Citation Numbers: 94 Op. Att'y Gen. 32
Judges: DOUGLAS F. GANSLER, Attorney General.
Filed Date: 3/17/2009
Status: Precedential
Modified Date: 7/5/2016
Dear John B. Franzone
You have requested our opinion whether wagering on video replays of "historic" (previously held) horse races, by means of a product known as "Instant Racing," is authorized at race tracks and satellite simulcast betting ("SSB") facilities in Maryland under current law.
In our opinion, Instant Racing is not permitted at race tracks or SSB facilities in the State because it does not constitute pari-mutuel betting, as authorized by the Maryland Horse Racing Act, at those locations.
Race Tech offers "Instant Racing" in 12 different game themes. Letter of Eclipse Compliance Testing (November 13, 2008) at pp. 4-9 ("ECT Letter"). At the Commission meeting, CEI indicated that it was proposing to operate the most basic version, known as "Thoroughbred Mania," at Rosecroft.3 In general, Thoroughbred Mania seeks to re-create for its users some features of the traditional wagering experience associated with live horse racing. To do this, "Thoroughbred Mania" relies on a number of innovations not found in traditional pari-mutuel wagering.
Broadly speaking, "traditional" pari-mutuel wagering is conducted through a central totalizator system which calculates odds for various outcomes in a particular race based upon the wagers received.4 For each wager, a certain percentage is first deducted as *Page 34 "takeout."5 The remainder is then credited to a "betting pool" composed of all other wagers of the same type. For example, any bet for a horse "to win" Race One goes to the "win pool" for Race One. After the race results are ruled "official,"each dollar wagered on the winning horse is entitled to an equal share of the total in the pool. The totalizator system calculates this share or ratio and indicates the payout.
According to RaceTech, Instant Racing also uses betting pools in calculating its payouts. Based on Race Tech's presentation and the materials provided to the Commission, we understand that the "Thoroughbred Mania" version of Instant Racing functions as follows: Players make their wagers through the use of self-service machines, just as patrons at race tracks may do in lieu of betting with a teller. Unlike traditional wagering on horse races, however, in Instant Racing, the patron bets on the outcome of a race that has already been run — i.e., "an actual horse race that was conducted by a licensed U.S. pari-mutuel facility, and that concluded with official results." Race Tech, LLC Memorandum (undated), included in "Proposal for Instant R acing — Rosecroft" (October 17, 2008) ("Race Tech Memorandum") at p. 1. Each self-service machine is connected to a video server that contains data and recordings of past races, which are randomly sent to the individual machines in use.6 Before making a selection, the player has the opportunity to examine past performance data, originally published on the day the race was held, showing the records of each of the entries at that time.7 However, information identifying the race, the race track, the horses participating in the race, and the owners, trainers and jockeys of those horses is withheld until after a wager has been made.
To place a wager, an Instant Racing patron attempts to select the first three finishers of the race in exact order. After deducting *Page 35 the takeout amount, the central totalizator system automatically divides and allocates each wager into various types of pools, in predetermined percentages, that correspond to each type of "win." For example, in Thoroughbred Mania, there are betting pools corresponding to the following outcomes, which are considered "wins":
• three selections in exact order
• top two selections in exact order
• top two selections finishing first, second, or third
• any of the three selections finishing first and second
• any of the three selections finishing first and third
• first selection finishing first
ECT Letter at p. 3. In addition to the betting pools for each type of win, a portion of all wagers is periodically allocated to a kind of reserve pool, called the "seed pool," until the seed pool has reached a pre-determined level.8
After the bettor has made selections and placed a bet, the bettor's machine then displays a video of the race. The bettor may elect to view the entire race or only the last few seconds of the race. Upon completion of the video presentation, if the bettor has achieved a particular type of "win," the Instant Racing machine displays the winning results "using entertaining video and/or mechanical displays." Race Tech Memorandum at p. 1.
If a bettor has achieved a particular type of "win," the bettor receives the money from the corresponding pool. Race Tech Memorandum at pp. 3-4. As noted above, the payout amounts vary for different types of "wins" depending upon the difficulty of winning in a particular manner and on the amount of money in the pool for that type of "win" at a particular time. Id. at p. 1. If a bettor loses, the amounts in the various pools continue to accumulate until another bettor, w agering on a different race, wins the particular pool. Id. at p. 4. *Page 36
Thus, the betting pool for each type of "win" grows as wagers are made and part of each wager is allocated to that pool. When a bettor achieves the type of "win" associated with a particular pool, the bettor is credited with the contents of that pool . Race Tech Q A at p. 4. A prescribed sum is then transferred from the seed pool to the newly depleted pool to ensure that the latter pool contains a pre-determined minimum amount of money. The seed pool thus ensures that the next winner of that betting pool will receive at least that minimum amount. Race Tech Q A at pp. 4-5.9
One of the exceptions to the general prohibition of gambling is for "pari-mutuel betting conducted under the Maryland Horse Racing Act." CR §
The Maryland Horse Racing Act defines "pari-mutuel betting" as:
the system of betting in which those who successfully bet on horses that finish in specified positions share the mutuel pool, less the takeout and the breakage.
BR §
In pari-mutuel wagering under the Maryland Horse Racing Act, bettors wager on a particular race, or a series of races. A bettor's wager becomes part of a betting pool, also called a "mutuel pool," for a particular race (or races) depending upon the type of wager made. At the conclusion of the race or races, after the takeout is deducted, the remaining money in the applicable betting pool is shared among the successful bettors.15 Thus, the odds are set, as near as may be, solely and completely by the bettors themselves, rather than by reference to some external standard or oddsmaking procedure. Bettors are not wagering against the "house," but against each other. In each race, just as the horses compete on the track for a share of the purse, those wagering on the outcome compete amongst themselves for a share of the total wagered. *Page 39 2. SSB Facilities
In addition to pari-mutuel betting at race tracks, the Maryland Horse Racing Act authorizes such betting at SSB facilities. The statute defines "satellite simulcast betting" as:
(1) pari-mutuel betting at a satellite simulcast facility in the State on a race that is simulcast from a sending track by a mile thoroughbred racing licensee, a harness racing licensee, or the State Fair Society; and
(2) transmission of the pari-mutuel information regarding bets at the satellite simulcast facility to the sending track.
BR §
As the statutory definition makes clear, an SSB facility may conduct betting only on races it receives from a race track licensed by the Commission; whether the races are held live at that track or simulcast to that track from outside the State. Therefore, Instant Racing would only be authorized at an SSB facility if it were authorized at a Maryland race track.
1. Betting on Completed Races
Instant Racing is a system for betting on the outcome of races that have already been run. In authorizing pari-mutuel betting under the Maryland Horse Racing Act, the General Assembly has allowed betting on live or simulcast horse races. We are not aware of anything in the legislative history of the Act that suggests that the Legislature considered authorization of wagering on races run in other jurisdictions that had been completed and whose results were *Page 40 known long before the bets were placed. See 72 Opinions of the AttorneyGeneral 313, 314-19 (1987) (reviewing legislative history).
With respect to SSB facilities, the term "simulcast" implicitly, if not explicitly, refers to an event happening simultaneously with its broadc ast. The term is a shortened version of the phrase "simultaneous broadcast." See Random House Dictionary of the English Language (2d ed. 1987) at p. 1784. Thus, the common understanding of the phrase "satellite simulcast betting" would exclude betting on a race that had already been run and whose results were known. See F.D.R. SrourPartnership v. Montgomery County, ___ Md. ___,
2. Betting Pools not Pari-Mutuel Pools
In traditional pari-mutuel wagering, those who successfully bet on the same winning outcome share a betting pool. See BR §
Furthermore, bettors in a traditional pari-mutuel system, through their differing opinions and the money wagered on such opinions, participate directly in setting the odds on the various possible outcomes of a given race. Typically, the bettors are the only determinant of what the odds will be. For obvious reasons, thiscannot occur in Instant Racing because, as noted above, no two *Page 41 players are ever betting on the same race. To the extent the success or failure of other players, or other factors such as the timing of "wins," may influence the size of payouts available in Instant Racing, it does not occur through the same process which is at work in traditional pari-mutuel wagering. Indeed, from the materials provided, it is not always possible to determine what precise method, formula or procedure Race Tech will use to arrive at an appropriate payout in any given situation. What is clear, however, is that the method used is fundamentally different.
3. Seed Pool
A key element of Instant Racing demonstrates why it is not pari-mutuel betting. While the allocation of wagers in Instant Racing provides for a takeout within the statutory limits, it will also frequently include a deduction for the seed pool, a concept foreign to pari-mutuel betting.
Since it is virtually assured that only one bettor will win the contents of a betting pool, Instant Racing provides for the seed pool to replenish betting pools immediately following payout from a win. However, the Maryland Horse Racing Act contains no provision for a "seed pool" as part of the takeout or otherwise; nor is there any reference to such a mechanism in the Commission's regulations. The seed pool is thus a key element of betting pools in Instant Racing, yet does not exist in pari-mutuel betting under the Maryland Horse Racing Act.16
The use of the seed pool is also at odds with the treatment of "minus" pools in pari-mutuel wagering under the Maryland statute. In pari-mutuel betting, on rare occasion, there is a minus pool — i.e., the monies in the pool are insufficient to pay a prescribed minimum *Page 42
for every dollar bet.17 In such instances, the race track owner is required to pay each successful bettor a prescribed, minimum amount of winnings (typically, five cents on the dollar). See COMAR
4. Summary
The betting on horse racing currently authorized under State law involves betting on live races, whether run in Maryland or simulcast into the State. Instant Racing is wagering on completed races. In addition, its betting pools are not pari-mutuel pools as authorized by Maryland law. The concept of a seed pool — a central feature of Instant Racing — is unknown to pari-mutuel wagering under Maryland law. Given that the prohibitions against gambling in State law are to be liberally construed against the authorization of such activity, the Commission may not authorize Instant Racing at race tracks or SSB facilities unless the General Assembly amends current law.
Finally, we note that the only reported court decision that has considered the issue has held that Instant Racing is not "pari-mutuel wagering."19 See W yoming D owns Rodeo Events, LLC, *Page 43
Douglas F. Gansler Attorney General
Bruce C. Spizler Assistant Attorney General
Robert N. McDonald* Chief Counsel Opinions and Advice
• not more than 18% from each regular mutuel pool;
• not more than 21% from each multiple mutuel pool on 2 horses; and
• not more than 25.75% from each multiple mutuel pool on 3 or more horses.
BR §
• 7.70% to the race track licensee (operator) from which the race track licensee shall pay 0.25% to the Maryland Race Track Employees Pension Fund
• 0.32% to the Maryland Racing Commission for State tax
• 1.10% to the Maryland-Bred Race Fund
• 7.70 % for purses
• 0.18% as an additional amount for purses; and
• 1% to the Maryland Million, Ltd. for Maryland Million races.