New horse racing law could lead to lawsuit

The owners of the state’s largest race track are weighing whether to sue to block a new law about who is entitled to get televised signals for out-of-state races.

Vince Francia, general manager of Turf Paradise, tells Capitol Media Services the law signed last week by Gov. Doug Ducey endangers its ability to continue to get signals from several tracks. That’s because the company that provide the signals, Monarch Content Management, has said it will withdraw from the Arizona market if it must comply with a new state law requiring it to also share those signals with all the off-track betting sites operated by Arizona Downs.

Francia said such a move would have a major impact on Turf’s revenues, with 44 percent of its revenues coming from those who wager on the races provided to Turf by Monarch and from revenues from other Monarch sites where people bet on live races from Turf. That translates out to close to $4 million a year.

“It’s something we would not be able to survive,” he said.

But Ann McGovern, general manager of the newly opened Arizona Downs in Prescott Valley said all she wants is fairness.

What’s behind the spat is a last-minute provision added by Sen. Sonny Borrelli, R-Lake Havasu City, to an unrelated measure dealing with horse racing at Tucson’s Rillito Park. The additional language spells out that any simulcast of live racing brought into Arizona from another state “must be offered to each commercial live-racing permittee in this state and additional wagering facility in the state.”

The essence is simple: If Monarch wants to continue providing signals to Turf it also has to serve Arizona Downs and its OTB facilities – including facilities in the Phoenix area, and at the same rate.

The move drew fire from Sen. J.D. Mesnard, R-Chandler, who said the state should not be getting involved in the spat and dictating contract terms. But the Senate approved it anyway and Ducey signed it into law.

It is set to take effect Aug. 27. In the interim, Francia said Turf is examining its legal options, saying there are doubts about its constitutionality.

He’s not the only one. Monarch President Scott Daruty, whose teletrack signals are at the heart of the fight, also is consulting with attorneys about challenging the act.

One issue, said Daruty, is the 1978 federal Interstate Horseracing Act which is designed to ensure that states do not use their own laws to interfere with interstate off-track wagering. Then there is the Commerce Clause of the U.S. Constitution that has its own limits on the ability of states to interfere in matters of interstate commerce.

But McGovern said all the new state law does is ensure that brokers like Monarch provide equal access and equal treatment to anyone who wants to buy the signal.

And Tom Auther, one of the co-owners said there’s nothing illegal about the new Arizona law, saying similar statutes exist in other states. The real danger, he said, would be to allow Monarch — or any signal provider – to cut deals with one track for exclusive access to OTB signals that would put every other track in the state out of business.

Daruty, for his part, said it’s not that simple, saying Monarch has had a relationship with Turf for decades, long before Arizona Downs reopened for OTB last year and began live racing last month.

It starts with selling Turf and its OTB sites the signals from the tracks owned by the Stonach Group, Monarch’s parent company. That includes California’s Santa Anita Park and Gulfstream Park in Florida.

Monarch also sells signals from other tracks its parent company does not own.

Finally, it sells the signals from the more than 130 days of live racing at Turf to other tracks.

“It’s been profitable for them, it’s been profitable for us,” Daruty said.

He said Monarch also has been selling its signal to Arizona Downs for teletrack wagering at its Prescott Valley facility. What it is not willing to do, Daruty said, is sell to Arizona Downs’ six OTB sites, including three in the Phoenix area that he said are close to OTB sites operated by Turf, two of them within one mile.

“We’re a business and we want to see our product distributed successfully,” he said. “And we don’t think that sort of marketplace works.”

He compared it to someone wanting to set up a McDonald’s franchise, telling the corporation they know it’s a good location because it’s across the street from an existing McDonald’s.

“They’re going to tell you to get lost,” Daruty said.

“They’re not going into new markets and creating new distribution for our product,” he said. “What they’re really doing is, I believe, going out and trying to just cannibalize or just cherry-pick off of the business that Turf Paradise has and hope that they can attract some of it over to their location.”

McGovern said that’s not true – and not just because her company also has OTB sites in Lake Havasu City, Flagstaff and Pinetop-Lakeside.

“Any wagering dollars have been incremental to previous wagering dollars,” she said, adding to the overall total amount that people are betting rather than simply redividing it. McGovern also said she has studies about the overall wagering at Turf Paradise since Arizona Downs begin off-track betting a year ago.

“And their handle has gone up as well,” she said. “We have the data to show that.”

That, however, still leaves the question of whether the state can, or should, be in the business of telling Monarch and other signal providers that they have to serve all or serve none.

McGovern said there’s no reason for Monarch to object, especially since it is technically acting as a broker for horsemens’ groups across the country who actually own the rights. And she said expanding the places where people can wager is in the best interests of the horsemen.

“We’re going into markets that are going to allow them to make more money for their horsemen and for their business,” McGovern said.

“We don’t have any reason to want to cannibalize Turf Paradise’s OTBs,” she said. “We want them to be successful,” saying it will “strengthen the overall industry.”

The other question that remains is the threat by Monarch that it would pull out of Arizona entirely rather than be forced to sell its signals to the Arizona Downs OTB sites. It’s a warning that Daruty made earlier this month in a letter to Ducey, just days before the governor signed the bill.

Daruty told the governor that allowing Arizona to impose such a mandate and continuing to operate here would set a “dangerous precedent,” setting the stage for lawmakers in the more than 35 other states where Monarch operates to impose similar requirements.

Francia said that would still leave Turf with signals from other tracks.

But he said that those who wager at the track and its 55 OTB sites happen to like — and wager on — the races that Monarch offers, endangering the 44 percent of its handle coming from those races.