Fifth Circuit Court of Appeals: HISA Unconstitutional

Holding that the Horseracing Integrity and Safety Authority is not subordinate to the Federal Trade Commission, the U. S. Fifth Circuit Court of Appeals declared its enabling legislation unconstitutional Nov. 18.

"A cardinal constitutional principle is that federal power can be wielded only by the federal government. Private entities may do so only if they are subordinate to an agency," a three-judge panel of the court wrote in a 35-page opinion. "But the Authority is not subordinate to the FTC. The reverse is true. The Authority, rather than the FTC, has been given final say over HISA's programs."

The appellate reversed a decision of the U. S. District Court for the Northern District of Texas that had upheld the constitutionality of the HISA after it was challenged by the National Horsemen's Benevolent and Protective Association, multiple state HBPA affiliates, the State of Texas and the Texas Horse Racing Commission.

The decision was written by Judge Stewart Kyle Duncan on behalf of the three-judge panel, who reasoned that the control given to the Authority violates a provision of the U. S. Constitution limiting the delegation of federal power to private entities.

"The Authority’s power outstrips any private delegation the Supreme Court or our court has allowed. We must therefore declare HISA facially unconstitutional," Duncan wrote. "In doing so, we do not question Congress’s judgment about problems in the horseracing industry. That political call falls outside our lane. Nor do we forget that 'judicial power to declare a law unconstitutional should never be lightly invoked.' We only apply, as our duty demands, the settled constitutional principle that forbids private entities from exercising unchecked government power.

"By delegating unsupervised government power to a private entity, HISA violates the private non-delegation doctrine," the panel concluded before remanding the case back to the lower court for further proceedings consistent with its opinion.

The plaintiffs in the original district court action first had to overcome the question of whether they had standing to challenge HISA, and if so, whether their claims were ripe for adjudication. The district court sided with the plaintiffs on both issues, neither of which was argued in the appeal that followed.

A question was raised, however, as to whether the Fifth Circuit has jursidiction to decide the appeal based on an argument that the HBPAs did not file a timely notice of appeal. The argument, a technical one, did not gain traction with the appellate court.

That left the substantive question characterized by Duncan as "which one, agency or Authority, has the whip hand?"

Noting that the act passed by Congress does not create anti-doping, medication, or racetrack safety programs nor empowers the FTC to do so, the decision says those programs were instead put into the hands of the Authority to create; and that the FTC cannot lawfully review the Authority's policy decisions.

Established when the Horseracing Integrity and Safety Act was signed into federal law in 2020, the federal HISA program is currently responsible for drafting and enforcing uniform safety and integrity rules in U.S. Thoroughbred racing, having begun its Racetrack Safety Program in July. Its Anti-Doping and Medication Control Program is set to take effect at the start of the new year.

"While HISA is disappointed by the Fifth Circuit's decision, we remain confident in HISA's constitutionality and will be seeking further review of this case," Charles Scheeler, chair of HISA's board of directors, said in a statement. "If today's ruling were to stand, it would not go into effect until January 10, 2023, at the earliest. We are focused on continuing our critical work to protect the safety and integrity of Thoroughbred racing, including the launch of HISA's Anti-Doping and Medication Control Program on January 1, 2023."

HISA has been opposed by some states and horsemen organizations, with critics claiming it oversteps states' authority or creates bureaucratic red tape and additional costs without substantive policy changes. 

"We have been saying for years this law and the defined Authority itself are unconstitutional, and we are pleased the court has unanimously sided with our position, an outcome many in our industry thought was impossible," Eric Hamelback, CEO of the National Horsemen's Benevolent and Protective Association, said in a statement. "Today's unanimous ruling clearly states the entity constructed under HISA is an unconstitutional body and should not hold governing power over our industry, a position we have long supported. On behalf of the NHBPA, I can assure you that we will be following this development closely and support the power reverting back into the hands of the state racing commissions."

In response to the Fifth Circuit Court of Appeals ruling, the Association of Racing Commissioners International scheduled an emergency meeting of regulatory personnel Thursday afternoon.

One regulator, the California Horse Racing Board, released a statement late Thursday afternoon: "The decision today does not alter any existing laws or regulations currently in effect. Therefore, unless and until a federal court makes a further decision on the case, the California Horse Racing Board will continue to honor its agreement with the Horseracing Integrity and Safety Authority by enforcing all HISA rules. Both the CHRB and HISA are committed to the principle of promoting safety in horse racing."

—Byron King also contributed to this story.