Racing authority and its critics argue again in federal court

Fighting again to defend its legality, the Horseracing Integrity and Safety Authority came under skeptical questioning from federal judges Wednesday in Cincinnati in the latest court challenge by state racing commissions and track operators.

How much power the Federal Trade Commission exercises over HISA was the biggest bone of contention between lawyers and the three judges hearing the case in the Sixth Circuit Court of Appeals.

“If there are settings where the FTC is subordinate to the authority, I consider that a serious problem,” judge Jeffrey Sutton told Washington-based attorney Pratik Shah, who represented HISA. “The reason I am so skeptical is I’ve already watched the FTC deploy this authority. We’ve already seen their reluctance to second guess the authority.”

LISTEN: Hear Wednesday’s Sixth Circuit hearing in its entirety.

Shah disputed the premise the FTC merely was rubber-stamping regulations written by HISA. He compared it with the power given by the government to the Securities and Exchange Commission.

“If they actually have on the back end the authority to modify any rule, it’s almost like, on all fours, with the SEC’s modification authority,” Shah said. “The question is is the delta between the modification power in the SEC statute and in this statute of constitutional significance?”

The arguments were similar to those made in New Orleans, where the Fifth Circuit court three weeks ago ruled HISA unconstitutional. In both cases, the legality of HISA has hinged on whether it reaches beyond the limits of Article 1 of the U.S. Constitution. Critics argue that because HISA is a private authority and not a government agency, it should not have the final power to write racing regulations. Supporters say the FTC, which oversees HISA, does have the last word, so that should make the whole process legal.

“The commission in every circumstance is reviewing the authority’s proposal based on the requirements set out in the statute, the considerations set out in the statute and the other principles set out in the statute,” said FTC attorney Courtney Dixon, referring to what was signed into law by former President Trump nearly two years ago. “The commission absolutely gets to have an independent view of what those requirements, considerations and principles mean. It doesn’t have to take the authority’s word for it.”

The 11 plaintiffs, including the states of Oklahoma, West Virginia and Louisiana as well as the U.S. Trotting Association and the operators of racetracks in Oklahoma, begged to differ.

“All the FTC can do is make recommendations to modify a regulation,” said Matthew McGill, a Washington attorney representing the USTA and Hanover Shoe Farms in Pennsylvania. “When the FTC does make those recommendations, the authority is not obligated to do so.”

Sutton and his fellow judges Guy Cole and Richard Griffin spent much of the 50-minute session asking all three lawyers whether the FTC really has the last word over HISA.

Noting the written law said HISA was created to protect horses and the integrity of races, Griffin asked McGill, “Does the horse-racing authority have more authority than those categories?”

“Absolutely,” McGill said.

“That’s what I thought,” Griffin said. “So the interim rules that the FTC can promulgate are more limited than the rule-making of the horse-racing authority, right? They’re not the same.”

“Yes,” McGill said.

Dixon and Shah, who argued on behalf of the FTC, HISA and 16 other defendants, said that was not the case at all.

“We’re trying to construe the statute not in a way to invalidate it on a facial challenge but to uphold it,” Shah said. “I think we have the better reading ... that FTC has pretty broad authority under its interim, final rule-making authority to actually enter any rule that ‘is necessary to protect the health and safety of horses.’ That’s the condition that Congress satisfied.”

Under questioning from Sutton, Dixon admitted the FTC “hasn’t utilized its final rule-making authority.”

“Why isn’t that problematic?” Sutton asked.

“The statute hasn’t been in effect that long,” McGill said. “It’s repeatedly told the public that it can petition for a rule making if it’s necessary to protect the safety and health of horses – again, what the final, interim, rule-making authority describes.”

The National Horsemen’s Benevolent and Protective Association, one of the plaintiffs that successfully argued against HISA in the Fifth Circuit, monitored Wednesday’s case and said it was happy with how things went.

“Each judge on the panel raised questions of counsel concerning the arguments for and against HISA,” National HBPA attorney Peter Ecabert said in a written statement. “I felt as if the questions were probing of each side. ... While there is no deadline for the court’s opinion, all interested parties are hoping this comes sooner rather than later in the best interest of the industry.”

A spokesperson for HISA had not responded yet to a Horse Racing Nation request for comment Wednesday morning.

The judges eventually will issue a ruling on the legality of HISA. If it makes the same ruling of unconstitutionality as the Fifth Circuit, then HISA might ask the U.S. Supreme Court to hear its appeal. For now, last month’s ruling in New Orleans gives HISA until Jan. 10 to find a legal remedy or face a shutdown.