Colonial starting gate. Photo by Laurie Asseo.

Colonial starting gate. Photo by Laurie Asseo.

by Nick Hahn

Though Colonial Downs surrendered its license at the October 15th Virginia Racing Commission meeting, few believed that the track intended to relinquish its seat at the racing industry table.  Colonial’s latest move exhibits that point.  A Colonial Downs-affiliated company has filed a “demand for arbitration and statement of claim” with the American Arbitration Association against the Virginia Horsemen’s Benevolent and Protective Association (VHBPA), VHBPA officials said.  The VHBPA represents the state’s horsemen.

The arbitration process is allowed as part of the 2010 agreement between the VHPBA and EZ Horseplay, the advance deposit wagering (ADW) company which Colonial Downs owns and operates and which conducts business under a license separate from that held by Colonial Downs.

Colonial Downs contends that EZ Horseplay has been harmed because the VHPBA has encouraged horsemen’s groups in other states to stop sending their signal to EZ Horseplay; Colonial contends this is a restraint on trade.   Frank Petramalo, the executive director of the VHPBA, denies the charge.

The role of the VHBPA is muddied.  Many members of the VHBPA are members of horsemen’s groups in other states and could (in theory) have carried an anti-EZ Horseplay message back to those other states.  Yet through source market fees the VHBPA receives 5% of wagers placed through EZ Horseplay; thus, a reduction in wagering harms the VHBPA, as well as the wagering company.

Meanwhile, VHBPA officials indicated that the organization may have some counter claims of its own, including Colonial’s role in the establishment of a newly created rival horsemen’s group, the Old Dominion Thoroughbred Horsemen’s Association (ODTHA).

The formation of that group may have been a misstep by Colonial Downs.  It did not receive recognition from the Racing Commission, as the company had hoped.  It postponed the one event that it had planned for October 22.  And on Tuesday, Alan Foreman, chairman of the national umbrella Thoroughbred Horsemen’s Associations group, told the Maryland Racing Commission that his group had sent the ODTHA a letter demanding that it cease using the “Thoroughbred Horsemen’s Association” name.

 

Now, perhaps, the action will shift to the arbitration process.

“Nothing will happen very quickly,” observed Petramalo about the early stages of the arbitration process, which generally leads to quicker decisions than does the court system.

The arbitration process is typically four to six months, Petramalo said, significantly shorter than many court filings, yet carries legally binding results.  The initial steps of arbitration include the selection of an arbitrator and preliminary conferences.

Well in advance to the arbitration decision, lies the determination on the status of source market fees — an issue which appears to be much more imminent.

Under Virginia law, 10 percent of wagers made via ADWs are paid to the state.  Half of that 10 percent goes to the “unlimited licensee,” which until the surrender of its license was Colonial Downs; the other half goes to “representatives of the recognized majority horsemen groups,” in other words the VHBPA.

Colonial Downs surrendered their license at the October 15th Racing Commission meeting effective November 1st.  The Virginia Racing Commission voted unanimously to accept the surrender.

That would seem to indicate that Colonial would no longer have any claim on the source market fee money.

But if Colonial does not have a claim on the money, what happens to it?  And does any of that impact the VHBPA’s status as majority horsemen’s group, or claim on the funds?

Now Commission officials are awaiting an Attorney General decision on what may happen to ADW source market fees of all ADW companies licensed in Virginia on that date.  “We are waiting for the answer to that question.  Does it go into escrow or something else?” Bernie Hettel, Executive Director of the Commission.  “We are waiting on an official Attorney General opinion.”

Nick Hahn has been covering Virginia racing since before there was a racetrack. His “Off to the Races” radio show is a must-listen, and his “Nick’s Picks” tip sheet is a shortcut to wagering profits at Colonial Downs.