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S.F. No. 1663 - Horse Racing Regulations Modifications and Clarifications - the First Engrossment
Author: Senator Sandra L. Pappas
Prepared By: Stephanie James, Senate Counsel (651/296-0103)
Date: March 17, 2015


On July 8, 2014, the Office of the Legislative Auditor (OLA) issued a report (“Minnesota Racing Commission: Oversight of Purse Contributions at Running Aces Harness Park”) that detailed the results of an investigation into whether Running Aces had been paying the proper amount towards purses.  The issue stemmed from conflicting interpretations of Minnesota Statutes 2013, section 240.13, subdivision 5, paragraph (a), clause (1).  The OLA report recommended an amendment to the statute to clarify that purse contributions must be calculated on the handle, and to address the lack of a definition in statute of “the time period of live races.”

In May of 2013, Running Aces and the Horsemen’s Association negotiated an agreement that Running Aces would pay 8.4 percent on the handle toward purses going forward and otherwise purported to resolve the dispute.  The OLA’s report concluded that the parties did not have the authority to simply resolve the dispute by agreement; rather, the commission should control the negotiations and make the final determination on the amount of payment required.

This bill makes changes to statute to clarify the provisions at issue in the Running Aces purse contribution dispute, and makes other changes as described below.

Section 1 [Racing Season] deletes the restrictions on the first day and total length of the racing season for pari-mutuel wagering.  This section is effective January 1, 2016.

Section 2 [Takeout] defines “takeout” as the money withheld by statute or rule from each pari-mutuel pool.

Section 3 [Handle] defines “handle” as the aggregate of all pari-mutuel pools, excluding refundable wagers or cancellations.

Section 4 [Mixed Meet] defines “mixed meet” as a racing day or series of days on which racing of more than one breed occurs.

Section 5 [Banked] defines “banked” as a game of chance in which the house participates, takes on all players, collects from all losers, pays all winners, and can itself win.

Section 6 [Steward] defines “steward” to include judge, chief steward, and presiding judge, stewards, and judges of the commission or a class B licensee, but excluding other racing officials like paddock or placement judges.

Section 7 [Appointment of Director] eliminates a requirement that the director of the Minnesota Racing Commission have experience in the administration and regulation of pari-mutuel racing.  This section replaces that requirement with one that the director be “qualified by experience and training to possess the skills necessary” to discharge the duties of the director.

Section 8 [Commission Powers and Duties] clarifies that the commission has the power to issue subpoenas to compel attendance of witnesses.  Permits the commission to compel submission of any evidence it deems necessary to carry out its duties.

Section 9 [Application] changes certain conditions for obtaining a class C racing license to engage in certain occupations related to horse racing. This section requires an applicant to submit an affidavit that the applicant has not been found, in Minnesota or another jurisdiction, to have violated a law, rule, or order related to horse racing, pari-mutuel betting, or any other form of gambling.  In certain respects, this is broader and in other respects it is narrower than current law. Current law requires disclosure of a violation, whether or not there’s been a finding of a violation.  Current law does not require disclosure of violations in other jurisdictions.  Current law does not require disclosure of violations related to pari-mutuel betting or other forms of gambling.

Section 10 [License Issuance and Renewal] permits certain classifications of class C licenses to be issued for a period of more than one year, and less than three years.  This section is effective July 1, 2015.

Section 11 [Revocation and Suspension] adds grounds (adversely affecting the public health, welfare, or safety) for the commission to revoke a class C license. Permits appealing a revocation of a class C license to the commission. Extends from 20 days to 30 days after summary suspension of a class C license the time for holding a contested case hearing; extends from 20 days to 30 days from the close of the hearing record the deadline for the administrative law judge to issue a report.

Section 12 [License Fees] eliminates a cap on the amount of an annual class C license.

Section 13 [Purses] specifies that a contract to pay additional money for purses beyond certain specified amounts, must be in writing and filed with the racing commission. This section sets a rate of 8.4 percent of handle (aggregate of all pari-mutuel pools) as a minimum purse amount for live races at a class A facility.  This section also modifies the purse contribution structure for simulcast racing, in the following ways:

  • eliminates a distinction between the purse amount paid from simulcast wagers for races during the racing season and outside of racing season, since the concept of a racing season is effectively eliminated in section 1;
  • sets the contribution toward payment of purses at at least 37 percent of takeout remaining after payment to the breeders fund and out-of-state racetrack on any day a class A facility is licensed;
  • eliminates a tiered purse contribution based on annual wagers on simulcast races;
  • eliminates a deduction of an amount agreed to by the licensee and the horsepersons’ association;
  • eliminates a separate requirement that 8.4 percent of wagering on simulcast racing in the offseason be paid for purses in live races; and
  • provides that allotments to purses and the breeders fund from wagering on simulcasts of a live mixed meet shall be by agreement, in a specified manner, by the breeder organizations participating in the meet.

Requires the licensee to pay 5.5 percent of the takeout from wagers on simulcast races occurring outside of the state to the commission for the Minnesota breeders fund.

Eliminates a provision that required that money set aside for purses from wagering on simulcasts during the racing season be used for purses for live races during the same racing season, and money set aside from wagers on simulcasts outside the racing season be used for purses for live races during the next racing season. 

This section is effective January 1, 2016.

Section 14 [Simulcasting] permits simulcasting to be conducted on a commingled pool basis or, with approval of the commission, on a separate pool basis.

Section 15 [Card Club Revenue] permits more than the percent that is specified in statute to be contributed toward purses from card club revenue. Permits the licensee and the horseperson’s organization to negotiate percentages that exceed those specified in this section of statute, if the agreement is in writing and filed with the commission.

Section 16 [Taxes imposed] changes the base for a one percent tax that the licensee pays to the Minnesota breeders fund.  Under current law, the tax is calculated on the total amount bet on each racing day; this section bases the tax, instead, on the handle for live races conducted at the class A facility.

Section 17 [Disposition of Proceeds; Account] requires that money contributed to the breeder’s fund from all simulcasting – not just full racing card simulcasts – be distributed to specified incentives for the horse breeding industry in Minnesota.

Section 18 [Powers and Duties] increases the maximum fine, from $2,000 to $5,000, that the commission can authorize a steward to impose on licensees for violation of law.

Section 19 [Fines] permits the commission to recover attorney fees and costs associated with a contested case that the commission wins, from fines imposed by the commission.  Under current law, all fines are deposited in the general fund.  This section changes the threshold of a fine, from $2,000 to $5,000, that constitutes a contested case. This section is effective July 1, 2016.

Section 20 [Rulemaking Authority] authorizes the commission to promulgate rules governing wireless communication between the premises of a licensed racetrack and any place outside the premises, and governing procedures for sampling and testing horses for prohibited substances.

Section 21 [Exceptions] exempts licensing and background investigations under the Racing Commission from the state’s criminal offender rehabilitation chapter.  The effect of this is that the Racing Commission does not have to issue a license to a person who has met the criteria for proving rehabilitation after certain criminal violations.

Section 22 [Revisors’ Instruction] directs the revisor to put the definitions in alphabetical order and correct cross-references throughout the statutes.

Section 22 [Repealer] repeals unnecessary definitions for “average daily handle” and “full racing card.”







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