Both sides file briefs in Horseracing Integrity and Safety Authority case

The Horseracing Integrity and Safety Authority argued in supplemental briefs filed Thursday to a U.S. Circuit Court that recent congressional action has nullified any legal concerns about its constitutionality, while opponents of HISA argued in their own briefs that the court still needs to consider additional claims challenging HISA’s role in regulating the racing industry.

The supplemental briefs were filed after the U.S. Sixth Circuit Court of Appeals, based in Cincinnati, requested the arguments following the passage of legislation late in 2022 that included an amendment to HISA’s enabling legislation. Supporters of the amendment have contended that the language addressed the constitutional challenges lodged by plaintiffs in the case, as well as a recent decision by a three-judge panel of the U.S. Fifth Circuit that called HISA’s enabling legislation “facially unconstitutional.”

The constitutional question rests on the so-called “private nondelegation” clause, which prevents Congress from delegating regulatory power to a private company. HISA’s enabling legislation, which passed in an omnibus spending package late in 2020, gave the Federal Trade Commission oversight of HISA, a private company that has so far been largely funded with loans provided by racing constituencies supportive of the authority.

The decision by the U.S. Fifth Circuit calling HISA unconstitutional, which was released in November, reversed a lower court’s ruling and placed HISA in legal limbo. Supporters of HISA than pressed federal legislators to amend the 2020 enabling legislation in another omnibus spending bill passed late in 2022.

In its Sixth Circuit brief, HISA cited Congress’s action and claimed that the passage of the amendment “obviates the principal basis for Plaintiff’s private-nondelegation claim in this case, which is predicated on a prior version of HISA that no longer exists.” The amendment states specifically that the FTC “may abrogate, add to, and modify the rules” of HISA.

“The FTC’s explicit modification power fundamentally alters the operation of HISA to make clear that the Authority is subordinate to the FTC,” the brief states.

The brief cites precedents upheld by other courts sanctioning the relationship between the Securities and Exchange Commission and the Financial Industry Regulatory Authority, a private company ratified by Congress in 2007 that provided the legal model for HISA when its enabling legislation was drafted by supporters.

In its brief, HISA asked the Sixth Circuit to dismiss the case, and it further argued that remanding the case to the court that already dismissed the constitutional questions would be “a waste of party and court resources.”

Although the plaintiffs in the case, which include a number of state racing commissions, private racing companies, and state attorneys general, conceded that the amendment addressed the largest concern of the U.S. Fifth Circuit, they argued in their own briefs that the court still needs to hear the case out, citing objections to other facets of HISA’s operations. Those objections include a contention that the FTC lacks the authority to devise fundamental policies for HISA and the ability of HISA to raise funds directly from the states, according to the brief.

“The recent amendment to HISA addresses only one of these many constitutional problems,” the brief states, in arguing that the plaintiffs deserve a full consideration of their arguments. “All of HISA’s other constitutional defects, however, remain unremedied.”

The Sixth Circuit’s decision in the case is expected to be critical to the future of HISA, which was designed by supporters to create a national regulatory and enforcement agency for racing to replace the current state-by-state structure. While HISA has strong support from a number of powerful racing constituencies, the National Horsemen's Benevolent and Protective Association, which brought the case heard by the Fifth Circuit, and a handful of state racing commissions and attorneys general who are dismissive of federal power have combined to challenge the implementation of its programs in their own states.

The Fifth Circuit opinion was cited by the FTC in December when it declined to approve rules submitted by HISA that would govern the authority’s anti-doping and medication control program, which would entail the takeover of sampling, drug testing, and enforcement of drug rules in the states under HISA’s jurisdiction. HISA had intended to roll out the program on Jan. 1.

Following the passage of the congressional amendment, the Fifth Circuit said it would delay the release of its so-called “mandate” enforcing its ruling until it could hear additional arguments from the opposing sides. The mandate was expected to be issued Jan. 10.

If the Fifth Circuit clings to its own ruling and the Sixth Circuit upholds HISA’s constitutionality, both sides are expected to ask the U.S. Supreme Court to weigh in on the issue.