Section 1 [Purpose] describes the purpose of the bill.

Section 2 [Account Holder] defines “account holder” as a natural person who opens an account with an authorized advance deposit wagering provider.

Section 3 [Advance Deposit Wager] defines “advance deposit wager” as a wager on a horse race outside of the state that is placed through an advance deposit wagering provider.

Section 4 [Advance Deposit Wagering] defines “advance deposit wagering” as a system of pari-mutuel wagering in which withdrawals are debited to and winning payoffs are credited to an account held by an authorized advance deposit wagering provider.

Section 5 [Authorized Advance Deposit Wagering Provider] defines “authorized advance deposit wagering provider” as a person who holds a class C license as a racing or gaming-related vendor and has contracted with a class A or B licensee to provide advance deposit wagering on horse racing.

Section 6 [Minnesota Resident] defines “Minnesota resident” as a person who provides a physical or post office box address in Minnesota when opening an advance deposit wagering account.

Section 7 [Source Market Fee] defines “source market fee” as a percentage of the amount wagered by a Minnesota resident through advance deposit wagering that is paid by the advance deposit wager provider to Canterbury and Running Aces racetracks or a licensed sponsor of management of horse racing.

Section 8 [Authority] adds vendors to the list of people the commission may license for employment in horse racing where pari-mutuel betting is conducted.

Section 9 [Application] requires that an applicant for a license for employment in horse racing never have been convicted of or entered a guilty plea, Alford plea, or plea of no contest, to an offense under laws pertaining to the mistreatment of animals.

Section 10 [License Fees] sets a license fee at $10,000 per year to provide advance deposit wagering on horse racing.

Section 11 [Takeout; Distribution of Winnings] specifies that only certain licensees (not including owners of racetracks or ADW providers) must retain a percentage of bets to be distributed for purses and certain other purposes.

Section 12 [Advance Deposit Wagering]

Subdivision 1 [Advance deposit wagering authorized] makes advance deposit wagering legal by stating that ADW is “pari-mutuel betting on horse racing.”  (The criminal code exempts “pari-mutuel betting on horse racing” from the crime of betting unlawfully.)

Subdivision 2 [Prohibited acts] makes it unlawful to provide ADW without a license and under contract with Canterbury or Running Aces.

Subdivision 3 [Contract required] requires that an ADW provider have a contract with Canterbury Park or Running Aces covering specified issues.

Subdivision 4 [Bond required] requires an ADW provider to post a bond for $1,000,000 before accepting a wager from a Minnesota resident. The bond is surety for payment of fees imposed by the state, including source market fees, regulatory fees, breeders fund fees, and for payments to Minnesota resident account holders.

Subdivision 5 [Plan of operation] requires an ADW provider to submit to the Racing Commission a plan of operation for advance deposit wagering.  The ADW provider may not offer ADW until the Racing Commission approves their plan.  This section specifies issues that must be addressed in the plan.

Subdivision 6 [Source market fees; payment; distribution] requires that source market fees be set by contract between unspecified parties. Permits the Racing Commission to set a minimum for source market fees by rule. Requires a class A or class B licensee to pay the source market fees that it receives.  The ADW provider pays source market fees to class A and B licensees (i.e. race track owners and managers) who, in turn, pay 28 percent of the collected fees to Running Aces and 72 percent to Canterbury.  This section specifies how the racetrack must use the portion of source market fees that it receives.  Fifty percent must be applied to breeders awards and purses, with 33 percent of that amount paid to the state for deposit to the breeder’s fund and used for specified purposes, and the remainder used for purses in a specified manner. If a racetrack ceases to be licensed, then it will not receive source market fees and the fees it would have received will be paid to the other licensed racetrack.

Subdivision 7 [Payments to state] imposes a fee of one percent on all amounts wagered by Minnesota residents with an ADW provider.  These fees are 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 costs of regulating hose racing and pari-mutuel wagering.  This section also imposes a breeders fund fee of one-quarter of one percent of all amounts wagered by Minnesota residents through an ADW provider. This fee is deposited in the state treasury, credited to a racing and card-playing regulation account in the special revenue fund, and is appropriated to the commission to offset the cost of administering the breeders fund and promote horse breeding in Minnesota.

Subdivision 8 [Enforcement] creates a private right of action for a class A or class B licensee against any person who accepts a pari-mutuel wager from a Minnesota resident that is not authorized under this chapter.  This private right of action entitles the licensee to injunctive relief and presumed damages of ten percent of wagers, plus costs and attorney fees.  The presumptive damages would be distributed in the same percentages to Canterbury and Running Aces as source market fees (i.e 28 percent to Running Aces and 72 percent to Canterbury).

This subdivision also creates a cause of action for the Racing Commission against a person who accepts a pari-mutuel wager from a Minnesota resident that isn’t authorized under this chapter.  The commission is entitled to injunctive relief and to recover the fees the person would have had to pay as a licensed ADW provider, costs, and attorney fees.  This section permits the commission to issue fines.

This subdivision authorizes the Racing Commission to adopt rules to implement advanced deposit wagering licensing through exempt procedures.  The exempt rules will be permanent.

Section 13 [Taxes Imposed] limits the applicability of certain taxes to class B and D licensees, instead of all licensees.  Class B licenses are for sponsorship and management of horse racing; Class D licenses are for pari-mutuel horse racing by county agricultural societies.  (Class A licenses are for ownership and operation of a racetrack; class C licenses are for certain occupations and for providing advance deposit wagering.)

Section 14 [Payment] changes the due date for remittance of taxes on pari-mutuel pools.

Section 15 [Disposition of Proceeds; Account] is a conforming change.

Section 16 [Fines] eliminates a requirement that the Racing Commission set minimum and maximum fines for violations of laws or rules relating to horse racing.  Provides for fines imposed by the Racing Commission to be deposited in a dedicated account and appropriated to the Racing Commission, instead of being deposited into the general fund, as they are now. Establishes a right to, and a procedure for, a contested case hearing for fines in excess of $5,000.

Section 17 [Illegal Bets] is a conforming change.

Section 18 [Effective Date; Application] sets the effective date for all sections as July 1, 2016, except that enforcement provisions allowing suit by racetracks or the state against advance deposit wagering providers take effect November 1, 2016.  The grant of rulemaking authority is effective the day following final enactment.