There is a loophole in Florida’s para-mutual law called Advance Deposit Wagering. It allows patrons to wager on racing — greyhound and horses — electronically. Patrons establish an account with an ADW company, and deposit money into the account prior to making any wagers. They can then place wagers from a computer, a home telephone or even a mobile phone. It is taking place in Florida and siphoning money away from Tallahassee.
Former Lt. Governor Jeff Kottkamp, who served from January, 2007 to January, 2011 after three terms in the state House, is general counsel to the Florida Greyhound Association. He wants to close the ADW loophole.
He wrote this piece for Browardbeat.com:
Unreported Wagers a Losing Bet for Florida
By Jeff Kottkamp
Greyhound racing has a rich history in the Sunshine State. The first greyhound race track opened in Florida over 100 years ago. Our state quickly became the nation’s unofficial capital of the sport. Greyhound racing became one of the most popular spectator sports in America.
While some of Florida’s smaller tracks have closed in recent years, greyhound racing as an industry is still very much alive. In fact, it was recently reported that live attendance and wagering at Florida’s greyhound racetracks increased in 2013. Florida continues to be the leading state in the nation for live greyhound racing in both attendance and in wagering.
The state started collecting taxes on greyhound races (as well as horse races) in 1931 to help offset budget shortfalls during the Great Depression. Since then, more than $73 billion has been wagered in Florida at pari-mutuel tracks with the state collecting $4.35 billion in taxes.
Over the last ten years the reported amount wagered, as well as the revenue to the state, from greyhound races and other pari-mutuel activities has seen a significant decline. It appears that a large percentage of the decline is the result of wagers that are being diverted by Advanced Deposit Wagering or ADW.
Last year’s Gambling Impact Study commissioned by the Florida Legislature determined that most ADW firms have established themselves in Oregon through a hub network which opened in 2000. The amount wagered through the hub has dramatically increased from $2 million its first year to $2.24 billion in 2012. From 2007 to 2012 the amount wagered using the ADW hub increased 47% while at the same time the reported amount of live wagers at Florida’s pari-mutuels fell a corresponding 46%.
It has been conservatively estimated that the amount wagered that is currently reported to the state is less than half of the actual amount being bet at Florida’s pari-mutuel facilities (ADW accounts for the other half of wagers being placed). That also means that the state is not collecting taxes on roughly 50% of the money being wagered in Florida (about $1 billion) as a result of Advanced Deposit Wagering.
Florida is not the only state facing this problem. In September of 2012 the State of New York issued a Report of the Impact of Advance Deposit Wagering on its pari-mutuel industry. According to the report New York lost out on $200 million in wagers placed through ADW primarily at its race tracks in 2012 alone. Those are wagers, like in Florida, that are not reported and not taxed.
As a result of the report New York’s Wagering and Racing Board recommended that their state law be amended to require ADW operators who accept wagers from New York residents to be licensed in the state. The Board also recommended imposing statutory distributions (taxes and fees) on each wager accepted from a New York resident using ADW. Other states, including California, Oregon, Washington, Virginia and Illinois already impose fees and taxes on ADW operators who collect wagers from their residents
Florida has always been a fairly conservative state when it comes to gambling. Voters in the state rejected casino gambling three time (1978, 1986 & 1994). The state aggressively challenged the Seminole Tribe when they opened a high stakes bingo parlor in 1979. Even the state lottery was not approved until 1984. Generally, only those gambling activities specifically approved by voters or otherwise authorized by law are legal.
Which raises a question about Advanced Deposit Wagering. Since ADW is not specifically authorized by Florida law some believe it illegal. This seems to be a legitimate concern. Considering the amount being wagered in Florida using ADW, as well as the negative impact to the state of Florida, it would appear to be an activity that is ripe for review by the Attorney General.
Regardless of the whether the Attorney General investigates the matter the Florida Legislature should follow the lead of other states and require ADW operators who accept wagers made in Florida to not only be licensed in the state but also pay taxes and purses on those wagers. Anything less is a bad bet for Florida.
(Jeff Kottkamp was Florida’s 17th Lieutenant Governor and served in the Florida House of Representatives for three terms. He is General Counsel to the Florida Greyhound Association)