What’s Next? HISA’s Status Dependent On Multiple Court Cases, Lawmakers

Uncertainty with regards to the Horseracing Integrity and Safety Authority has been abundant in horse racing since the Federal Trade Commission – the government agency that oversees the Authority – disapproved the HISA medication rules, citing legal uncertainties.

HISA's proposed medication rules will not take effect on Jan. 1, 2023, as previously scheduled, but the racetrack safety program will remain in effect until at least Jan. 10, 2023. Meanwhile, the individual state racing commissions remain in charge of their own medication programs.

Through all the continuing legal maneuvering, horsemen have been left wondering what will happen next.

According to the Thoroughbred Daily News, which 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, there are several vital considerations when it comes to HISA's immediate future:

  • First and foremost, the FTC will require an additional 60 days for public comment if and when HISA resubmits its medication rules for approval.
  • Legislation that created HISA was ruled unconstitutional last month by the Fifth Circuit Court of Appeals in New Orleans, which reversed a lower court ruling in a lawsuit filed by the National HBPA and various affiliates. This ruling goes into effect Jan. 10, unless HISA receives a stay in court. While the ruling is only binding in the states of Texas, Louisiana, and Mississippi, HISA may suspend the racetrack safety program in all other states as well to avoid future litigation.
  • The Sixth Circuit Court of Appeals in Cincinnati heard arguments concerning similar constitutional questions on Dec. 7, but it remains unclear when that court will issue a ruling. If the Sixth Circuit disagrees with the Fifth and rules HISA constitutional, the Supreme Court may have to get involved.
  • A case in the U.S. District Court of Texas–Northern District, Amarillo Division–raises additional constitutional problems with the law. This case deals with not just HISA's executive authority, but also it's legislative and judicial authority. Any decision made by this court would then be raised to the Fifth Circuit Court of Appeals, which does have precedent with last month's ruling but a different panel of judges might make a different decision.
  • Lawmakers may or may not insert language into the upcoming year-end spending bill which affords the FTC greater law-making authority. If they do, HISA could resubmit its medication rules to the FTC. This does not solve the Amarillo court problem.
  • Kentucky lawmaker, Damon Thayer, is attempting to resuscitate law from 2011 that allows the state “to participate in an interstate compact, where a group of states can work together on laws pertaining to horseracing.” Thayer said: “I don't just want to be a critic of HISA. I want to be a critic of HISA who's offering another alternative.”

Read more at the Thoroughbred Daily News.

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Churchill Downs Inc. To Buy Historical Horse Racing Company Exacta Systems For $250 Million

Churchill Downs Incorporated (CDI) announced on Monday that it has entered into a definitive agreement under which CDI would acquire all of the outstanding equity interests of Exacta Systems LLC for total consideration of $250 million in cash, subject to certain working capital and other purchase price adjustments. The transaction will provide CDI the opportunity to realize synergies related to the company's recent acquisition of Colonial Downs racetrack and the Rosie's Gaming Emporium HRM facilities in Virginia.

Exacta, a provider of technology to support historical horse racing (HHR) operations, has integrated a diverse set of leading historical racing machine (HRM) gaming manufacturers into its HHR platform, including AGS, IGT, Light & Wonder, Everi, Konami and Incredible Technologies. Exacta supports HHR operations in Virginia, Kentucky, Wyoming, and New Hampshire.

“For nearly a decade, Exacta has been a creative force supporting the growth of historical horse racing in the U.S.,” said Bill Carstanjen, chief executive officer of CDI. “We look forward to expanding Exacta's national footprint and further diversifying the game offerings available to players at HRM facilities around the country.”

For tax purposes, the acquisition will be treated as an asset purchase allowing CDI to realize incremental tax benefits, which will provide additional cash flow and will enhance the overall economics of the transaction. The Transaction will be funded with cash on hand and through the Company's existing credit facility. The Transaction is dependent on various and customary closing conditions, including obtaining required regulatory approvals. The Transaction is expected to close in 2023.

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Sam Houston Executives Excited To ‘Test The Weekend Market’ In 2023

With a towering wave of momentum behind it, Texas' horse racing season begins Friday, Jan. 6, at Sam Houston Race Park, followed by a new racehorse owners' seminar the next day. Cue the trumpets. The Thoroughbred season continues through April 8, with 43 days of racing at Sam Houston, and then Lone Star Park in Grand Prairie will provide the stage for 44 days of racing.

In recent years, the horse industry's progress in the state probably has been more significant than at any time since the passage of The Texas Racing Act in 1986 and the subsequent opening of major racetracks. Over the last few years, Thoroughbred purses in Texas have doubled, from $13,167,859 in 2018 to $26,489,975 in 2021, according to The Jockey Club. In other words, the purses, or prize money, returned to 2007 levels. And the typical Texas-bred starter went from earning $10,722 to bankrolling $18,062.

Progress on the racetrack inevitably leads to advances in the breeding industry. In this case, inter alia, it led to the arrival of Mr Speaker, the only Grade One winner to stand in the state who also sired a Grade One winner. And since Mr Speaker's arrival from Lane's End in Kentucky, his son Speaking Scout won the recent Hollywood Derby (G1) at Del Mar. Such a luminary deserves special treatment, and Lori and Mark Collinsworth created the Forks of the Paluxy Farm in Bluff Dale just to accommodate the state's most accomplished and promising stallion. Mr Speaker's first Texas-bred foals will take their first steps this year.

All this momentum and progress was largely a consequence of the Horse Industry Escrow Account, created by lawmakers in 2019 “to foster the growth of the Texas horse industry.” The HIEA has funneled more than $50 million into Texas purses, for all breeds.

With the purses increasing and the racing improving, one of the state's foremost leading trainers, Danny Pish, was inspired to develop his new 1880 Training Center in Lipan. When the Texas horse industry was going nowhere, Pish had been tempted to go elsewhere, but the momentum and progress kept him home.

And so what now? Sam Houston will begin with daily purses around $230,000, according to Bart Lang, the track's director of racing, who has worked many years in Texas racing, as well at Oaklawn Park in Hot Springs, Ark. But the Sam Houston schedule will be dramatically different from that of a year ago. For one thing, the track will race only three days a week: Fridays, Saturdays and Sundays, plus holiday programs on Martin Luther King Day and Presidents' Day. The season will feature afternoon racing, with a first-race post time of 1 p.m., compared to last year's largely nighttime schedule. And the 43 days are seven fewer than last year's season.

“This will be a good experiment,” Lang said, “a good opportunity. We'll test the weekend market and see how it all goes. Sometimes when you're forced into something, it leads to some good ideas. Everybody at the track is very excited about the new schedule.”

Last June, the executive director of the Texas Racing Commission, Amy Cook, issued a memorandum that, in effect, prohibited the racetracks from exporting their simulcast signals outside the state. The importing of simulcast signals was not affected, nor was intrastate simulcasting. But interstate simulcasting, it was argued, would trigger the involvement of the Horseracing Integrity and Safety Act, or HISA. So Texas joined six other states — Idaho, Montana, Nevada, North Dakota, Oregon and Wyoming — in declining to comply with HISA.

In November, the U.S. Court of Appeals for the Fifth Circuit found HISA to be “facially unconstitutional.” So Congress will have to modify the statute, and the imbroglio could very well return to the courts before it's ultimately settled and there are, it's hoped, nationwide standards, rules and regulations.

In the meantime, to compensate for the loss in revenue from the interstate simulcasting and, at the same time, in an effort to maintain daily purse levels, Sam Houston adjusted its season to something that looks like all-weekend-all-the-time. Cue the trumpets.

The leading stables from last season are all back, such as those of trainers Steve Asmussen, Karl Broberg, J.R. Caldwell, Austin Gustafson, Bret Calhoun and Pish. In fact, Sam Houston received about 1,800 applications for its 1,200 stalls in the stable area, Lang said. So there's literally a waiting list.

Once again the highlights of the season will be the Houston Racing Festival, this year on Jan. 28, and Texas Champions Day, on March 25. The Festival features five stakes worth $800,000, including the $300,000 Houston Ladies Classic (G3) and the $200,000 John B. Connally Turf (G3).

The Ladies Classic has become the most significant race in the state for fillies and mares. The 2022 winner, Pauline's Pearl, went on to capture the Troienne Stakes (G1) at Churchill Downs and to push her earnings to $1,695,200. Trained by Asmussen, the Texan who's the sport's all-time leader in victories and who topped the standings at Sam Houston in 2022, Pauline's Pearl has had six workouts at Fair Grounds in New Orleans as she prepares for her 2023 return to competition.

The 2021 winner of the Ladies Classic was none other than Letruska. She began her championship campaign at Sam Houston, going on to win the Apple Blossom (G1), the Ogden Phipps (G1), the Personal Ensign (G1), the Spinster (G1) and, of course, the Eclipse Award as the sport's outstanding mare. She has earned more than $3 million in her career.

 

Completing the stakes of the Festival are the $100,000 Bob Bork Texas Turf Mile, for 3-year-olds; the $100,000 Bara Lass Stakes, for 3-year-old Texas-bred fillies; and the $100,000 Groovy, for Texas-breds.

Texas Champions Day will feature seven stakes, each offering a purse of $100,000, including the inaugural Texas Thoroughbred Association Derby and TTA Oaks. For older horses there will be the Richard King, at nine furlongs on the turf; the San Jacinto, at 1 1/16 miles for fillies and mares on the turf; the Spirit of Texas, at three-quarters of a mile; the Yellow Rose of Texas, at three-quarters of a mile for fillies and mares; and the Star of Texas, at one mile.

Cue the trombones.

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Senate Bill Would Create Pathway To Citizenship For Equine Workforce

A Senate bill sponsored by Colorado Sen. Michael Bennet (D) could pave the way for equine workers, both on the backstretch and in the breeding industry, to apply for U.S. citizenship. Bloodhorse.com reports that the bill would allow equine workers to be eligible for H-2A visas rather than H-2B visas; there is an annual cap on H-2B visas, but there is no such limitation on H-2A visas.

Certified Agriculture Workers must work in the industry for two years to be eligible to apply for U.S. citizenship, and must complete 10 years total and then another four under provision legal status. Spouses and minor children are also covered.

For the farms, the bill establishes a wage structure that would help owners keep costs down.

Bennet's office reported that it hopes to attach the bill to the omnibus spending bill, expected to be released Dec. 19 and voted on Dec. 23.

Read more at bloodhorse.com.

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