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Illinois adjusts account wagering cap

Posted: Tuesday, August 31, 2010 7:25 PM

HAWTHORNE RACE COURSE

FourFootedFotos.com

by Neil Milbert

Responding to a 47% drop in betting from each of the account wagering providers that do business in Illinois since regulators imposed a 5% cap on out-of-state wagering fees effective July 12, the Illinois Racing Board on Tuesday voted 7-1 to raise the cap to 9%.

The new cap will take effect Thursday, enabling the account wagering customers to bet on tracks—such as Del Mar Thoroughbred Club and Saratoga Race Course—that charge more than 5% for their signals.

“Whatever is necessary to turn these signals back on, that’s what we want to do,” said Illinois Thoroughbred Horsemen’s Association President Mike Campbell.

Campbell previously had expressed “support for our fellow horsemen in states that have prime content signals …

“They believe their signals have significant value and are not willing to undermine that value by selling to a state that imposes a cap that is less than fair market value,” he said.

Arlington Park President Roy Arnold joined Campbell in urging the board to adopt the 9% cap.

“We want the ability to honor contracts freely entered into before July 12,” Arnold testified. “The problem right now is we have content we want to get and we cannot get it. The 9% cap will allow us to secure the premium content that our customers want. We have serious legal issues with interfering with pre-entered contracts.”

Also lending their support were those that had originally supported the 5% cap: Hawthorne Race Course, Fairmount Park, Balmoral Park, Maywood Park, and the Illinois Harness Horsemen’s Association.

“I understand the reasoning,” said Fairmount President Brian Zander. “I don’t see an issue with 9% but my personal preference would have been to have the envelope a little smaller—higher than 5% and less than 9%.”

“We have a comfort level this will work out,” said Balmoral President John Johnston.

The proponents of the cap had a shared concern that racing conglomerates such as Churchill Downs Inc. and MI Developments Inc. would bundle their tracks and sell the account wagering package at a higher rate. For example, if this were the case, Magna hypothetically could charge the same 9% fee for both Santa Anita Park and Portland Meadows.

“We have no problem paying a higher rate if the signal warrants,” said IHHA executive director Anthony Somone, citing Del Mar, “but not for a ‘B’ track.”

The new rule mandates that each track receive individual consideration and creates checks and balances.

“If there’s anti-trust activity going on the board can act on it,” said the board’s general counsel, Shelley Kalita.

The only board member who voted against the 9% cap was Paul Smith, who expressed fears that it would prompt many tracks with non-premium racing to hike their rates.

“We’re not compelling anyone to pay 9% for the signal,” countered board Chairman Joe Sinopoli. “This is not a requirement. If someone wants 8% and you don’t want to pay 8% you don’t have to. If a track is asked to pay above the market rates just say ‘No, we don’t want it.’”

Sinopoli said the Racing Board office was “inundated with calls from account wagering customers complaining” because they were unable to bet on Saratoga or Del Mar.

Bob Dwyer of Naperville, Illinois, a member of Horseplayers Association of North America, testified on behalf of the rule change.

“It was discouraging not to have those tracks available,” he said. “We’ve seen what happens when a regulation is put in that’s not consistent with the market. I have confidence in the business acumen of the people who run the (‘B’) tracks. It’s in their best interest to keep fees low.”

In other action at Tuesday’s meeting, the board approved Hawthorne’s request to reduce the racing week to four days, reduce graded stakes purses, and eliminate an ungraded $100,000 race during its October 1-December 31 meeting.

The Hawthorne Gold Cup (G2) purse was reduced from $500,000 to $250,000, the Hawthorne Derby (G3) from $250,000 to $150,000 and the Robert F. Carey Memorial Handicap (G3) from $150,000 to $100,000. The Indian Maid Handicap was the ungraded race that was removed from the stakes schedule.

Hawthorne Assistant General Manager Jim Miller said the $500,000 in reductions will bring the purse account to a break-even balance.

“Our intent is to begin the meeting with daily overnight purses no lower than $125,000, excluding stakes,” explained Miller. “We’re hoping for an increase the first of November and then another increase the first of December.”

Miller pointed out that impact fee money owed the tracks by riverboat casinos through Illinois House bills 1918 and 4758 is currently tied up in court. He said if the funds are released “we’ll make an immediate request to the board to raise purses.”

Campbell said the ITHA supports the reduction in stakes purses and the elimination of Sunday from the racing week.

“Hawthorne is owed $2-million in recapture [under the statute that legalized full-card simulcasting in Illinois] and $1.6-million in overpayment of purses,” the Campbell said. “We don’t believe Hawthorne should carry us.”

Neil Milbert is an Illinois correspondent of Thoroughbred Times