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`Sometimes, Government Works’: Sixth Circuit Rules HISA Constitutional

“Sometimes, government works.” With those words, the United States Court of Appeals for the Sixth Circuit has upheld the constitutionality of the Horse Racing Integrity and Safety Act (HISA), setting up a potential court battle in the U.S. Supreme Court.

In short, the Sixth Circuit has ruled that the language added to the bill at the end of 2022 to address concerns of unconstitutionality were sufficient to alleviate those concerns.

The plaintiffs in the Sixth Circuit case were comprised of the state of Louisiana; Oklahoma and its racing commission, plus West Virginia and its racing commission. Three Oklahoma tracks–Remington Park, Will Rogers Downs, and Fair Meadows–are also plaintiffs, as are the Oklahoma Quarter Horse Association, the U.S. Trotting Association, and Hanover Shoe Farms, a Pennsylvania Standardbred breeding entity. On the other side of the aisle were the United States of America, the HISA Authority, and six individuals acting in their official capacities for the Federal Trade Commission (FTC).

The key issues surrounded the FTC's rule-making power, and whether the Act gave them enough power to keep it from being subordinate to the the Horseracing Authority.

After the United States Court of Appeals for the Fifth Circuit ruled that HISA was unconstitutional because it “delegates unsupervised government power to a private entity,” and thus “violates the private non-delegation doctrine” back in November, lawmakers added language to the bill to address those concerns.

The three judges on the Sixth Circuit panel–Jeffrey Sutton, Richard Allen Griffin and R. Guy Col Jr.–delivered a unanimous opinion, written by Chief Judge Sutton.

“In response,” reads Friday's opinion from the Sixth Circuit, “Congress amended the Act to give the Federal Trade Commission discretion to `abrogate, add to, and modify' any rules that bind the industry. The Constitution anticipates, though it does not require, constructive exchanges between Congress and the federal courts. A productive dialogue occurred in this instance, and it ameliorated the concerns underlying the non-delegation challenge. As amended, the Horseracing Act gives the FTC the final say over implementation of the Act relative to the Horseracing Authority, allowing us to uphold the Act as constitutional in the face of this non-delegation challenge as well as the anti-commandeering challenge.”

The ruling continues, “After the Fifth Circuit issued its decision and after we heard oral argument in our case, Congress enacted, and the President signed into law, an amendment to the Act that increased the FTC's oversight role. The amendment eliminated the FTC's interim-rule authority and instead gave sweeping power to the FTC to create rules that `abrogate, add to, and modify the rules of the Authority.'”

The ruling cites prior cases which, “taken together, draw a line between impermissible delegation of unchecked lawmaking power to private entities and permissible participation by private entities in developing government standards and rules.”

In its ruling, the court said that the central question was whether or not the Authority was inferior to the FTC. “The Horseracing Authority is subordinate to the agency,” they write. “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 opinion goes on to say why HISA is subordinate to the FTC in two specific instances:

Rulemaking. As amended, the Horseracing Act gives the FTC supervision over the rules that govern the horseracing industry. At the outset, the Horseracing Authority drafts rules on racetrack safety and anti-doping matters, and the FTC must approve those proposals if they are consistent with the Act. But, critically, as the FTC “deems necessary or appropriate,” it “may abrogate, add to, and modify the rules.” The FTC's power to abrogate and change the Authority's rules creates “a clear hierarchy.”
Enforcement. A similar conclusion applies to enforcement of the Act. The Horseracing Authority's enforcement duties are extensive, granted. The Authority implements the Act, investigates potential rule violations, and enforces the rules through internal adjudications and external civil lawsuits. Even so, the FTC's rulemaking and rule revision power gives it “pervasive” oversight and control of the Authority's enforcement activities, just as it does in the rulemaking context.

In its arguments before the court, the State of Oklahoma objected that the amendments to the language, “does not change one feature of the Act—that the FTC has power only to review proposed rules by the Authority for `consistency' with the Act, a standard of review that, it says, does not pick up policy disagreements.”

The judges disagreed. “Maybe so,” they write. “But even if that is the case, the FTC's later authority to modify any rules for any reason at all, including policy disagreements, ensures that the FTC retains ultimately authority over the implementation of the Horseracing Act.”

HISA issued a statement that said, “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.”

The National HBPA, one of the plaintiffs in the Fifth Circuit case, issued a statement as well. “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.”

Statement from NTRA President and CEO Tom Rooney

“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.”

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At 1-Month Mark For Drug Control, HISA Braces Industry For Changes

Four weeks out from the anticipated effective date for the Anti-Doping and Medication Control Program (ADMC), the Authority overseeing the Horseracing Integrity and Safety Act (HISA) is stepping up its awareness campaign so industry participants can be properly prepared for a sweeping change in regulatory protocols.

“We are officially on the one-month countdown to what we are confident will be the launch of our ADMC program on Mar. 27,” Lisa Lazarus, the chief executive officer for the HISA Authority, said during a Monday video press conference.

“Everyone is sort of on the same page of wanting uniformity and wanting consistency,” Lazarus continued. “And we're excited for the chance to actually show the industry what that looks like. I think once we get past Mar. 27, we'll be able to convert some doubters into believers.”

Part of what Lazarus and Ben Mosier, the executive director for the Horseracing Integrity and Welfare Unit (HIWU), are trying to get across to industry entities is that the looming ADMC implementation date is a very real deadline that they believe will not be affected by any current court action.

Mosier underscored that the ADMC launch is “what my team is focused on right now until somebody tells us otherwise.”

Added Lazarus: “One of the challenges for us, and why we are beating the drum as much as we possibly can, is to make sure stakeholders realize this is actually coming on Mar. 27. The moment the Federal Trade Commission [FTC] approves the [ADMC] regulations, they are effective.”

That date represents the last day of the FTC's 60-day review period for the ADMC rules, and Lazarus said “all indications” are that the FTC will greenlight them.

“The minute they approve them, state racing commissions are out of the drug-testing business, and we're the sole entity responsible in those states where HISA is operating,” Lazarus said.

Lazarus did note an exception: “The [federal] court in Louisiana has enjoined HISA from operating in Louisiana and West Virginia, so we will not be administering the ADMC program in those states, and yes, state regulations will continue to be in effect there.”

Lazarus also noted that the four federal lawsuits aiming to try to derail HISA were all initiated prior to the December 2022 rewrite of the HISA law that amended the act's operational language with the aim of quelling legal allegations of anti-constitutionality.

“I really don't think there is anything” in the courts that can stop the FTC's approval from happening, “which is why I'm so confident,” Lazarus said. “There is no pending legal action that is on the schedule to be resolved ahead of Mar. 27, [and] no party, no person, no entity has mounted any challenge to that [rewritten] law.”

Asked about immediate changes that horse owners and trainers might notice on Day 1 of implementation, Mosier noted several examples. One involved exactly who-HISA personnel or the existing track stewards-would be responsible for selecting horses for post-race testing.

“All testing is managed and directed by HIWU,” Mosier explained. “But what we're doing, and don't want to lose, is the ability for local personnel to inform testing selections. And what I mean by that is currently [in] the industry, the stewards [select horses for post-testing]. And we're not going to lose that ability. But we have to ensure that their selections are done in compliance with the rules, so we're working very closely with the stewards to make sure that they are educated and understand the rules and are essentially certified to now do this under our direction.”

Mosier continued: “We can also still hear information actively from veterinarians, or other personnel, on the ground [regarding factors] they see on the backstretch that typically flow up to the stewards on a daily basis.”

But, Mosier added, the flow of “nationwide intelligence” will also work in the other direction, meaning that local testing protocols might be triggered by information that flows downward from higher-up Authority entities, including from tips that come via HISA's whistleblower program.

Lazarus put it this way: “I think having a nationwide strategy that is intelligence-driven is going to be an opportunity for the industry to see how clean [or not]” the sport is.

Lazarus added that participants will experience “far higher levels of out-of-competition testing that the industry's ever seen, [instead of] almost-exclusive reliance on post-race testing to manage integrity.”

Mosier said when a horse is brought to a test barn, for example, the chain of custody will be paperless.

Mosier said horsemen can expect to have to electronically sign off on testing via an iPad (with instructions available in both English and Spanish), and that this system will assign unique markers that will accompany the specimen samples to the testing lab. Horsemen will then be electronically forwarded receipts from the test-barn process to streamline and provide proof of testing.

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Lucinda Finley Q&A: “Long Litigation Road Ahead” For HISA

The Congressional amendment to the Horseracing Integrity and Safety Act (HISA) at the end of last year–affording the Federal Trade Commission (FTC) more rule-making governance–has not yielded a pause on the legal maneuverings surrounding the law.

Already this year, the Fifth Circuit Court of Appeals denied a motion by the HISA Authority for that court to vacate its recent opinion that HISA is unconstitutional, and instead sent two different cases back down to the district court level.

In response, the Texas Racing Commission–which has so far barred the federal law from being enforced in its jurisdiction–said the action meant Texas tracks could once again beam their simulcasting signals out-of-state. Sam Houston, which is currently running, has so far refrained from taking that course due to the “” swirling around the matter.

At the end of January, the FTC published HISA's Anti-Doping and Medication Control (ADMC) rules on the Federal Register, initiating a 14-day public comment period. Should the FTC approve them, HISA has set a program implementation date of March 27.

All the while, two other HISA-related lawsuits are working their way through the courts–one currently before the Sixth Circuit Court of Appeals, and the other in the Texas Northern District Court, Amarillo Division.

To get a handle on where all this leaves HISA, the TDN once again spoke with constitutional law expert Lucinda Finley, Frank Raichle Professor of Trial and Appellate Advocacy, and director of Appellate Advocacy at the University of Buffalo Law School.

The following is heavily edited from a longer interview.

TDN: Can you give an overview of where all the latest legal actions that have come down since we last spoke leave HISA?

LF: No court has yet ruled on whether the newly amended HISA–which gives the FTC greater authority to accept, reject, or modify the HISA Authority's proposed rules–is constitutional or not. But the congressional amendments to HISA do put it on stronger legal footing on the single issue that the U.S. Court of Appeals for the Fifth Circuit addressed, the private delegation doctrine, or in non-legal parlance, whether HISA granted too much authority to make rules to a private body, instead of the FTC.

The congressional amendments make it clear that the FTC has at least as much regulatory authority as the Securities and Exchange Commission [SEC] does when it considers whether to adopt rules proposed by a private body. The SEC rule making structure has repeatedly been ruled constitutional by many federal courts.

But despite how the congressional amendment responds to the Fifth Circuit concerns about the previous version of the HISA statute, it is not surprising to me that the Fifth Circuit panel refused to consider whether to vacate their opinion or to rehear the case. It is standard appellate procedure for a federal appellate court, after they've initially ruled, to send things back to the district court. The district court will be the first one to determine whether the amendments that Congress recently made are sufficient to satisfy the concerns that the Fifth Circuit had.

The other thing that the Fifth Circuit did is to lift a stay or a suspension of an injunction that another district court had issued against enforcing HISA in Louisiana and West Virginia. So, HISA cannot legally enforce its rules in those two states. But what HISA can do is go back to that district court and argue that the recent congressional amendments have satisfied the constitutional concerns raised by the Fifth Circuit–therefore that the amendments make HISA constitutional–so they could ask that district court to remove its injunction against enforcing HISA in West Virginia and Louisiana.

How I interpret the recent Fifth Circuit decision not to vacate its November ruling and not to rehear its November decision is to simply say: Take your arguments back to the district courts, let the district courts consider those arguments in light of our November ruling and in light of the amended statute.

TDN: Do they go back to the same district court?

LF: No, they go back to the district courts in which each case originated. One of them goes back to a district judge who initially found HISA, even before Congress amended it, to be constitutional. The other case, the West Virginia and Louisiana case, goes back to a district judge who expressed grave concerns about HISA's constitutionality prior to amendment.

TDN: In the district courts, are the plaintiffs likely to challenge other provisions of HISA?

LF: Several of the cases challenging HISA do raise other constitutional challenges in their original complaints, and they can argue all those other challenges back in the district court. If they didn't raise them [before], they could possibly ask to amend their complaints to raise other constitutional challenges.

In cases against HISA filed around the country, some of them challenge the way members of the private Authority are appointed, arguing that because they are functioning like federal government officials, they should be appointed through the process the constitution and federal statutes lay out for appointing and removing federal officials.

Now, that argument could be affected by Congress's recent amendments.

Before HISA was amended, plaintiffs' main argument was it delegated too much governmental authority to the private Authority, thus the private Authority was really acting like a governmental agency. So, if the courts think the new congressional amendments now leave the FTC with greater final say over what the HISA rules are, a judge may be less likely to accept the challenges to how members of the private Authority and its board are appointed. Again, to compare the HISA structure to the SEC, the way that members of the private body–known as FINRA–that proposes rules to the SEC are appointed has been upheld.

There are also cases bringing constitutional challenges to the private Authority's investigatory and enforcement powers. They claim that giving so much authority for investigating and punishing violations to a non-governmental body violates due process of law. No court has yet decided that argument.

In my opinion, that constitutional argument is weaker because under the HISA statute, there is a process for appealing any sanction based on an investigation of a rule violation–it can go up through a well-established administrative appeal process with federal administrative law judges, who are the ones hearing the appeal. That means that no punishment is final until it is ruled on by a federal official.

TDN: What you're saying is the Congressional amendment potentially has influence on the overall constitutionality of HISA beyond that one provision it was designed to fix…

LF: Yes. Congress's amendments to HISA responded only to what the Fifth Circuit had found to be the problems. But those problems were kind of an umbrella. The fifth Circuit issue was: Did the statute give too much regulatory authority to the private Authority? Congress's amendment has addressed that and clarified that the FTC is now a lot more than a rubber stamp.

And so, if a judge now decides that that congressional amendment makes the HISA structure much closer to the SEC structure–which has been upheld as constitutional, including the way in which people are appointed to the private entity, FINRA, and in its investigatory authority–then it is more likely that the other challenges to HISA would not be accepted.

Although, let me clarify. There is a difference with the SEC's process for investigating alleged violations of its rules. The SEC has its own government employees doing the investigations and the initial determinations. Under the HISA statute, the initial investigations and determinations are not done by FTC government employees–they're done by employees of the private Authority. That is still a potential challenge which has been raised in some of the lawsuits around the country.

TDN: Do you think this action might have any influence on the FTC's pending decision on whether or not to approve HISA's ADMC rules?

LF: I don't think it will. I mean, as soon as Congress amended the statute, the FTC said, 'now we're going to go ahead with the rulemaking process on the medication rules.' That is a strong signal.

Right now, we have a situation where the groups that are opposed to HISA have been throwing every legal argument they can think of at the statute, hoping that something sticks. Well, something did stick with the Fifth Circuit and Congress responded to that. So now, all the groups that are opposed to HISA are going to try to argue back in the district courts that the congressional fix isn't enough, and to then throw other arguments against HISA.

There's a long litigation road ahead for the statute and the Authority. I think I'm going to start calling the HISA statute the 'full employment for the lawyers' statute. The real people benefiting are the lawyers getting all these cases.

TDN: Given the swirling legal uncertainty, if the FTC approves the ADMC rules and they go into effect, will the Authority be leaving itself open to strong legal challenges when the first medication violation adjudications come rolling in?

LF: Well, let me put it this way. Trainers that have been sanctioned under the old system of each state determining its rules and sanctions have shown a propensity for hiring as many lawyers as they can to appeal and try to get their penalties reduced or vacated. Why would that change just because the penalty is for a HISA rule as opposed to a state commission rule?

TDN: And running up against the federal government is a little different than running up against a state commission?

LF: Yes, and that may be one of the things that the various HBPAs are worried about.

TDN: The Texas Racing Commission stated that the recent Fifth Circuit Court of Appeals action means that HISA has no jurisdictional authority in the state, and therefore, they can beam their simulcasting signal out-of-state once more. The Sam Houston lawyers are more circumspect. Who's right?

LF: The Fifth Circuit did not issue an injunction against the statute and rules. It was just what's called a declaratory judgment. So, there is not currently any binding legal order that applies in Texas that prohibits HISA from acting. The HISA statute applies to any entity that simulcasts into other states, so if any Texas track does start sending its signal to other states, it will be subject to HISA unless a court issues an injunction prohibiting HISA from acting.

But should HISA try to enforce any regulations in Texas, whoever was the target of any enforcement could sue to get an injunction saying, 'you can't enforce your rules if this circuit said you're unconstitutional.' So, in a roundabout way, the Texas Racing Commission is correct but–and this is a big but–only for the superseded version of HISA before the congressional amendments. If the courts rule that the congressional amendments fix the problem found by the Fifth Circuit then they would not enjoin HISA from acting in Texas. So I think the circumspection of the lawyers for Sam Houston is warranted.

Eventually, where is this all going in Texas or any other objecting state? It's becoming a game of whack-a-mole. The Fifth Circuit says this part of HISA is unconstitutional. Congress fixes it. Now, some other court says, 'another part of HISA is unconstitutional.' Well, Congress could then fix that. All of the challenges to HISA are delaying implementation, but ultimately, I do not think they will not stop the movement towards uniform national rules for the multi-state business of horse racing.

TDN: There's another case in the Northern District of Texas, Amarillo. Do you know what's happening with the case-and do you still think this could prove a major headache for HISA this year?

LF: There's been no further decisions in that court. That judge has to follow the Fifth Circuit decision on the challenge to the previous version of HISA about the allocation of responsibility between the FTC and the private Authority. Before that Judge, HISA and the FTC will argue that the newly amended statute satisfies the Fifth Circuit concerns, and that judge could allow the newly amended rules to go into effect. But as I said in our previous conversation, that case in Amarillo does have a lot of other challenges to HISA, such as to the way members of the Authority are appointed and the investigatory process and powers given to HISA.

If you file a case in the Amarillo branch of the Federal District Court for that part of Texas, you get Judge [Matthew] Kacsmaryk. He has quickly gained a reputation based on his rulings for being very hostile to broad federal regulation, and he has all kinds of hot button issues being brought to him, asking him to undo often decades of federal regulatory schemes. So, that's why I said it's the case that could become a major headache for HISA, because that case would get appealed to the Fifth Circuit which has already shown scepticism about the extent to which Congress delegates federal power to a private entity.

TDN: Where does this leave the pending ruling in the Sixth Circuit?

LF: The Sixth Circuit, because they haven't ruled yet, has more options before them based on the congressional amendment. The Sixth Circuit asked the lawyers to submit briefs addressing how the congressional amendment affected the appeal. The Sixth Circuit could say, 'well, the HISA statute has changed in significant ways. We want to let the district court start afresh and assess the parties' arguments based on the new statute.'

There really doesn't seem to be a lot of point for the Sixth Circuit to issue an opinion about whether they think a now superseded version of the statute is constitutional. So, I think it is likely that the Sixth Circuit will decide the appeal before them is moot and send it back to the district court, where the HISA and FTC lawyers will try to persuade the district court judge that the congressional amendments do solve all the constitutional concerns that the Fifth Circuit raised.

TDN: Do you think HISA is right to forge on with implementation of the full program (pending FTC approval), or do you think it would behoove them to put the breaks on while all the legal shenanigans play out?

LF: This is asking for my personal opinion–I'm trying to provide an impartial legal view. But I think that yes, the HISA Authority is pursuing the right course. Remember, several states have voluntarily agreed to follow their rules. So, for those states who've said, 'we participate in this, we want to follow your rules,' these rules need to be developed.

This is maybe getting a little too deep into the weeds, but the judge in Amarillo is famous for issuing nationwide injunctions. If the judge in Amarillo were to do that, then HISA would be legally prohibited from implementing its rules anywhere. But in the meantime, there isn't a national injunction, so, why wouldn't they continue knowing that there are a substantial number of states–including some of the most prestigious racetracks and racing circuits in the country–that want to follow their uniform rules?

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Statement On HISA’s Anti-Doping Rules From ARCI

The Association of Racing Commissioners International (ARCI) has formally asked the Federal Trade Commission (FTC) to set aside and temporarily not approve proposed anti-doping and medication control rules proposed by the Horseracing Integrity and Safety Authority (HISA) until the constitutionality of the HISA Act is determined by the Courts.

“This has nothing to do with wanting uniform rules or having a central rule-making authority, two things the ARCI supports,” said Ed Martin, ARCI President. “This all has to do with avoiding a situation where an enforcement action is overturned because the authority of the enforcing entity to act is in question. The potential exposure to the entire sport is avoided by leaving the existing state rules and enforcement in place until this gets sorted out.”

The ARCI Board voted unanimously to make a similar request in early December and the FTC shortly thereafter rejected the proposed HISA rules without prejudice citing reasons of the underlying legal uncertainty. With the Fifth Circuit Court's rejection earlier this week of HISA's petition based on changes made recently to the Act, the potential for regulatory chaos remains.

The filing made today reads as follows:

“ARCI requests that the FTC yet again reject the Rules or, at the very least, withhold decision until all legal challenges to the Act are finally adjudicated. As you might know, in addition to the federal court case that led to the Fifth Circuit's ruling, other litigations raising material questions about the legitimacy and constitutionality of the Act remain pending. Moreover, after HISA resubmitted the proposed Rules, the Fifth Circuit denied HISA and the FTC's petition to vacate the court's earlier ruling and for a rehearing, meaning two important things: (1) by mandate of the Fifth Circuit, the preliminary injunction prohibiting HISA enforcement in states within the Fifth Circuit will return to full effect and no longer be stayed; and (2) the Fifth Circuit's decision that the Act is unconstitutional will stand for the time being.

Once again, the FTC is in a unique position to restore some level of regulatory certainty to the horse-racing industry. It should do so by quickly and publicly announcing what it already determined a few weeks ago–that it will not approve HISA's proposed rules at this time. A decision to the contrary would come at too great a cost, as it would lead to regulatory uncertainty, exacerbate existing confusion throughout the horse-racing industry, and seriously compromise public interests.”

Should the FTC approve the HISA rules and penalties were imposed for a violation of those rules, the action could be appealed and potentially overturned and wiped away due to the finding in the Fifth Circuit that HISA is unconstitutional.

Likewise if a racing commission enforces the existing State anti-doping rule and penalties imposed for a violation are appealed using the argument that the federal rule preempts state action the possibility that it can be overturned also exists.

The only way to avoid this Catch-22 is to leave state rules and enforcement in place by delaying final action on the HISA ADMC rules.

The ARCI has not taken a position on the pending litigation, although some member states have and are litigating the constitutionality of the Act. In August, Martin called for HISA to sit down with all litigants and negotiate a way out. That did not happen.

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