By Robert Freeman, of Proskauer
The Sixth Circuit will not revisit its decision from this past spring that upheld the constitutionality of the regulatory scheme established when Congress amended the Horseracing Safety and Integrity Act. In May, the circuit court denied the petition for full court review filed by a host of plaintiffs, which included Louisiana, Oklahoma, West Virginia, and an enumerated list of entities and businesses within the horseracing industry. (Oklahoma v. U.S., 62 F.4th 221 (6th Cir. 2023), reh’g denied No. 22-5487 (6th Cir. May 18, 2023)).
Unlike other major sports, horseracing has not had one leading regulatory authority, but rather has been overseen by a variety of state and local regulatory bodies and private organizations. As the Fifth Circuit noted in a related litigation, at least 38 state regulatory schemes have applied differing protocols and safety requirements for horseracing, including those relating to overworking horses, unsafe tracks, doping, and other health and safety issues facing jockeys and horses. Concerned by the number of recent doping scandals in the industry and track fatalities in the U.S. – indeed, it had been reported that at least 500 thoroughbreds died in 2018 alone from racing-related injuries – in 2020, Congress decided to act and created a national oversight body to govern racetrack safety, anti-doping, and medication control when it passed the Horseracing Integrity and Safety Act of 2020, 15 U.S.C. §§ 3051-60 (the “Act”).
The Act nationalized the regulatory authority for thoroughbred racing in a slightly unconventional manner by putting a private, nonprofit organization, the Horseracing Integrity and Safety Authority, Inc. (the “Authority” or “HISA”), in charge of developing and administering regulatory programs and rules, as well as apportioning funds. HISA was empowered to promulgate rules on a variety of issues, including prohibited medications, laboratory protocols and accreditation, racetrack standards and protocols, injury analysis, enforcement, and fee assessments, all affecting “covered” thoroughbreds, jockeys, and horseraces. As originally enacted, the Act granted expansive regulatory power to the Authority with only a limited role given to the Federal Trade Commission (“FTC”) to, among other things, publish and review the Authority’s proposed rules and issue certain interim rules only with “good cause.” This framework prompted legal challenges from a crowded field of horsemen’s associations and state racing commissions that argued that the Act violated the Constitution’s private non-delegation doctrine by delegating unmonitored lawmaking power to a private entity. As the Sixth Circuit noted, the Constitution permits only the federal government to exercise federal power and prohibits unchecked reassignments of power to a non-federal entity, including in instances where a private entity participates in developing government standards and rules. In brief, as the court explained, “[A] private entity may not be the principal decisionmaker in the use of federal power, may not create federal law, [and] may not wield equal power with a federal agency” [citations omitted].
In response to these legal challenges, Congress amended the Act to ultimately give final discretion and thus more governmental authority to the FTC. (Consolidated Appropriations Act of 2023, Pub. L. No. 117-328, 136 Stat. 4459 (2022)). Under the amended Act, the FTC was given discretion to “abrogate, add to, and modify” any rules that bind the industry as the FTC “deems necessary or appropriate.” The Act also provides that the FTC may act as it “finds necessary or appropriate to ensure the fair administration of the Authority, to conform the rules of the Authority to requirements of this Act and applicable rules approved by the Commission, or otherwise in furtherance of the purposes of this Act.” 15 U.S.C. § 3053(e). Following these legislative changes, the numbers displayed on the “odds board” quickly made the Authority a favorite to overcome any legal challenges.
However, despite the changes to the Act, the plaintiffs remained unbowed and argued that the Act remained unconstitutional because of the excessive authority granted to a private entity. In June of 2022, a Kentucky district court rejected the plaintiffs’ legal challenge to Congress’s delegation of power to HISA.
Subsequently, in March 2023, the “stewards” from the Sixth Circuit upheld the Act as constitutional. In deciding the issue, the court had to determine if the private entity (i.e., HISA) functions subordinately to the supervising agency, the FTC. If HISA was indeed subordinate to the FTC, then the Act would be upheld; if not, the delegation of power would be unconstitutional. Ultimately, the court found that since HISA was inferior and subordinate to the FTC, the Act could withstand the constitutional challenge. While the 2020 version of the Act gave the Authority unbounded regulatory and enforcement power, leaving the FTC with little oversight to modify proposed rules, the court found that the amended Act provides the FTC “pervasive” oversight and “ultimate discretion over the content of the rules that govern the horseracing industry and the Horseracing Authority’s implementation of those rules.” In the court’s view, this overarching review power allows the FTC to bear responsibility from a policy and enforcement standpoint.
At the homestretch, the court also reined in the plaintiffs’ challenge under the Tenth Amendment anti-commandeering doctrine, which generally provides that States cannot be commanded by the federal government to administer a federal regulatory program. The plaintiffs argued that HISA has the power to “put the states to an unconstitutionally coercive choice” to fund a federal program because if local horseracing administrators do not pay fees to HISA, they may be threatened with federal preemption. In rejecting this argument, the court stated that the States are offered a non-coercive choice (as opposed to a command), and the States make the ultimate decision of whether to comply: “If a State participates, it often has discretion in how it implements the program. If a State decides not to participate, the State’s activities are preempted. By offering States such a non-coercive choice – regulate or be preempted – Congress has not violated any constitutional imperatives.”
Following the decision, the plaintiffs filed a petition for rehearing en banc. The appeals court responded “Nay” and denied the petition on May 18, 2023. Thus, barring Supreme Court review, if you had HISA to win in the second race at the Sixth Circuit track in Cincinnati, you were a winner.
