Witnesses urge lower ADW fees, warn South Carolina ADW alone won’t match Virginia’s HHR revenues

Nel. Young, chair of the Senate subcommittee, heard testimony on Senate Bill 344 on advanced-deposit wagering (ADW) and related measures during a subcommittee hearing in which industry representatives and a former Virginia regulator urged changes to the bill’s fee structure and sought more information on South Carolina’s equine industry.

Nelson Clemens, CEO and owner of AmWest Entertainment (AmWager), testified in support of ADW legalization but asked lawmakers to reduce the bill’s proposed statewide takeout and license charges. “I am Nelson Clemens and I am the CEO and the owner of AmWest Entertainment, which operates under our brand name AmWager,” Clemens said. He told the panel that the group he represents prefers lowering the 5 percent annual fee on wagers in the draft legislation to 3.5 percent and reducing the proposed 1 percent license fee to 0.5 percent to leave more margin for market development and player incentives.

The core of Clemens’s argument was economic: ADW operators that serve many states decide where to spend marketing dollars based on expected net revenue after required payments and operating costs. Clemens listed typical ADW operating costs—tote and TV fees, data feeds, server and streaming costs, licensing and background checks, payroll and rent—and said those expenses, combined with required payments, leave little left for promotions, matching deposits and rebates needed to compete with offshore operators and major sports-betting firms.

David Lermond, former executive director of the Virginia Racing Commission, gave regulators’ perspective and warned the committee not to assume ADW alone will replicate Virginia’s gains attributable to HHR. “I would strongly urge the subcommittee to consider any proposed amendments lowering the required percentages to the commission and racing industry development fund in order to incentivize ADW licenses not only to operate but aggressively promote their business in South Carolina,” Lermond said. He described Virginia’s experience: statutory payments tied to ADW in Virginia total about 11.5 percent (5 percent to purses, 4 percent to the Virginia Equine Alliance, 1.5 percent to the commission, and 1 percent to the breeders fund), and those required payments have limited ADW growth there.

Lermond contrasted ADW with historical horse racing (HHR), which he said is the larger revenue source in Virginia and the principal driver of the state’s breeding incentives. “The total handle on HHR was $5,000,000,000 last year,” he told the panel, and he said Virginia’s Equine Alliance allocates about $10 million annually to a certified-horse program that offers 25 percent bonuses for Virginia-certified horses—an incentive Lermond said draws breeders and training programs to Virginia. He emphasized that the draft South Carolina bill does not authorize HHR; the committee discussed that distinction while weighing whether to adopt language modeled on Virginia’s approach.

Committee members asked several practical questions: how other states set ADW fees, whether fees are applied to gross handle or post-takeout amounts, and how much enforcement/regulatory work the commission would require. Lermond and Clemens answered that ADW fee regimes vary by state (Lermond estimated many states use lower percentages than Virginia) and said the bill’s percentages were being applied to the industry’s “takeout” concept for presentation purposes. Lermond suggested a half-percent licensing fee would likely be sufficient to fund regulatory oversight in a leaner model.

Members also pressed for local context and data. Senators asked staff to provide: (1) comparative fee schedules for other states, (2) details of Virginia’s certified program and how its Equine Alliance distributes funds, and (3) estimates of South Carolina’s current and historical horse population and geographic concentrations (Aiken, Camden, Orangeburg, portions of Spartanburg and Edgefield were repeatedly named as horse-industry areas). The chairman said he expects another subcommittee meeting and asked stakeholders to draft possible amendments for the next hearing.

No formal votes occurred at this session. The subcommittee adjourned with directions to collect comparative data and program details before reconvening.

Ending: The subcommittee ended the hearing with a plan for follow-up—staff and members will gather state-by-state fee comparisons, Virginia-certified program specifics, and estimates of the horse population and geographic concentrations in South Carolina. The chair said members should prepare proposed amendments for the next subcommittee meeting, which will be set at the call of the chair.