Senate Bill Report — SB 5563

Summary

A Senate Bill Report on SB 5563, as of February 4, 2025, prepared by nonpartisan staff of the Senate Committee on Business, Financial Services & Trade on a bill concerning horse racing, sponsored by Senators Fortunato and Warnick by request of the Horse Racing Commission. It gives background on the Washington Horse Racing Commission, parimutuel wagering, race meet requirements and the Commission's operating account. The bill would remove the requirement that one commissioner be a breeder, remove the 11-race daily limit, and lower the gross receipts threshold for the 1.3 percent withholding from $50 million to $20 million. It would let non-nonprofit licensees retain no more than 15 percent of daily gross receipts and raise the Commission's equine industry spending limit from $300,000 to $500,000.

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                            SENATE BILL REPORT
                                  SB 5563

                                      As of February 4, 2025

Title: An act relating to horse racing.

Brief Description: Concerning horse racing.

Sponsors: Senators Fortunato and Warnick; by request of Horse Racing Commission.

Brief History:
     Committee Activity: Business, Financial Services & Trade: 2/06/25.


                                     Brief Summary of Bill
           • Modifies certain requirements of commissioners at the Washington
             Horse Racing Commission (Commission).
           • Removes the limit to the number of live races per day for a race meet.
           • Reduces the annual threshold that a licensee must withhold 1.3 percent
             of the daily gross receipts to pay the Commission from $50 million to
             $20 million..
           • Clarifies that licensees of race meets that are not nonprofits may retain
             15 percent of the daily gross receipts.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE

     Staff: Clint McCarthy (786-7319)

     Background: The Washington Horse Racing Commission. The Washington Horse Racing
     Commission (Commission) was established in 1933 and is responsible for licensing,
     regulating, and supervising all race meets held in Washington where the parimutuel system
     of betting is used. The Commission is also responsible for inspecting each race course in
     the state at least once a year. The Commission consists of three commissioners that are




     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

Senate Bill Report                              -1-                                             SB 5563
     appointed by the Governor and confirmed by the Senate and serve six-year terms, with one
     member required to be a breeder of race horses. In addition to the commissioners, four
     members of the Washington State Legislature are appointed ex-officio members. These are
     non-voting members whose duties are to assist in the policy-making rather than the
     administrative functions of the Commission, to collect data deemed essential to future
     legislative proposals and to exchange information with the Commission. Horse racing
     commissioners are bared from making wagers on the outcome of horse races at a race meet
     conducted in Washington State under the authority of the Commission.

     Betting or wagering on a horse race is lawful in Washington only if it is by the parimutuel
     method. The parimutuel method is a wagering system in which the bets of a particular type
     are pooled, taxes and commissions are removed, and payoffs are calculated by sharing the
     pool among all of the winning bets. Licensees that operate race meets must withhold and
     pay to the Commission daily, for each authorized day of parimutuel wagering, a parimutuel
     tax that is a percentage of all the licensees' daily gross receipts from the licensees' in-state
     parimutuel machines.

     Race Day Meet Requirements for Persons Licensed by the Washington Horse Racing
     Commission. Persons licensed by the Commission can have race meets with no less than six
     races and no more than 11 races per day. For each race, the licensee must pay $500 each
     day if the licensee has gross receipts from parimutuel machines in excess of $50 million in
     the previous year. For licensees that have gross receipts that are less than $50 million in the
     previous year, the licensee must pay $200 per year.

     For the purpose of encouraging the breeding of valuable thoroughbred horses in
     Washington State, at least one race of each day's meet must consist exclusively of
     Washington bred horses.

     Sources and Uses of the Washington Horse Racing Commission Operating Account.
     Sources. The receipts from the parimutuel tax must be deposited in the Washington Horse
     Racing Commission Operating Account (Account), in addition to any gifts, grants, or
     endowments the Commission receives. The Commission, or the Commission's designee,
     may authorize expenditures from the Account. Moneys in the Account must be used for the
     Commission's operating expenses, except as otherwise required in the terms of a gift, grant,
     or endowment.

     Sums paid to the Commission, including license fees, but excluding licensee withholdings
     paid to the Commission related to nonprofit race meets and Washington-bred-only horse
     race payments, must be retained by the Commission for the payment of salaries to its
     members, secretary, clerical and office expenses, and all other expenses incurred.

     All moneys collected by the Commission and not expended at the end of the biennium must
     be paid to the state treasurer and be placed in the Washington State Fair Fund.



Senate Bill Report                              -2-                                          SB 5563
     Uses. The Commission, or the Commission's designee, may authorize expenditures from the
     Account. The Commission may pay 0.5 percent to a new licensee as reimbursement for the
     cost of the new licensee's new racetrack for a period of 15 years.

     The Commission is authorized to spend up to $300,000 per fiscal year from its operating
     account for the purpose of developing the equine industry, maintaining and upgrading
     racing facilities, and assisting equine health research.

     The state may not pay for salary, wages, expenses, or compensation, of any kind, in
     connection with the work of the Commission.

     Licensee Requirements. For licensees that are not nonprofit by nature and have gross
     receipts in excess of $50 million, the licensee must withhold and pay to the Commission 1.3
     percent of daily gross receipts. If the receipts are less than $50 million, the licensee must
     pay 1.803 percent of the daily gross receipts.

     For licensees that are not nonprofit by nature and have gross receipts in excess of $50
     million, the licensee may retain 13.7 percent of the daily gross receipts. If the receipts are
     less than $50 million, the licensee may retain 14.48 percent of the daily gross receipts.

     Payments to nonprofit race meets must be distributed on a per-race-day basis and used only
     for purses at race tracks that have been operating for five consecutive years immediately
     preceding the year of payment. The Commission must distribute funds up to $15,800 per
     race day from funds. Since July 1, 1999, the Commission must calculate the average daily
     gross receipts of parimutuel wagering that is conducted only at the physical location of the
     live race meet at race locations where the annual gross receipts of all their in-state
     parimutuel machines exceed $50 million at the conclusion of each authorized race meet.

     New licensees may retain 25 percent of breeder awards for reimbursement of capital
     construction of the new licensee's new racetrack for a period of 15 years.

     Class 1 Racing Associations. For a class 1 racing association, the sale of parimutuel pools at
     satellite location are conducted simultaneous to all parimutuel wagering activity at the
     licensee's live racing facility. This type of association may be approved to disseminate
     imported simulcast race card programs to satellite locations provided that they conduct at
     least 40 live racing days with an average track handle on the live racing product of a
     minimum of $150,000 per day during the 12 months immediately preceding the application
     date. To promote the development of a new association facility and to meet the best interest
     of Washington equine breeding and racing, the Commission may reduce the required
     minimum average track handle the live racing product from $150,000 per day to $30,000
     per day. These associations may conduct horse racing contests, and the Commission is
     directed to establish rules for the conduct of handicapping contests involving the outcome
     of multiple horse races.



Senate Bill Report                             -3-                                         SB 5563
     Summary of Bill: Washington Horse Racing Commissioner Membership Requirements
     and Restrictions. The requirement for one of the three horseracing commissioners be a
     breeder of racehorses is removed. Commissioners can wager on simulcast races held outside
     the state of Washington.

     Washington Horse Racing Commission Employees. Clarifies that no employee of the
     Commission can simultaneously work as an employee of a track and as an employee of the
     Commission.

     Licensee Requirements Related to Meets and Races. The limit on licensees to have no more
     than 11 races per day is removed. The requirement for a licensee to pay $500 per race is
     retained and applies to all race days. The lower fee of $200 per race day for licensees that
     have gross receipts less than $50 million is removed.

     The requirement that at least one race of each day's meet consist of Washington bred horses
     is modified to have one race at each meet be offered exclusively for Washington bred
     horses.

     The annual threshold on gross receipts for parimutuel machines requiring a licensee to
     withhold and pay the Commission 1.3 percent of daily gross receipts is lowered from $50
     million to $20 million. For licensees with gross receipts less than $20 million, the licensee
     must withhold and pay 1.8 percent of the daily gross receipts to the Commission.

     Payments to nonprofit race meets must be distributed on a per-race-day basis and used only
     for purses at racetracks that have been approved for race dates in the current year. If no
     nonprofit racing dates are approved, any amount in the fund that exceeds $180,000 at the
     end of the year must be deposited into the Commission's operating account.

     Licensees of race meets that are not nonprofit in nature are authorized to retain no more
     than 15 percent of the daily gross receipts.

     The requirement that the sale of parimutuel pools at satellite locations be conducted
     simultaneous to all parimutuel wagering activity conducted at the licensee's live racing
     facility in the state of Washington is removed.

     Class 1 Racing Associations. The condition that a class 1 racing association has to have
     conducted at least 40 live racing days with an average on track handle of a minimum of
     $50,000 per racing day during the 12 months immediately preceding the application date
     before a licensed class 1 racing association may be approved to disseminate imported
     simulcast race card programs to satellite location is removed.

     Licensed Advanced Deposit Wagering Companies. In addition to class 1 racing
     associations, licensed advanced deposit wagering companies are authorized to conduct
     horse race handicapping contests. The Commission may establish rules for the approval of


Senate Bill Report                             -4-                                        SB 5563
     handicapping contests involving the outcome of multiple horses.

     Commission Use of Funds. The prohibition on the the Commission using license fees for
     salary, wages, expenses, or compensation of any kind be paid to the state in connection with
     the work of the Commission is removed.

     Moneys in the account at the end of the fiscal year may be be dispersed to Washington State
     registered equestrian nonprofit organizations or recognized equine-related youth
     organizations though a grant process setup by the Commission in addition to being sent to
     the Washington State Fair Fund.

     The authorization of the Commission to pay 1 percent collected from a new licensee for
     reimbursement of capital construction of a new race track for 15 years is removed.

     The Commission is required to distribute funds up to $30,000 per race day from funds
     generated from the 0.001 percent of the daily gross receipts of all of its in-state parimutuel
     machines.

     The amount that the Commission is authorized to spend up to for the purpose of developing
     the equine industry, maintaining and upgrading racing facilities, and assisting equine health
     research is increased from $300,000 to $500,000.

     Appropriation: None.

     Fiscal Note: Requested on February 3, 2025.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: Ninety days after adjournment of session in which bill is passed.




Senate Bill Report                             -5-                                         SB 5563


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