More than three decades have passed since a thoroughbred named Affirmed captured the last Triple Crown in 1978. Nearly the same amount of time has gone by since Pennsylvania has made any significant changes to the 1981 Race Horse Industry Reform Act.
Recently, though, four Republican state senators introduced a bill featuring the most sweeping changes to Pennsylvania horse racing since the Reagan administration.
SB 1188—the brainchild of state Sens. Elder Vogel, R-Allegheny; Dominic Pileggi, R-Delaware; Joseph Scarnati, R-Jefferson; and Tommy Tomlinson, R-Bucks—would essentially shift every aspect of horse racing under the umbrella of the Gaming Control Board, boost Internet betting, increase horse-racing marketing, fund out-of-competition drug testing and prohibit race track personnel from accepting gifts from breeders and trainers.
Since its initial presentation in November 2013, SB 1188 has gained seven more Republican co-sponsors, meaning the bill is likely a lock to pass the Republican-controlled Senate once it is brought to a vote. On April 2, SB 1188 was sent to the appropriations committee, on which all of the bill’s primary sponsors sit.
Although SB 1188 faces a long haul to the finish line, if it does become law in 2014, it means the Gaming Control Board will have yet another industry under its control after it gained oversight of tavern gaming when the amendment to the Local Option Small Games of Chance Act took effect in January.
Perhaps the most transformative amendment to the 1981 Race Horse Industry Reform Act by Chapter Two of SB 1188 is that it abolishes both the State Horse Racing Commission and the State Harness Racing Commission. These three-member commissions, which currently operate as administrative bodies under the Department of Agriculture, would give way to centralized governance of horse racing and horse betting by a new Bureau of Horse Racing within the Gaming Control Board. The Bureau of Horse Racing would then oversee day-to-day operations of horse racing and pari-mutuel wagering.
Shifting oversight of horse racing to the Gaming Control Board makes sense, considering the horse-racing industry still exists largely because of a little known but extremely lucrative subsidy from casino slot revenue.
Thanks to the efforts of then-state Sen. Vince Fumo and then-Gov. Ed Rendell, the Pennsylvania Race Horse Development and Gaming Act of 2004, known as Act 71, provided that 12 percent of all casino slot revenue would go to support the Race Horse Development Fund (RHDF). Between 2006 and 2013, the RHDF received $1.67 billion of the $14.5 billion gamblers lost in slot machines. In the 2012-13 fiscal year alone, the RHDF received $225 million, according to The Philadelphia Inquirer.
With the RHDF receiving more than the state police, Department of Health and Department of Agriculture, a law such as SB 1188 is long overdue to update regulatory oversight, licensing and drug testing in the sport.
As SB 1188 co-sponsor Pileggi told TheLegalBlitz.com, “Our goals are to make Pennsylvania a national leader in ensuring the integrity of the horse-racing industry, to continue the growth of an industry which provides more than 23,000 jobs in Pennsylvania and contributes significantly to open-space preservation, and to better fit the regulation of horse racing within the context of how Pennsylvania regulates other forms of legal gambling, such as slots, table games, small games of chance and the state lottery.”
One such regulation is the implementation of out-of-competition drug testing. Although increased drug testing will eat a nice hole into the Gaming Control Board’s budget, Pennsylvania remains one of the few states without off-track testing. SB 1188 would grant the Gaming Control Board supervisory authority to conduct year-round, random drug testing of all horses entered in a race, stabled in Pennsylvania, or shipped through a Pennsylvania facility. Stricter drug testing is much needed, as a 2009 grand jury investigation found that trainers at the Penn National Race Course in Dauphin County were injecting horses with dangerous substances including snake venom, energy drinks and baking soda.
Additionally, SB 1188 prohibits improper gifts and bribes to track officials. Although seemingly a no-brainer, such a prohibition was not originally included in the 1981 Race Horse Industry Reform Act. Specifically, Section 211 provides, “No owner, officer, manager or employee of an applicant or licensed business entity or their spouses, parents, fathers-in-law, mothers-in-law, siblings, sons, daughters, sons-in-law or daughters-in-law shall accept gifts from breeders, owners, trainers, or other individuals who participate in the conduct of horse racing in this commonwealth.” As news of an FBI probe into race-fixing at Penn National leaked last year, SB 1188 provides much-needed reform and oversight to this potentially very lucrative business.
Another key component of the law is its efforts to increase marketing of horse races and provide more ways to wager on races via the Internet.
The bill would allow the Gaming Control Board to impose a 1.5 percent surcharge on all race purses to be used exclusively for the promotion and marketing of horse racing. These increased marketing dollars would hopefully attract more spectators to races, which would in turn attract more people to Pennsylvania casinos in the face of increased gambling competition from all six border states.
Finally, SB 1188 would expand electronic wagering on Pennsylvania races. The bill broadly defines “electronic wagering” as a “legal wager placed by an individual in this commonwealth related only to the outcome of a horse race taking place in this commonwealth, placed or transmitted by an individual through telephone or any electronic media approved by the board and accepted by a licensed business entity or its approved off-track betting system located in this commonwealth.”
Currently, Pennsylvania residents can place Internet wagers via Xpressbet.com and PAbets.tvg.com. However, SB 1188 would allow for more Internet wagering options, increased payment processors, and stricter oversight of Internet wagering provider licensing fees and taxes. In short, it would become much easier for the average gambler to fund a trifecta wager electronically with an ordinary credit card.
The bill’s sponsors have assured doubters that the amended law would comply with related federal laws including both the Interstate Horseracing Act of 1978 (15 U.S.C. § 3001 et seq.) and the Unlawful Internet Gambling Enforcement Act, or UIGEA (31 U.S.C. §§ 5361-67). The UIGEA makes it clear that “unlawful Internet gambling does not include placing, receiving, or otherwise transmitting a bet or wager where … the bet or wager does not violate any provision of … the Interstate Horseracing Act of 1978.”
Expanding Internet wagering on horse races now appears to be a strong signal of the commonwealth’s willingness to explore Internet poker and sports betting in the future. Perhaps it is even a trial run to test the Gaming Control Board’s ability to manage Internet wagers.
Ultimately, SB 1188 is a long overdue modernization and reformation of the horse-racing industry.
Consolidating duplicative administrative agencies, increasing transparency, attracting new customers, and ensuring the safety of the horses is a superfecta of laudable goals that members of both parties will hopefully support when it comes time to vote.
Steven J. Silver is an associate at Goldberg, Miller & Rubin. He won the International Association of Gaming Advisors’ Shannon Bybee Scholarship in 2012 and was recently published in the John Marshall Journal of Computer & Information Law for his research into the convenience casino industry. He can be reached at 215-735-3994.