Legislation to revive the lagging horse-racing industry has taken a controversial turn with a last-minute proposal to make California the first state in the nation to let race fans bet that a horse will lose.
With the Legislature's 2009-10 session ending Tuesday, lawmakers are set to consider a bill written by Assembly Speaker John Perez (D-Los Angeles) that would also attempt to attract the annual Breeders' Cup championship to the Golden State by setting aside $2 million a year to promote the race. The event is now held at a different location around the country each year.
If adopted, the legislation would also take a higher percentage from the bets to increase the purse offered to the owners of the winning horse in any race.
California's horse-racing industry — like horse racing nationwide — has suffered from a decline in attendance and in betting that was only exacerbated by the recession.
Between 2004 and 2009, commissions collected by racetrack operators and winning purses for horse owners declined about 12%, according to the California Horse Racing Board. During the same period, attendance at racetracks and simulcast facilities in the state dropped 25%.
But an amendment added last week has sparked debate by allowing an "exchange wagering" system that would let two or more bettors place opposing wagers on a race.
The bill would allow betting-exchange businesses to accept bets for and against horses, with odds set by the bettors.
Supporters of the legislation discount worries that exchange wagering could open the door to corruption, in which gamblers who bet against a horse could sabotage the animal or its jockey. Supporters note that the bill would require the California Horse Racing Board to draft rules for placing bets with exchange wagering businesses.
"Essentially, people already bet against a horse," said George Wiley, an aide to Perez. "When you bet on a horse, you bet that six or seven other horses lose."
Exchange wagering is permitted in England and Australia, and New Jersey lawmakers are considering legislation to permit it in that state.
Proponents of the bill say exchange wagering sparked new interest in horse racing in England over the last decade by increasing the amount of money bet on the races and by drawing in younger bettors.
"If we want to help this industry, the provisions in this bill will do that," Wiley said.
But opponents of the new wagering system, including horse-racing companies with online betting operations, have called the proposal "hastily crafted" and risky. Critics of gambling also blast the idea, saying exchange wagering is just another way for gambling operators to take money from bettors.
"It's a dying business and they know it, and what they are trying to do is to use every last dollar they have to create more forms of predatory gambling," said Les Bernal, executive director of Stop Predatory Gambling, a nonprofit group based in Washington.
Critics within the racing industry say exchange wagering would unfairly benefit businesses like Betfair.com, the London-based Internet betting firm that controls most exchange wagering in England. A spokesperson for the company rejected such claims.
Churchill Downs Inc., the owner of four horse-racing facilities as well as an online wagering platform called TwinSpires.com, opposes the exchange wagering amendment, saying the idea has not been thoroughly studied to ensure that race operators and horse owners would get a fair share of the bets.
"We want to make sure that the cure is not worse than the disease," said Brett Hale, senior vice president of Churchill Downs.
George Haines, president of the Santa Anita Park racetrack in Arcadia, criticized the proposed law in a statement posted on the track's website. Santa Anita is owned by Magna Entertainment, which operates seven other racing facilities, several off-track betting facilities and a national online wagering business known as XpressBet.
Perez's bill was introduced in February and focused primarily on bringing the Breeders' Cup championship to California.
The event was held at Santa Anita last year, generating an estimated $60 million in spending throughout the region and the state, according to the Los Angeles County Economic Development Corp.
But Perez's office added the amendment to allow exchange wagering Aug. 19, less than two weeks before the end of the legislative session. A hearing on the new amendment has not been scheduled.
In traditional "pari-mutuel" betting, the odds for a particular horse are determined by the total amount bet on the race. The race operator — often a racetrack or a county fair — pools the money and is responsible for paying out the winnings, subtracting a purse for the horse owners and a commission for the track.