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State auditors have found the Oregon Racing Commission (ORC) struggles with delays in filling openings for commissioners, weak oversight and transparency of funds to support the horseracing industry, and limited documentation of its review of historical horseracing (HHR) machines.
The audit, conducted by the state’s Audit Division, also found that ambiguity in state gambling laws has led to mixed interpretations of what those statutes allow, posing a risk to the economic interest of sovereign tribal nations.
“Everyone benefits when our laws are clear and fair,” Oregon Secretary of State LaVonne Griffin-Valade said in a statement.
“This audit points out important areas of ambiguity that the racing commission, legislators and the governor’s office can address to ensure we have clarity, a fully staffed commission and appropriate stakeholder input in our gambling statutes and enforcement.”
The audit noted that the horseracing industry, which has been regulated for almost a century, faces challenges around its financial stability.
The ORC regulates some $6.4bn annually in total wagers placed on races conducted inside and outside Oregon. Griffin-Valade said the state receives about $3m each year, with the majority going to the commission to support horse associations and those that operate race meets.
Auditors also mentioned the controversy around the proposed 225-HHR machine complex at Grants Pass Downs horseracing complex.
In a nine-page opinion released last year, Attorney General Ellen Rosenblum concluded the proposal would violate two provisions of the Oregon Constitution that prohibit lotteries, except those operated by the state lottery, and was a violation of the prohibition against casinos.
The ORC eventually denied the application, while still calling the opinion “erroneous.”
According to the 46-page audit released Wednesday (August 9), auditors found the need to add requirements either in policy or rule to evaluate gaming and wagering operations to ensure there is no conflict with the Oregon Constitution and state statutes.
The ORC also needs to enhance rules and develop policies and procedures for allocation and reviewing the use of advanced deposit wagering (ADW) hub funds.
Auditors found the commission must enhance commission meeting minutes to provide clear and transparent communication approval detail, including attachments received by the commission used to inform their decisions. Finally, the ORC should ensure documentation of its license reviews are maintained and safeguarded.
Oregon is one of the main hubs for online horse race betting, or ADW, in the U.S. Licensees include Churchill Downs' TwinSpires, Flutter's TVG and Stronach Group's Xpressbet.
“While I generally agree with the findings, I would like to clarify that I took over as director well after this audit had begun and was actively working on many of these issues before the audit team mention them,” ORC executive director Connie Winn told VIXIO GamblingCompliance on Friday (August 11).
Winn was appointed executive director on September 1, 2022 by former Democratic Governor Kate Brown.
“I am very proud of the hard work that the ORC is doing,” she said.
In a letter to Kip Memmott, director of the state’s Audit Division, Winn said in an effort to increase oversight and transparency of pari-mutuel wagering, ORC staff had drafted proposed rule language to implement the recommendation and in July began the formal rulemaking process to adopt new regulations.
In terms of allocating and reviewing the use of ADW funds, Winn said the commission plans to file new rules for public comment no later than November.
“The staff reviewed the use of the hub funds from the past year,” Winn wrote. “ORC staff made changes and enhancements to the hub fund application process to ensure that requests for funds are specific and detailed, and that unused funds are either returned or subsequent requests be made to use the funds for other purposes.”
Winn also reminded auditors that the ORC sends out the meeting agenda and non-confidential documents that will be discussed at the meeting to interested parties and industry partners on its distribution list, and the ORC has set up redundant document repositories with separate backups to store audit documents to ensure permanence.
Auditors also suggested the legislature needs to address potential constitutional changes by providing more clarity around the definition of a casino in state statutes.
To manage technological advances, lawmakers should set specific statutory limitations on “elements of user interfaces and player experiences, for online and physical gambling products.” Lawmakers also should make sure the limitations apply to those companies licensed by the ORC, according to the audit.
To maintain a full and renewed commission, auditors said the governor’s office should consider prioritizing the appointment of successors to replace commissioners who have multiple expired terms, as well as to fill all existing vacancies.
