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HF 3211

3rd Engrossment - 89th Legislature (2015 - 2016) Posted on 06/02/2016 10:59am

KEY: stricken = removed, old language.
underscored = added, new language.
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A bill for an act
relating to pari-mutuel horse racing; authorizing advance deposit wagering;
providing for horse-racing revenue; appropriating money; amending Minnesota
Statutes 2014, sections 240.08, subdivision 1; 240.13, subdivision 4; 240.15,
subdivision 2; 240.25, subdivision 1; Minnesota Statutes 2015 Supplement,
sections 240.01, by adding subdivisions; 240.08, subdivision 2; 240.10; 240.15,
subdivisions 1, 6; 240.22; proposing coding for new law in Minnesota Statutes,
chapter 240.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2015 Supplement, section 240.01, is amended by adding
a subdivision to read:


new text begin Subd. 1a. new text end

new text begin Account holder. new text end

new text begin "Account holder" means a natural person not otherwise
prohibited from wagering who applies for and opens an account with an authorized ADW
provider.
new text end

Sec. 2.

Minnesota Statutes 2015 Supplement, section 240.01, is amended by adding a
subdivision to read:


new text begin Subd. 1b. new text end

new text begin Advance deposit wager. new text end

new text begin "Advance deposit wager" means a wager
placed through an advance deposit wagering provider on a horse race that is conducted
outside of the state.
new text end

Sec. 3.

Minnesota Statutes 2015 Supplement, section 240.01, is amended by adding a
subdivision to read:


new text begin Subd. 1c. new text end

new text begin Advance deposit wagering; ADW. new text end

new text begin "Advance deposit wagering" or
"ADW" means a system of pari-mutuel wagering in which wagers and withdrawals are
debited and winning payoffs and deposits are credited to an account held by an authorized
ADW provider on behalf of an account holder.
new text end

Sec. 4.

Minnesota Statutes 2015 Supplement, section 240.01, is amended by adding a
subdivision to read:


new text begin Subd. 1d. new text end

new text begin Authorized advance deposit wagering provider; ADW provider.
new text end

new text begin "Authorized advance deposit wagering provider" or "ADW provider" means a person who
holds a class C license under this chapter as a racing or gaming-related vendor and has
entered into a commission-approved contract with a class A or class B licensee to provide
advance deposit wagering on horse racing under this chapter.
new text end

Sec. 5.

Minnesota Statutes 2015 Supplement, section 240.01, is amended by adding a
subdivision to read:


new text begin Subd. 10a. new text end

new text begin Minnesota resident. new text end

new text begin "Minnesota resident" means a person who provides
a physical address or post office box address in the state of Minnesota as the person's
primary residence when applying for and opening an ADW account.
new text end

Sec. 6.

Minnesota Statutes 2015 Supplement, section 240.01, is amended by adding a
subdivision to read:


new text begin Subd. 20a. new text end

new text begin Source market fee. new text end

new text begin "Source market fee" means a percentage of the
amount wagered by a Minnesota resident through an authorized advance deposit wagering
provider that is paid by the ADW provider to a class A or class B licensee.
new text end

Sec. 7.

Minnesota Statutes 2014, section 240.08, subdivision 1, is amended to read:


Subdivision 1.

Authority.

The commission may issue class C occupational licenses
to persons who wish to be employed in horse racing where pari-mutuel betting is
conducted as:

(a) horse owners or lessees;

(b) jockeys or drivers;

(c) exercise riders;

(d) grooms;

(e) trainers and their assistants;

(f) pari-mutuel personnel;

(g) security officers;

(h) new text begin vendors; and
new text end

new text begin (i) new text end other occupations the commission by rule determines require licensing to ensure
the integrity of horse racing in Minnesota.

Sec. 8.

Minnesota Statutes 2015 Supplement, section 240.08, subdivision 2, is
amended to read:


Subd. 2.

Application.

(a) An application for a class C license must be on a form
the commission prescribes and must be accompanied by an affidavit of qualification
that the applicant:

(1) is not in default in the payment of an obligation or debt to the state under Laws
1983, chapter 214;

(2) does not have a felony conviction of record in a state or federal court and does
not have a state or federal felony charge pending;

(3) is not and never has been connected with or engaged in an illegal business;

(4) has never been found guilty of fraud or misrepresentation in connection with
racing or breeding;

(5) has never been found guilty of a violation of law or rule relating to horse racing,
pari-mutuel betting or any other form of gambling which is a serious violation as defined
by the commission's rules; deleted text begin and
deleted text end

(6) has never been found to have knowingly violated an order of the commission or
a law or rule of Minnesota or another jurisdiction relating to horse racing, pari-mutuel
betting, or any other form of gamblingdeleted text begin .deleted text end new text begin ; and
new text end

new text begin (7) has never been convicted of or entered a guilty plea, Alford plea, or plea of no
contest to an offense under chapter 343 or 346 or a similar law in another jurisdiction
pertaining to mistreatment of animals.
new text end

(b) The application must also contain an irrevocable consent statement, to be signed
by the applicant, which states that suits and actions relating to the subject matter of the
application or acts or omissions arising from it may be commenced against the applicant in
any court of competent jurisdiction in this state by the service on the secretary of state of
any summons, process, or pleading authorized by the laws of this state. If any summons,
process, or pleading is served upon the secretary of state, it must be by duplicate copies.
One copy must be retained in the Office of the Secretary of State and the other copy must
be forwarded immediately by certified mail to the address of the applicant, as shown by
the records of the commission.

Sec. 9.

Minnesota Statutes 2015 Supplement, section 240.10, is amended to read:


240.10 LICENSE FEES.

new text begin (a) new text end The fee for a class A license is $253,000 per year and must be remitted on July
1. The fee for a class B license is $500 for each assigned racing day and $100 for each
day on which simulcasting is authorized and must be remitted on July 1. The fee for a
class D license is $50 for each assigned racing day on which racing is actually conducted.
Fees imposed on class D licenses must be paid to the commission at a time and in a
manner as provided by rule of the commission.

new text begin (b) new text end The commission shall by rule establish an annual license fee for each occupation
it licenses under section 240.08.

new text begin (c) The initial annual license application fee for a class C license to provide advance
deposit wagering on horse racing under this chapter is $10,000 and an annual license
fee of $2,500 applies thereafter.
new text end

Sec. 10.

Minnesota Statutes 2014, section 240.13, subdivision 4, is amended to read:


Subd. 4.

Takeout; distribution of winnings.

A new text begin class B or class D new text end licensee
conducting pari-mutuel betting must deduct from a straight pari-mutuel pool, before
payments to holders of winning tickets, an amount equal to not more than 17 percent of
the total money in that pool. The new text begin class B or class D new text end licensee must deduct from a multiple
pari-mutuel pool, before payments to the holders of winning tickets, an amount equal to
not more than 23 percent of the total money in that pool. The remaining money in each
pool must be distributed among the holders of winning tickets in a manner the commission
by rule prescribes for each type of pool. Breakage must be computed on the basis of
payoffs rounded down to the next lowest increment of 10 cents, with a minimum payoff of
$1.10 on a $1 ticket, except that the licensee may reduce the minimum payoff to $1.05 on
a $1 ticket if there is not a sufficient amount in a pool to make a minimum payoff of $1.10.

Sec. 11.

new text begin [240.131] ADVANCE DEPOSIT WAGERING.
new text end

new text begin Subdivision 1. new text end

new text begin Advance deposit wagering authorized. new text end

new text begin Advance deposit wagering
is authorized pari-mutuel betting on horse racing under this chapter if conducted in
compliance with this section and the Interstate Horseracing Act of 1978, United States
Code, title 15, section 3001 et seq.
new text end

new text begin Subd. 2. new text end

new text begin Prohibited acts. new text end

new text begin It is unlawful for any person to accept an advance deposit
wager from a Minnesota resident unless the person is an authorized advance deposit
wagering provider as defined in section 240.01, subdivision 1d, and conducts advance
deposit wagering under the terms of a contract that meets the requirements in subdivision
3 and other requirements of this chapter.
new text end

new text begin Subd. 3. new text end

new text begin Contract required. new text end

new text begin Before accepting an advance deposit wager from a
Minnesota resident, an authorized advance deposit wagering provider must have a written
contract in place with the licensed racetrack that conducts racing of the breed on which
wagers will be accepted. The contract must be approved by the commission and by the
horsepersons' organization representing the majority of horsepersons racing the breed
involved at the licensed racetrack. The contract must, at a minimum:
new text end

new text begin (1) provide for the payment of a source market fee for advance deposit wagers placed
by Minnesota residents. The payment must be made, at a minimum, on a quarterly basis;
new text end

new text begin (2) specify the manner in which the amount of the source market fee is determined;
new text end

new text begin (3) govern all other aspects of the business relationship between the licensed
racetrack and the ADW provider;
new text end

new text begin (4) provide for what will happen if either party to the contract discontinues
operations or ceases to be licensed in Minnesota;
new text end

new text begin (5) provide that the contract is enforceable only in the state courts of Minnesota; and
new text end

new text begin (6) provide for a term of agreement of not more than three years.
new text end

new text begin Subd. 4. new text end

new text begin Bond required. new text end

new text begin Before accepting an advance deposit wager from a
Minnesota resident, an authorized advance deposit wagering provider shall demonstrate
evidence of financial responsibility in a format prescribed by the commission through a
surety bond executed and issued by an insurer authorized to issue surety bonds in this
state, an irrevocable letter of credit, or other form of financial guarantee in an amount to
be determined by the commission. The commission may also accept, as evidence of
financial responsibility, a surety bond, an irrevocable letter of credit, or other form of
financial guarantee in accordance with this subdivision filed with one or more states where
the applicant is licensed as an advance deposit wagering provider. The commission may
ask for additional evidence of financial responsibility at any time the commission deems
necessary. Any surety bond, an irrevocable letter of credit, or other form of financial
guarantee issued under this subdivision shall be in favor of this state and shall specifically
authorize recovery by the commission for the payment of all fees required by this chapter,
including source market fees, regulatory fees, and breeders fund fees, as well as payments
due to Minnesota resident account holders.
new text end

new text begin Subd. 5. new text end

new text begin Plan of operation. new text end

new text begin (a) The commission shall not license or authorize
a person to conduct advance deposit wagering under this section unless the person
has submitted, and the commission approved, a plan of operation for advance deposit
wagering. At a minimum, the plan of operation must provide for:
new text end

new text begin (1) methods of resolving disputes with account holders and licensed racetracks;
new text end

new text begin (2) procedures to protect the security of account holders' accounts and information;
new text end

new text begin (3) methods to verify the identity of account holders and ensure that all account
holders are natural persons who are at least 18 years of age;
new text end

new text begin (4) procedures to ensure that wagers are only accepted from account holders who have
sufficient funds on deposit and that no credit is extended by the person to an account holder;
new text end

new text begin (5) procedures for keeping accurate records of all contests, wagers, and payouts;
new text end

new text begin (6) annually contracting with an independent third party to conduct an audit and
submit the results of the audit to the commission; and
new text end

new text begin (7) other requirements established by the commission in rule.
new text end

new text begin (b) A plan of operation must be submitted in a manner prescribed by the commission.
A plan of operation may only be amended with the approval of the commission. The
commission may withdraw approval of a plan of operation.
new text end

new text begin Subd. 6. new text end

new text begin Source market fees; payment; distribution. new text end

new text begin (a) It is the intent of the
legislature that the proceeds of advance deposit wagering authorized by this chapter
be used to support and improve the horse racing industry in Minnesota by improving
purses, supporting breeding, and ensuring that the industry is adequately regulated for
the protection of all participants.
new text end

new text begin (b) Source market fees shall be established by contract and are in addition to other
contractual fees such as host fees.
new text end

new text begin (c) Except as provided in paragraph (e), a class A or class B licensee shall pay all
source market fees it receives from an ADW provider as follows:
new text end

new text begin (1) 28 percent to a licensed racetrack that primarily conducts standardbred horse
racing; and
new text end

new text begin (2) 72 percent to a licensed racetrack that primarily conducts thoroughbred and
quarter horse racing.
new text end

new text begin (d) Of the total source market fees received by a licensed racetrack under paragraph
(c), at least 50 percent must be set aside for breeders awards and purses. Of the amount
set aside: (1) at least 33 percent shall be paid by the racetrack to the state for deposit to
the breeders fund and must be expended solely for breeders awards in accordance with
section 240.18, subdivisions 2, paragraph (d), clause (2), and 3, paragraph (b), clause (2);
and (2) the remainder shall be paid by the racetrack to purse accounts for races held at the
racetrack pursuant to agreements between the racetrack and the horsepersons' associations
that represent a majority of the type of breed that races at the track.
new text end

new text begin (e) No source market fees shall be paid by a class A or class B licensee to a licensed
racetrack whose license has been revoked or not renewed under this chapter. In the event
that a racetrack's license has been revoked or not renewed, source market fees otherwise
payable to that racetrack by a class A or class B licensee under this section shall be paid
to the other licensed racetrack.
new text end

new text begin Subd. 7. new text end

new text begin Payments to state. new text end

new text begin (a) A regulatory fee is imposed at the rate of one
percent of all amounts wagered by Minnesota residents with an authorized advance deposit
wagering provider. The fee shall be declared on a form prescribed by the commission.
The ADW provider must pay the fee to the commission no more than seven days after
the end of the month in which the wager was made. Fees collected under this paragraph
must be deposited in the state treasury and credited to a racing and card-playing regulation
account in the special revenue fund and are appropriated to the commission to offset the
costs associated with regulating horse racing and pari-mutuel wagering in Minnesota.
new text end

new text begin (b) A breeders fund fee is imposed in the amount of one-quarter of one percent of all
amounts wagered by Minnesota residents with an authorized advance deposit wagering
provider. The fee shall be declared on a form prescribed by the commission. The ADW
provider must pay the fee to the commission no more than seven days after the end of
the month in which the wager was made. Fees collected under this paragraph must be
deposited in the state treasury and credited to a racing and card-playing regulation account
in the special revenue fund and are appropriated to the commission to offset the cost of
administering the breeders fund and promote horse breeding in Minnesota.
new text end

new text begin Subd. 8. new text end

new text begin Enforcement. new text end

new text begin (a) A class A or class B licensee shall have a private right of
action against any person who accepts a pari-mutuel wager from a Minnesota resident that
is not authorized by this chapter. The class A or class B licensee is entitled to injunctive
relief and to presumptive damages equal to ten percent of the total of wagers accepted
in violation of this section, as well as reasonable costs and attorney fees. Presumptive
damages recovered under this subdivision shall be distributed as source market fees as
provided in subdivision 6.
new text end

new text begin (b) The commission shall have a right of action against any person who accepts a
pari-mutuel wager that is not authorized by this chapter. The commission is entitled to
injunctive relief and to recovery of all amounts that would have been payable to the state
under subdivision 7, as well as reasonable costs and attorney fees. The commission may
also fine the person under section 240.22.
new text end

new text begin Subd. 9. new text end

new text begin Rules. new text end

new text begin The commission may adopt rules to implement this section using
the expedited process in section 14.389.
new text end

Sec. 12.

Minnesota Statutes 2015 Supplement, section 240.15, subdivision 1, is
amended to read:


Subdivision 1.

Taxes imposed.

(a) There is imposed a tax at the rate of six percent
of the amount in excess of $12,000,000 annually withheld from all pari-mutuel pools by
deleted text begin thedeleted text end new text begin a class B or class Dnew text end licensee, including breakage and amounts withheld under section
240.13, subdivision 4. For the purpose of this subdivision, "annually" is the period from
July 1 to June 30 of the next year.

In addition to the above tax, deleted text begin thedeleted text end new text begin a class B or class Dnew text end licensee must designate and pay
to the commission a tax of one percent of the handle for live races conducted at a class A
facility, for deposit in the Minnesota breeders fund.

The taxes imposed by this clause must be paid from the amounts permitted to be
withheld by a licensee under section 240.13, subdivision 4.

(b) The commission may impose an admissions tax of not more than ten cents on
each paid admission at a licensed racetrack on a racing day if:

(1) the tax is requested by a local unit of government within whose borders the
track is located;

(2) a public hearing is held on the request; and

(3) the commission finds that the local unit of government requesting the tax is in
need of its revenue to meet extraordinary expenses caused by the racetrack.

Sec. 13.

Minnesota Statutes 2014, section 240.15, subdivision 2, is amended to read:


Subd. 2.

Payment.

The licensee must remit the tax to the commission or its
representative within seven days deleted text begin of the day ondeleted text end new text begin after the end of the month innew text end which it was
collected. The payments must be accompanied by a detailed statement of the remittance
on a form the commission prescribes. The commission may by rule provide for the
direct deposit of required payments in the commission's account in a financial institution
within the state and for determining the time of applicability of different tax rates under
subdivision 1.

Sec. 14.

Minnesota Statutes 2015 Supplement, section 240.15, subdivision 6, is
amended to read:


Subd. 6.

Disposition of proceeds; account.

The commission shall distribute all
money received under this section, andnew text begin , except as provided otherwise by section 240.131,
new text end all money received from license fees and fines it collects, according to this subdivision.
All money designated for deposit in the Minnesota breeders fund must be paid into that
fund for distribution under section 240.18 except that all money generated by simulcasts
must be distributed as provided in section 240.18, subdivisions 2, paragraph (d), clauses
(1), (2), and (3); and 3. Revenue from an admissions tax imposed under subdivision 1
must be paid to the local unit of government at whose request it was imposed, at times
and in a manner the commission determines. Taxes received under this section deleted text begin and fines
collected under section 240.22
deleted text end must be paid to the commissioner of management and
budget for deposit in the general fund. All revenues from licenses and other fees imposed
by the commission must be deposited in the state treasury and credited to a racing and
card playing regulation account in the special revenue fund. Receipts in this account are
available for the operations of the commission up to the amount authorized in biennial
appropriations from the legislature.

Sec. 15.

Minnesota Statutes 2015 Supplement, section 240.22, is amended to read:


240.22 FINES.

(a) The commission shall by rule establish a deleted text begin graduateddeleted text end schedule of civil fines for
violations of laws related to horse racing or of the commission's rules. The schedule must
deleted text begin include minimum and maximum fines for each violation anddeleted text end be based on and reflect the
culpability, frequency and severity of the violator's actions. The commission may impose
a fine from this schedule on a licensee for a violation of those rules or laws relating
to horse racing. The fine is in addition to any criminal penalty imposed for the same
violation. Fines imposed by the commission must be paid to the commission and except as
provided in paragraph deleted text begin (b)deleted text end new text begin (c)new text end , forwarded to the commissioner of management and budget
for deposit in the deleted text begin general funddeleted text end new text begin state treasury and credited to a racing and card-playing
regulation account in the special revenue fund and appropriated to the commission to
support racehorse adoption, retirement, and repurposing
new text end . deleted text begin A fine in excess of $5,000 is a
contested case under the Administrative Procedure Act.
deleted text end

new text begin (b) If the commission issues a fine in excess of $5,000, the license holder has the
right to request a contested case hearing under chapter 14, to be held as set forth in
Minnesota Rules, chapter 1400. The appeal of a fine must be made in writing to the
commission by certified mail or personal service. An appeal sent by certified mail must
be postmarked within ten days after the license holder receives the fine order from the
commission. An appeal sent by personal service must be received by the commission
within ten days after the license holder receives the fine order from the commission.
new text end

deleted text begin (b)deleted text end new text begin (c)new text end If the commission is the prevailing party in a contested case proceeding, the
commission may recover, from amounts to be forwarded under paragraph (a), reasonable
attorney fees and costs associated with the contested case.

Sec. 16.

Minnesota Statutes 2014, section 240.25, subdivision 1, is amended to read:


Subdivision 1.

Illegal bets.

No person may place or accept a bet as defined in
section 609.75 on or off the premises of a licensed racetrack other than a bet made with an
approved pari-mutuel systemnew text begin authorized under this chapternew text end .

Sec. 17. new text begin EFFECTIVE DATE; APPLICATION.
new text end

new text begin This act is effective July 1, 2016, except that: (1) the enforcement provisions in
Minnesota Statutes, section 240.131, subdivision 8, paragraphs (a) and (b), are effective
November 1, 2016, and apply to the acceptance of pari-mutuel wagers from Minnesota
residents on or after that date; and (2) Minnesota Statutes, section 240.131, subdivision 9,
granting rulemaking authority, is effective the day following final enactment.
new text end