregon Racing Commission estimated in December that the hubs would generate in excess of $1.55 million in tax revenue in 2005.