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Racing and Gaming Conference Focus Shifts to Horse Racing’s Future

By Scott Finley

After an opening day of casino and conventional gaming panels, the focus of Wednesday sessions was on developments in racing, including a review of the newly launched Horseracing Integrity and Safety Act and a thoughtful panel on how fixed-odds betting can positively impact the American horseracing industry.

Lisa Lazarus, newly appointed CEO of the Horseracing Integrity and Safety Authority (HISA) spoke of the challenges her organization has faced in launching the initial phase of the Federal Statute that created HISA.

Of the 21 states that host live racing, 17 state racing commissions have signed on and voluntarily registered with HISA, with over 34,000 horses and 28,000 owners on board. Yet there have been federal court cases filed in Texas and Kentucky challenging the constitutionality of the federal statute, and a more recent case in Louisiana seeking a temporary restraining order on the implementation of HISA regulations in that jurisdiction.

All three cases lost in the first round but are being appealed. To date, HISA has incurred over $1.8 million in legal fees fighting these legal challenges, making a considerable dent in the organizations initial $14 million annual budget.

The HISA Board anticipates further legal challenges, but has committed to implementing corrections to many of the issues that have generated complaints from various sectors of the racing industry.

“We still have several transparency issues that need to be addressed, said Lazarus, ” and we will.”

“We are a very young organization created by federal statute,” Lazarus continued, “but we are learning as we go and it will get better.”

Fellow panelist Ed Martin, President and CEO of the Association of Racing Commissioners International (ARCI) commented, “It's been a little messy [with the start-up], but it's gotten much better since Lisa showed up.”

At the heart of the disagreements over HISA, across all facets of the industry, is the process of turning over what has aways been a state regulated industry to a federal agency. However, owners, trainers, racing commissioners and multiple industry bodies are all in agreement that uniformity of regulations is essential for racing to thrive, grow, attract new fans and shed some of the negative images that have arisen over the past decade.

Speaker John Kimmel, a leading trainer and licensed veterinarian commented, “On the surface, two barometers here at Saratoga look good: NYRA stands to handle over $850 million for the meet and the average price of yearlings at the recent sales was over $400,000. But, there are looming problems out there.

“Lack of uniformity in state regulations creates havoc for horsemen that race in multiple jurisdictions. We need uniform medication withdrawal times. We also need to overcome differences in managing enforcement for on-track versus off-track stabled [race] entrants.”

HISA can resolve these multitude of different regulatory matters, but all states must come on board for the process to be effective.

Kimmel also suggested the HISA must do a better job of communicating with industry stakeholders and perhaps could create a marketing and public relations department.

“There are lots of rumors out these and complexly inaccurate statements,” Lazarus agreed. “We want to make racing better through uniformity and stability.”

New York is one of the four state racing commissions yet to come to an agreement to fully embrace HISA. Speaker Rob Williams, Executive Director of the New York State Gaming Commission (NYSGC), explained, “NYSGC has not accepted two of the tasks requested by HISA [registering participants by NY State employees and fully staffing drug testing collection].”

Overall, though, NYSGC has been supportive, providing staff and professional expertise to assist HISA in developing rules and regulations. Williams and Lazarus both anticipate that the differences can be worked out and that NYSGC and HISA will resolve the issues over funding and that New York State will eventually join the fold.

Panel moderator Alan Foremen, Chairman and CEO of Thoroughbred Horsemen's Association, “The road to uniformity is so difficult.”

“We are making even more effort to listen to the industry on the pending anti-doping programs,” Lazarus stated. “We are a young organization created by Federal Statute; learning as we go. It will get better.”

Perhaps most encouraging was the level of respect that all panelists and their respective organizations had for Lazarus' efforts to date. All seemed to reflect that all will improve once the growing pains of HISA are worked out.

Ed Martin concluded, “Once the industry begins to trust HISA, that's the key to getting there.”

“Fixed Odds and the Future of Horseracing” the concluding panel on Wednesday, brought together racing executives, service providers and fixed-odds operators to offer their opinions on the current state of fixed-odds horse betting, but more importantly where and how the racing industry can capitalize on the stratospheric growth of legal sports betting by coupling both pari-mutuel and fixed odds betting to the current sports betting content menus.

Dallas Baker, Head of Business Development for BetMakers US, the operator first to market with fixed-odds betting at Monmouth Park, was adamant. “This is THE MOMENT for racing in the USA. We are at a critical point moment.”

“Just think how Illinois Horsemen felt watching the Arlington Million at Churchill Downs this past weekend!” Baker exclaimed. Baker contended that like in his native Australia, fixed odds betting – primarily on win and place markets only–can revitalize a declining USA racing industry, capture younger bettors and fairly remunerate horsemen for purses, so long as the commercial and tax structures are on a level playing field for all operators and content providers.

Colorado is the only state besides New Jersey to have approved and regulated fixed odds on horse racing. Moderator Dan Hartman, Director of the Colorado Division of Gaming, explained how his agency consulted all segments of the racing industry, especially horsemen, and established a tax and regulatory scheme that returns a fair share to purses at Colorado's racetrack. The fixed-odds law sunsets in 18 months unless renewed by the Colorado Legislature. All stakeholders will be asked to weigh in on the future of fixed odds in Colorado at that point.

David O'Rourke, President and CEO of the New York Racing Association, believes that sports betting is a massive distribution channel for racing. NYRA plans to work with all current sports betting operators on ways in with NYRA pari-mutuel content may be added to current platforms and then see where fixed odds fits in.

NYRA recently concluded partnership deals with Caesars Entertainment and BetMGM to add NYRA horse racing content to those sports betting platforms. Regulatory and banking/funding roadblocks have so far limited the launch to only two states.

Paul Hannon, Senior Vice President Corporate development for PointsBet USA, is also bullish on fixed odds attracting a new audience to racing and building on the growth of online and retail sports betting in 30 states just four years after The Supreme Court overturned the Federal Law {PASPA] prohibiting sports betting in all States except Nevada.

“Racing must reap the benefits of Sports betting's growth,” Hannon said. “I believe that within two years of launch, fixed odds sports betting on racing will become the fifth-most wagered on sport, after NFL, NCAAB football, NBA and NCAA basketball.

“Racing fills a content void, especially this time of year between the end of NBA and the start of NFL when sports betting revenue and interest typically decline.”

Michelle Fischer, Vice President for SiS Content Services, also agrees that fixed odds on horse racing will be a successful product and generate new interest in racing from a younger audience.

“Adding fixed odds racing to existing sports betting platforms will only increase the pie,” Fischer stated.

She agreed with Hannon about the massive potential for racing, essentially a 24-hour per day global sports, nicely filling in the down time between more conventional sports. It has done so in the United Kingdom, Australia and much of Europe. It should be successful in America as well.

“Americans want to bet of American sports and American racing,” Fischer said. “We as an industry must give them the opportunity to do so.

“But we need an open market for content and a fair pricing model [as compared to conventional sports betting] to make this successful.”

O'Rourke summed up NYRA's position on the opportunity for racing to offering fixed odds to reach a newer and younger demographic.

“Racing is essentially an entertainment product, but you cannot lose control of your content.”

Tuesday sessions focused on downstate casino development in New York, with most speakers concluding that two of the three licenses are heavily favored to be warded to Genting Resorts World at Aqueduct and MGM Empire City Casino at Yonkers, both of which are well-established VLT “racino” facilities.

The third, and final downstate license is up for grabs, but unlikely to be situated in Manhattan due to community and business opposition.

At a Tuesday panel on “Sports Betting: What's Next?” speakers reflected on the excessive 51% tax rate in New York on mobile sports betting operators and how that may eventually lead to market decline and further competition. Panelists also echoed many of the same sentiments as expressed at the Wednesday Fixed Odds and the Future of Horse Betting session, as the conclusion of most regulators, including in New Jersey, is that “racing is a sport.”

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HISA Appeal to be Argued Aug. 30; Judge Denies Contempt Motion

The United States Court of Appeals for the Fifth Circuit will now hear oral arguments Aug. 30–slightly earlier than expected–in the injunction appeal brought by the Horseracing Integrity and Safety Act Authority (HISA) and the Federal Trade Commission (FTC).

Both entities are defendants in an underlying lawsuit that alleges unconstitutionality and federal rulemaking procedure violations regarding HISA's initial framework of regulations that went into effect July 1.

The Appeals Court docket previously indicated a September oral argument date was being planned.

At issue in the appeal is whether a lower court (U.S. District Court, Western District of Louisiana) erred in preliminarily enjoining HISA regulations that were purportedly harming the plaintiffs, who are led by the states of Louisiana and West Virginia, plus the Jockeys' Guild.

The Appeals Court ordered Aug. 8 that with the exception of three specifically contested HISA rules, HISA's legal authority would once again be valid in the two plaintiff states until that court heard “expedited” oral arguments from the two sides.

What happens in the Appeals Court will affect other actions in the lower court that are currently pending.

One such motion that had been outstanding was the plaintiffs' motion for the defendants to be held in contempt of court for allegedly violating terms of the preliminary injunction.

But on Aug. 15, Judge Terry Doughty of the district court denied that motion on the basis that, “The filing of a notice of appeal confers jurisdiction on the Court of Appeals and divests this Court over their aspects of the case. Once jurisdiction has divested, this Court may not take any action that would alter the status of the case as it rests before the Court of Appeals. Because the appeal involves the Preliminary Injunction at issue, this Court lacks jurisdiction to enforce the preliminary injunction or hold Defendants in contempt.”

Separately, a Tuesday filing in the district court stated that a pending “motion to intervene” involving 14 affiliates of the Horsemen's Benevolent and Protective Association and several other entities that want to join the lawsuit as plaintiffs has been assigned an Oct. 13 court date.

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Industry Will Pay Twice For HISA Litigation

Barely six weeks into its existence as the sport's national rule enforcer, the Horseracing Integrity and Safety Authority (HISA) has spent $1.8 million defending itself in four separate lawsuits currently pending or under appeal in federal court.

But the true irony behind the spiraling costs of the anti-HISA litigation is that almost all entities–owners, trainers, jockeys, tracks, racing commissions and states–are going to have to pay twice, regardless of the final outcomes of those complex lawsuits.

That's because plaintiffs like the Jockeys' Guild and various horsemen's associations will spend their organizations' money trying to halt HISA on constitutional grounds and federal rulemaking procedures, while at the same time HISA will be using money it collects from federally sanctioned assessments paid by those same industry participants to fight the lawsuits.

Lisa Lazarus, HISA's chief executive officer, disclosed the to-date litigation costs Sunday as the keynote speaker at the 70th annual Round Table Conference on Matters Pertaining to Racing hosted by The Jockey Club in Saratoga Springs, New York.

“As you all know, HISA is industry-funded,” Lazarus said. “So these lawsuits are ultimately being paid for by the industry, and ironically in part by the entities suing us. It is really a shame to see industry dollars that could [otherwise] be spent on positive reforms to make racing safer. It's deeply disappointing because there is so much we could do as an industry for unity.”

Stuart Janney III, The Jockey Club's chairman, didn't try to hide his disdain for the groups trying to derail HISA, terming the plaintiffs in the lawsuits as “certain politically charged states, rogue horsemen's groups, and–'Surprise, surprise!'–the Jockeys' Guild.”

And while the annual Round Table has largely devolved over the years into a two-hour echo chamber of platitudes, preaching-to-the-choir presentations, and a pep rally for pet Jockey Club projects, Janney did give a succinct analysis of where those lawsuits stand from a pro-HISA perspective during his closing remarks.

Janney focused on one of the lawsuits in particular, in which HISA and the Federal Trade Commission (FTC) are alleged to have violated the Fourth and Seventh Amendments to the United States Constitution, plus the Administrative Procedure Act, which governs the process by which federal agencies develop and issue regulations.

The states of Louisiana and West Virginia, plus the Guild, are the lead plaintiffs in that case, and just this past Friday, Aug. 12, 14 affiliates of the Horsemen's Benevolent and Protective Association petitioned a federal judge to be allowed to join the lawsuit.

“Significantly, the Louisiana federal district court found zero constitutional violations,” Janney said. “But it did initially agree with plaintiffs that the Authority's definition of 'covered horse' and its search-and-seizure rules expand beyond the scope of the statute ever so slightly.

“Practically speaking, this portion of the ruling has no impact, because the Authority voluntarily revised both rules to comply with the statute,” Janney said.

“The district court also questioned the Authority's rule on funding, which was actually favorable to the plaintiffs, Louisiana and West Virginia. And amazingly, if the plaintiffs prevail, it will have those two states paying hundreds of thousands more for HISA.

“And finally, [the court] queried the length of the notice and comment period, though it recognized that any of the claimed deficiencies can easily be remedied by the Authority, even if the Authority is ultimately unsuccessful on the merits,” Janney said.

“In other words, in ruling in favor of the Authority's opponents, the Louisiana federal district court nevertheless acknowledged that the implementation of the Authority's rules cannot be stopped,” Janney said.

“So to be clear, none of these issues threaten HISA's long-term viability. But they certainly waste time and money,” Janney said.

“Another federal lawsuit challenging the Authority and HISA was filed in Texas last week,” Janney said. “It recycles many of the failed claims. Like the cases that came before it, and those that will come after it, the new lawsuit merely serves as a distraction and a waste of industry resources,” Janney said.

“Ironically, under HISA, horsemen will be the ones who bear the brunt of these additional legal costs,” Janney said.

Lazarus gave an update on HISA's next steps, acknowledging that she understands HISA needs to build trust within the industry, even among those who already support it.

“We at HISA are accountable to you. We have to listen to everyone and adapt as appropriate,” Lazarus said.

“HISA wants open and collaborative dialogue with everyone in the industry who comes to us in good faith,” Lazarus said.

“Specifically, I will soon be creating several advisory groups, including a horsemen's group, to enhance engaging with stakeholders to ensure we are delivering the best programs to the industry,” Lazarus said.

“We will continue to refine the racetrack safety rules,” Lazarus said. “Future rules will fill in gaps, clarify ambiguities.”

A transition to a new and permanent website will hopefully ease some of the concerns from industry participants who have complained about the user interface when registering with HISA.

The rollout of the Anti-Doping and Medication Control Program (ADMC) is HISA's next high-profile endeavor.

“We've made significant progress on the ADMC program,” Lazarus said. “In recent weeks we have developed and refined, with input from hundreds of racing stakeholders, a comprehensive set of rules. These will be submitted to the FTC this coming week for implementation in January 2023.”

Lazarus continued: “We are building a seasoned, world-class team that will implement the first national anti-doping program in horse racing, with uniform testing and uniform sanctions. It will be tough, but it will be fair. And in time, horses will be able to complete with the comfort of knowing they will not be beaten by someone who is cheating.”

Beyond that, Lazarus explained, “We also see a future where we can marry anti-doping investigations and intelligence with a robust capability that will be deployed nationally in both in- and out-of-competition testing.”

Lazarus also gave an update on HISA's participation levels.

“We are now six weeks into the implementation of the racetrack safety rules. To date we have registered 34,000 horses and 28,000 people. And more importantly, in my view, 90% of horses, jockeys, and trainers that are competing are registered. And if you take the state of Louisiana out of the picture, we're at 95%, because the majority of our non-registered participants are located in Louisiana.

“We've reached voluntary agreements to implement HISA rules in 17 state racing commissions out of a total of 21 that HISA currently governs,” Lazarus added.

HISA is in the process of hiring a national medical director to support tracks nationwide with jockey safety and health protocols, and has already facilitated and paid for concussion testing for riders at 10 tracks, Lazarus said.

“Jockey welfare alongside equine welfare is a major priority for HISA,” Lazarus said.

But the topic of jockey welfare brought up another ironic twist, at least from Janney's perspective.

“If I were a jockey, I'd be very excited about [HISA's safeguards for riders],” Janney said. “But apparently, they're not. Upping the ante, [the Guild] joined with [other plaintiffs in the Louisiana lawsuit] in adding a charge of contempt. It's outrageous. The jockeys are wasting their time and are hurting our sport. I hope they will come to realize that.”

Janney continued: “HISA is a once-in-a-lifetime chance to grow the sport through increased integrity and enhanced safety of horse and rider. This business isn't the same as it was 10, 20, 30 years ago. We all know it. And we now understand the economics… Folks, it's time to get together on HISA. It's good for the sport. HISA is legal. HISA is here to stay.”

Lazarus also concluded her presentation with a plea for unity.

“I don't mean that we are going to agree on every single rule. But I mean that we unify around the governing principle, the core principle, that we need to speak with one voice,” Lazarus said.

“HISA, as I sit here today and address you, is not perfect. And as you know, it is still a work in progress. But I'm incredibly proud of the work done by our small team under the very tight time frame set by Congress and the legislation.

“We have one industry and one chance. Let's have vigorous debate about what the rules should be. Let's never forget that our real adversaries are the bad actors who tarnish our sport, anyone who is cavalier about horse welfare, and those who want to shut down horse racing for good.”

“It's been only six weeks since we have launched HISA. Give us some time. Give us some grace. This effort to enhance the safety and integrity of racing is so important. And if it fails, we all fail. And if it succeeds, we all succeed. It's really that simple,” Lazarus said.

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14 HBPA Affiliates, 4 Tracks Want in on HISA Lawsuit

Led by 14 affiliates of the Horsemen's Benevolent and Protective Association (HBPA) and four racetracks, an alliance of entities seeking protection from the alleged harms of the Horseracing Integrity and Safety Act Authority (HISA) have asked a federal judge to allow them to participate in an existing lawsuit that claims HISA and the Federal Trade Commission (FTC) violated the Fourth and Seventh Amendments to the U.S. Constitution, plus the process by which federal agencies develop and issue regulations.

On Friday, the anti-HISA parties filed what is known as a “motion to intervene” in United States District Court (Western District of Louisiana). If accepted by the judge, it would grant the petitioners status in the case alongside the lead plaintiffs from the states of Louisiana and West Virginia.

An “intervenor” designation allows outside parties who have a personal stake in the outcome of a civil suit to participate in a case, even if their interests don't align exactly with those of the original plaintiffs.

“[Our] interests will be seriously impaired if Defendants prevail in their effort to enforce the enjoined HISA Rules beyond Louisiana and West Virginia,” the movants wrote in their Aug. 12 court filing. “Intervenors are not adequately represented by the parties to this action. Intervenors therefore respectfully request that this Court grant their motion to intervene as plaintiffs to protect their and their members' interests.

“Specifically, Intervenors seek to ensure that HISA does not kneecap the horseracing industry as a whole or themselves with the implementation and enforcement of defective HISA Rules,” the filing continued.

HISA and the FTC have consistently denied the allegations listed in the underlying June 29 lawsuit, which was filed two days before the federally mandated July 1 start date for HISA's first set of rules.

“Plaintiffs' eleventh-hour challenge to those rules on the eve of the statutory deadline [is an] emergency of their own making,” the defendants wrote in court documents just after the complaint was filed, noting that the plaintiffs waited a full three months after the approval of the rules to challenge them in court as being immediately harmful.

The HBPA affiliates wanting in on the suit are Arizona, Arkansas, Illinois, Iowa, Indiana, Kentucky, Minnesota, Nebraska, Ohio, Oklahoma, Pennsylvania, Washington, Charles Town and Tampa Bay Downs. The Colorado Horse Racing Association, which is that state's statutorily recognized horsemen's group for all racing breeds, also wants to be an intervenor.

Three of the four opting-in racetracks are in Nebraska: Fonner Park, Horsemen's Park, and the recently approved racino that will go by the name Legacy Downs. The fourth is Arizona's Turf Paradise.

The North American Association of Racetrack Veterinarians, plus the state of Oklahoma and its racing commission, round out the list of potential intervenors.

“Intervenors seek to join this action to protect their interests and those of their members or citizens in avoiding severe economic harms to the horseracing industry generally and to Intervenors specifically through the enforcement of HISA Rules that suffer from fatal procedural and substantive defects,” the Aug. 12 filing stated.

“Intervenors further seek intervention to address HISA's exercise of regulatory power against Intervenors and the threat of severe sanctions that HISA is currently imposing on Intervenors,” the filing continued.

“Intervenors interests may not–indeed, will not–be adequately represented by the existing parties because they have a different ultimate objective from the [existing plaintiffs] by covering a different portion of the United States and of the horseracing industry,” the filing stated.

Beyond the states of Louisiana and West Virginia, the Jockeys' Guild and various Louisiana-based “covered persons” under HISA rule are the existing plaintiffs.

Friday's motion to intervene asked for “expedited” consideration. But that might not be possible because aspects of the underlying lawsuit have been appealed to a higher court.

When cases go under appeal, the lower-court judge has limited power to change anything in the underlying case until the appeals process has been completed. The movants in Friday's filing wrote that they recognized that fact.

“Of course, Intervenors understand that though this Court's preliminary injunction order is on appeal to the Fifth Circuit, which partially stayed the injunction pending the outcome of an expedited appeal,” the filing stated. “At a minimum, the Court could hold the motion to intervene in abeyance, pending the resolution of the appeal.”

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