Historical Horse Racing machines key to the sport’s future in California are in peril

California horse racing, struggling to stay afloat, got a stark reminder how uphill its battle is to add a new form of supplemental income this month when state Atty. Gen. Rob Bonta ruled against daily fantasy sweepstakes.

The decision underscored the power of Indigenous tribes when it comes to gambling in California.

Bonta’s ruling upholding tribal sovereignty, in conjunction with rare public comments from an influential tribal leader, puts the idea of Southern California getting Historical Horse Racing machines to bolster purses in worse shape.

The sport has been in decline nationally.

Dwindling foal crops, shrinking purses and a stagnant and aging fan base has pointed to California racing being on the edge of extinction. Mutuel handle, the amount of money bet, at Santa Anita this past meeting was marginally up mostly because the track’s parent company killed its northern California track, Golden Gate Fields, and the California Horse Racing Board (CHRB) in conjunction with the Thoroughbred Owners of California, facilitated the end of fair racing in Northern California.

The idea was that the money normally bet in Northern California, or acquired through simulcast wagering, would then be redirected to the south, so that Santa Anita and Del Mar could increase its daily purses.

The solution to these problems was identified a few years ago: The sport needs to get Historical Horse Racing, which looks, feels and sounds like a slot machine, so that revenue generated by the machines could be put into purses that would attract more trainers and owners to California.

The question everyone keeps asking is: What is the industry doing to get Historical Horse Racing?

In February, The Times outlined five pathways to adding Historical Horse Racing in California. Now only one or two seem viable.

The group that is running point on adding the machines is made up of former CHRB chair and Santa Anita official Keith Brackpool, now a consultant; Aidan Butler, president of 1/ST Racing, also known as The Stronach Group (TSG); Scott Daruty, a senior executive at TSG; Josh Rubinstein, president of the Del Mar Turf Club; and Bill Nader, president and chief executive of the Thoroughbred Owners of California.

The options earlier this year were: work a deal with the tribes; roll out a limited number of machines at the tracks and ask for permission later; install up to 1,000 machines at the tracks without permission; seek legislative or ballot initiative help; or negotiate with a single tribe instead of all of them.

Read more: Will California ever approve Historical Horse Racing machines to help save the sport?

The tribal nation’s control of California gaming is solid both legally and culturally. In 1988, Congress passed the Indian Gaming Regulatory Act and ceded all authority over gaming on tribal lands to the states in which they reside.

California passed laws that allowed only five types of gambling: American Indian casinos, which are allowed to have Las Vegas-style table games (except roulette) and slot machines; card clubs; charitable gambling (church bingo); the state lottery and pari-mutuel wagering connected to horse racing.

In 2000, voters passed Proposition 1A, which exclusively gave the right to use slot machines to the tribes.

In 2004, a state ballot initiative that would have allowed the expansion of non-tribal gambling was defeated 84% to 16%.

And Bonta ruled against daily fantasy sweepstakes, reiterating the state’s position on gaming.

“While the California Nations [Indian] Gaming Assn. commends Atty. Gen. Rob Bonta for standing up for the rule of law in California, it is also very clear that California has long turned a blind eye to illegal gambling — at the direct expense of tribal governments,” association chairman James Siva said. “Untold millions if not billions have been illegally wagered over the past decade. Where is the enforcement? Where is the accountability?”

This is not the ideal moment for the tracks and tribes to work out a deal.

“The chances of horse racing ramming something past the tribes is slim and none,” said Victor Rocha, conference chair of the Indian Gaming Assn.

Rocha spoke to The Times as owner and publisher of Pechanga.net, a website designed to give tribal members the latest news on politics and gaming, rather than as chair of the IGA because the IGA has a separate spokesperson.

“There are times that we work together [with the tracks,] but then there are groups like The Stronach Group who try and push things through, which is the definition of a fool’s errand,” Rocha said.

“Let’s just say they are very ambitious,” he said. “But I would say they don’t have enough juice or enough power. They don’t have enough people who care. The average age of a horse player is decomposing. This would be a desperate act by a desperate company.”

The Stronach Group did not respond to The Times’ requests for comment. There were no responses to multiple requests to interview Brackpool, Daruty and the attorney general.

Rocha questions the value of negotiating with horse racing leaders.

Read more: Inside California horse racing’s complex problems that could hurt the sport nationwide

“The whole argument that [Historical Horse Racing machines] will save horse racing is false,” Rocha said. “The only thing that can save horse racing is the second coming. Can anything save horse racing? The answer is no. If you look across the country and the modern day racino [a casino and race track with shared financial interest on the same property], you see it’s not about the horses. It’s about the bottom line of the owners.

“It is a dying industry. They are going to have to get a ballot initiative or go through the tribes. The tribes have exclusivity for Class 3 gaming in California. And we will protect our exclusivity. The attitude is, if they go down that path [without us,] there will be a fight.”

Historical Horse Racing machines are generally set up with an 8% takeout, the money that is kept by the operators and not returned to the bettors. Rocha was asked about a scenario in which 1% goes to the California breeders, 3% to racing purses and the tribes keep the remaining 4%.

“I don’t know if there is a deal to be made,” Rocha replied.

Adding to the frustration of the horsemen and horse players is the lack of information coming from the tracks on how they plan to address this issue and secure their future.

Rocha, who checked with others in tribal groups before answering the question, said he is unaware of any contact between the tribes and the group put together to secure Historical Horse Racing.

His account conflicts with what Butler, president of The Stronach Group, told The Times in May.

Read more: Stronach Group to shut down Golden Gate Fields to help prop up Santa Anita racing

“I believe there are a lot of ongoing talks with industry partners,” Butler said. He added there have been conversations with a few of the tribes about the issue.

Butler attributed the lack of information coming out of his working group to the sensitivity of the topic.

“You can’t litigate or negotiate in the media,” Butler said. “Some of the these are very, very delicate. You’ve got casinos, you’ve got tribal interests, you’ve got big gaming interests. Anything you do has to be so tactfully thought through. You’d love to say we’re doing this or we’re doing that, but the bottom line is anytime you put a statement out there, it’s dangerous to the overall strategy. Context is everything. You don’t want to say anything that a potential future partner or non-partner could get the wrong idea.”

The Times talked to almost two dozen people working in the horse racing industry in search of more details about the group’s actions, and none could provide insight. All members of the working group have signed a nondisclosure agreement.

The CHRB is not involved in the discussions but would be the regulator that oversees Historical Horse Racing should it ever come to fruition.

A little talked about option would be for a track to put forth an agenda item about adding the machines, and the CHRB could mostly rubber stamp it.

In 1983, state Atty. Gen. John K. Van de Kamp, who went on to lead the Thoroughbred Owners of California, issued an opinion that said: “The Legislature’s delegation of authority to the Board covering all aspects of horseracing has been upheld by the Supreme Court.”

The opinion referenced was the 1961 Supreme Court decision in the Flores vs. Los Angeles Turf Club. At issue was not HHR, which hadn’t been invented, but the ability of tracks to offer horizontal wagers such as the Pick Six and not have it viewed as a “sweepstakes,” which would not be legal.

“I think given this opinion, [the CHRB could authorize it] if it is done right,” said I. Nelson Rose, a professor, attorney and author considered one of the world’s leading experts on gambling and gambling law. “One provision is you would have to have a race meet taking place and a few other technicalities. Politically, that’s really going to be difficult because the tribes have such power in the Legislature. They’ve got huge power.

”The tracks just can’t compete politically with the tribes,” he said.” But they do have enough political juice to keep the tribes from getting some things they may want.”

The CHRB recently stirred the hornet’s nest of adding Historical Horse Racing. In November, CHRB Chairman Greg Ferraro told the New York Times that he expected Historical Horse Racing machines to be in California race tracks in the near future.

Nine months later, the only Historical Horse Racing machines that were rolled out were on the third floor grandstand at Santa Anita, but not usable by the public. The Times asked Butler about it at the time. He then ordered the machines to be shut off and put back in storage.

“The Northern California contraction has taken an inordinate amount of time and resources, but with that behind us some effort for purse supplements could start up again,” said Scott Chaney, executive director of the CHRB. “The CHRB is very much in favor of a purse supplement and will aid in seeking that.”

Chaney would not talk about Historical Horse Racing, only the need for supplementing purses.

“We would need a few more regulations in place,” he said. “It’s a lot more complicated than just putting machines in. There is a lot of regulation no one wants to talk about.”

There could be another problem.

Brackpool, who came to California after pleading guilty to criminal charges relating to securities trading in Britain, headed a group called Cadiz, which wanted to mine the water under the Mojave Desert and sell it to Los Angeles water interests.

The leaders of the Chemehuevi tribe, or Nuwu, opposed the project because of the aquifer’s potential connection to Bonanza Spring. The spring is part of the Nuwuvi Salt Song Trail, which is considered an ancient ceremonial loop in the desert. The Salt Songs are considered sacred and are used at many ceremonies to celebrate cultural revitalization and spiritual bond.

Brackpool and his company were viewed as opposing the tribes.

“If the guy comes in with baggage and if they think they want an Indian fighter, then they will get an Indian fight,” Rocha said. “Make that a failed Indian fighter. Bring him on. … The tribes are undefeated for 25 years.”

The Stronach Group opposed the tribes during a meeting with Bonta in Sacramento late last year during which they asked the attorney general to oppose the tribes and get on board for Historical Horse Racing. It didn’t happen.

Bonta’s office previously met with Kentucky operators to try to find out if there was a legal path for Historical Horse Racing machines. His office concluded that the machines were not legal under California law, according to a person with knowledge of the meetings not authorized to speak publicly about it because of the sensitivity of the matter.

Others support Rocha’s contention that horse racing needs more than Historical Horse Racing to survive.

“The problem is we don’t have enough bettors, enough gambling dollars going into racing,” said Marshall Gramm, chair of the economics department at Rhodes College in Memphis, Tenn., where he teaches a class on the economics of gambling. He is also a horse owner and gambler. “If the current economic model is that we need outside revenue, then it is unsustainable. [People could ask] if racing is supported [by state subsidies], why isn’t that money going to the local mill that is closing.

Read more: Attempt to revive horse racing in Northern California ends, affecting the sport around the state

“I’m very worried about The Stronach Group’s commitment to racing overall,” he said. “Is there going to be someone to fill their void if they leave the business? TSG is extremely unpredictable. Tomorrow they could do something great for racing or they could do nothing.

“I would love see racing in a position of surviving without external sources of revenue.”

Racing could pull a last-minute rabbit out of its hat. But it has to start with conversations with those who can help the sport.

The idea of negotiating with just one tribe is still on the table, although it would likely cause problems with the other tribes.

“Even if they make a deal with one tribe, it better be the right deal,” Rocha said. “The tribes see it as the camel’s nose under the tent.

“The way to get it done is through the [attorney general]. It’s the state of California that decides,” he said. “If it’s illegal, the tribes will take it to court. It took pressure from the tribes to get Bonta to make his [latest] ruling. The tribes are very protective of their exclusivity.”

Most people interviewed for this article said the outlook for adding Historical Horse Racing machines in California is grim.

“The race tracks’ influence is declining, but they have 70 years of history with the state legislature,” said Rose, the gambling expert. “[The state] doesn’t really care about the industries, but they do care about the taxes.”

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This story originally appeared in Los Angeles Times.