HISA: Federal spending bill includes paragraph to placate U.S. Fifth Circuit Court of Appeals

Federal lawmakers have inserted an amendment into an omnibus spending bill that would modify the relationship between the Federal Trade Commission and the Horseracing Integrity and Safety Authority in a bid to skirt concerns expressed by a U.S. Circuit Court over the constitutionality of the current structure.

The single paragraph includes language that says that the FTC “may abrogate, add to, and modify the rules of the Authority.” The paragraph is included in a 4,155-page omnibus spending package approved by the both the House and Senate Appropriations committees on Monday. The package is expected to be heard by both the full House and Senate by Friday, a deadline to pass a spending bill for the federal government.

One month ago, a three-judge panel of the U.S. Fifth Circuit Court of Appeals ruled that HISA, a private, non-profit company, is “facially unconstitutional” because, according to the decision, “the Authority, rather than the FTC, has been given final say over the HISA’s programs.” The decision said that the relationship violated constitutional principles preventing the federal government from assigning regulatory power to a private company.

The ruling has placed HISA in legal limbo. Last week, HISA announced that it had indefinitely shelved a plan to take over drug testing and medication enforcement in most U.S. racing jurisdictions on Jan. 1 after the FTC declined to approve its rules for the program, citing the ruling by the Fifth Circuit.

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HISA officials and its supporters have been lobbying the federal government to include language in the spending bill to “clarify” the relationship between HISA and the FTC in the hopes of nullifying the Fifth Circuit ruling. A similar challenge to HISA’s enabling legislation was heard early in December in the U.S. Sixth Circuit of Appeals, and a decision in that case is expected in early 2023.

The legal challenges to HISA have been initiated by the National Horsemen’s Benevolent and Protective Association, several state racing commissions, and other groups sympathetic to their concerns. The National HBPA and the state racing commissions contend that HISA’s programs are too costly for the industry, that the current state-by-state regulatory structure better serves the needs of the industry, and that HISA has not taken into account the opinions of horsemen in the formulation and approval of its rules.

Two weeks ago, the National HBPA began urging its members to sign a letter or submit comments to their legislators as a counterpunch to lobbying by HISA supporters.

In a statement released on Tuesday morning, Eric Hamelback, the chief executive of the National HBPA, said that the addition of the HISA amendment to the omnibus package would not resolve the concerns contained in the Fifth Circuit ruling, and he said that the National HBPA would continue to challenge the legal footing of HISA “all the way to the Supreme Court if we have to, in order to protect the interests of horsemen across the country.

“I am disheartened that, once again, legislation governing the horseracing industry was crafted in the dark of night with no public hearings and virtually no industry input,” Hamelback said. “You cannot fix a fundamentally broken law with one sentence. This amendment does not address other substantive issues, nor does it address the funding disaster that remains in the flawed Act.”

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HISA’s enabling legislation was passed in an omnibus spending package late in 2020, with bipartisan support and an endorsement from then Senate Majority Leader Mitch McConnell, a Kentucky Republican. McConnell is now the minority leader, and his Republican caucus is fractured. Several Republicans who were co-sponsors of the enabling legislation have now said they support a repeal of the act.

HISA officials declined to comment on the amendment Tuesday morning.

Supporters of the enabling legislation had said that they modeled the bill on legislation that created the Financial Industry Regulatory Authority, a private, non-profit company created in 2007 that writes and enforces rules governing registered brokers and broker-dealer companies in the U.S. The amendment contained in the omnibus package contains language that is similar to language in the FINRA model.

If the amendment is included in the package approved by Congress, HISA would have to resubmit its rules for its drug-testing and enforcement programs to the FTC for review and approval. At the earliest, HISA could set a spring start date for the program, but legal challenges to the authority’s existence will likely present hurdles for HISA well into 2023.

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