A unanimous opinion by a three-judge panel at the U.S. Court of Appeals for the Sixth Circuit in Cincinnati, Ohio, found the amended version of the Horseracing Integrity and Safety Act constitutional.
The March 3 ruling, written by Jeffrey S. Sutton, the Sixth Circuit's chief judge, is in contrast to a November 2022 opinion from the Fifth Circuit Court of Appeals that found the federal law unconstitutional because it delegated legislative authority to a private entity, the Horseracing Integrity and Safety Authority. The two cases resulted from separate lawsuits – the Fifth Circuit appeal was from a Texas district court and the Sixth Circuit from a Kentucky district court – filed against the Federal Trade Commission, HISA board members and other individuals by parties that included the National Horsemen's Benevolent and Protective Association, various HBPA affiliates, several state regulatory boards, state attorneys general, racetracks, and a licensed jockey and trainer.
The lawsuit appealed to the Sixth Circuit was filed by the states of Oklahoma and West Virginia, their racing commissions, operators of three Oklahoma racetracks, the state of Louisiana, the United States Trotting Association and the Hanover Shoe Farms Inc. of USTA president Russell Williams, and the Oklahoma Quarter Horse Racing Association.
In both cases, district judges upheld the constitutionality of the federal law, saying the Federal Trade Commission had sufficient authority to fulfill its governmental oversight role of a private entity. The Fifth Circuit panel disagreed, saying the law gave “a private entity (HISA) the last word.”
The December 2020 Horseracing Integrity and Safety Act, signed into law by President Donald Trump, created the Authority, a non-profit, non-governmental agency, to regulate safety and integrity issues in racing. The Authority's racetrack safety program went into effect July 1, 2022, and its Anti-Doping and Medication Control program is tentatively scheduled to begin March 27, pending approval from the FTC of its regulations. At that point, the Authority will take over responsibility for medication rules, drug testing and enforcement for Thoroughbred racing from every state, with the exceptions of Louisiana and West Virginia, which are parties in the Fifth Circuit appeal.
While the Sixth Circuit judges heard arguments before Congress amended the Horseracing Integrity and Safety Act in December 2022, the ruling was based on new language inserted in a year-end omnibus bill designed to strengthen and clarify FTC rule-making and enforcement oversight. The amendment to the law said the FTC could “abrogate, add to, and modify” the rules of the Authority.
“As amended, the Horseracing Act gives the FTC the final say over implementation of the Act relative to the Horseracing Authority,” Sutton wrote, “allowing us to uphold the Act as constitutional in the face of this non-delegation challenge as well as the anti-commandeering challenge.”
The anti-commandeering challenge was a reference to opponents of HISA saying the law gave states no choice in collecting fees required by the Authority to operate or to share information with the Authority. Sutton said the law does give states a choice to collect fees or permit HISA to collect them directly from those covered by the act, namely tracks and participants. Sutton wrote that, “Fraught though it may be, Congress has not commandeered the states by putting them to this choice.”
Under the original language of the Act, Sutton wrote, the FTC “played a limited role” in rule-making, but the amendment gave the FTC “sweeping power.”
R. Guy Cole Jr., one of the other judges in the Sixth Circuit panel, wrote a concurring opinion stating his belief that the law was constitutional even before the amendment strengthening the FTC's role.
Both Sutton and Cole cited parallels to the Maloney Act, which provides the Securities and Exchange Commission with oversight of private, self-regulatory organizations in the financial markets. They also compared it to the Bituminous Coal Act, which was passed by Congress and later amended to prevent coal producers from acting as a government entity.
“HISA is remarkably similar to the constitutional Maloney Act, and was so even when assessed irrespective of the amendment,” Cole wrote.
Sutton said the question of constitutionality came down to whether or not the Authority is “inferior” to the FTC, concluding, “The Horseracing Authority is subordinate to the agency. The Authority wields materially different power from the FTC, yields to FTC supervision, and lacks the final say over the content and enforcement of the law – all tried and true hallmarks of an inferior body.”
The third judge from the Sixth Circuit upholding the constitutionality of HISA was Richard Allen Griffin, who like Sutton was appointed to the Court of Appeals by President George W. Bush. Cole was appointed by President Bill Clinton.
INDUSTRY COMMENTS:
Horseracing Integrity and Safety Authority: “HISA is grateful to the Sixth Circuit for recognizing and affirming HISA's constitutionality. We remain focused on preparing for the launch of HISA's Anti-Doping and Medication Control (ADMC) Program on March 27 pending final approval by the FTC. Once launched, the combined ADMC and Racetrack Safety programs will, for the first time in racing's history, see national, uniform integrity and safety rules applied consistently to every Thoroughbred horse, racing participant and racetrack in the country.”
Tom Rooney, President and CEO, National Thoroughbred Racing Association: “The decision today by the Sixth Circuit Court affirming the constitutionality of HISA is not only the right decision, but the critical step we needed to move forward in the sport of Thoroughbred racing. Later this month, HISA will begin the implementation of the Anti-Doping and Medication Control Program and will be fully functional. Now is a time for unity within the industry. HISA is the law of the land, and we must all come together to support its initiatives so that HISA can continue its mission to improve the sport with uniform standards of safety and fairness across the country.”
Eric Hamelback, CEO, National Horsemen's Benevolent and Protective Association: “Today, we stand firmly on our victory in the Fifth Circuit, however we are disappointed in the Sixth Circuit ruling. We have stated from the onset that there are multiple aspects of unconstitutionality plaguing HISA. The Fifth Circuit ruled on the arguments presented to them, and the Sixth Circuit ruled on the arguments they were presented. With that, we remain confident in our arguments and committed to our case. As seen now, the shifting legal uncertainty only upholds more confusion ahead for the industry and should lead everyone to agree we need a new bill to correct this uncertainty. We will keep fighting all the way to the Supreme Court if necessary to protect our industry and make sure our rules and regulations are built on a legal foundation.”
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