After Rulings, HISA to Oversee Most U.S. Racing for Now

Divergence in decisions by federal appellate courts about the constitutionality of the Horseracing Integrity and Safety Act boils down to one thing at this point—whether the legislation creating HISA unlawfully delegates enforcement powers ordinarily reserved to the government.

At issue is whether the statute renders the Federal Trade Commission, under whose authority HISA operates, subordinate in enforcement matters to the private corporation authority created by HISA. In the simplest terms, the law is facially flawed if HISA, in fact, holds the upper hand. But, if the FTC is in charge of enforcement provisions, the law passes muster.

Two different federal appeals courts have reached different conclusions on this issue.

The Sixth Circuit Court of Appeals, in its March 2023 opinion affirming a case originating in a Kentucky federal district court, decided the issue in favor of HISA. The Sixth Circuit found "the FTC’s rulemaking and rule revision power gives it 'pervasive' oversight and control of the Authority’s enforcement activities, just as it does in the rulemaking context."

Supreme Court Move Upholds Ruling in Favor of HISA

An opposite result was reached by the Fifth Circuit Court of Appeals, which ruled July 5 that "HISA’s enforcement provisions violate the private nondelegation doctrine. The statute empowers the Authority to investigate, issue subpoenas, conduct searches, levy fines, and seek injunctions—all without the FTC’s say-so. That is forbidden by the Constitution."

Court: HISA Violates Private Nondelegation Doctrine

The hierarchy of enforcement power is the only area of disagreement between the two decisions. The Fifth Circuit agreed with a federal district court in Texas that approved HISA—and in effect agreed with the Sixth Circuit—on other important issues. Specifically, the Fifth Circuit found the FTC's oversight powers created by a congressional amendment to the original statute "means the (FTC) is no longer bound by the Authority’s policy choices. In other words, the amendment solved the nondelegation problem with the Authority’s rulemaking power. We also agree that HISA does not violate the Due Process Clause by putting financially interested private individuals in charge of competitors."

With this background, we look to the reach of each court's jurisdiction.

The Sixth Circuit Court of Appeals has appellate jurisdiction over four states: Kentucky, Ohio, Michigan, and Tennessee. The decision of the Sixth Circuit is final, and regulators in Kentucky and Ohio, where there are active Thoroughbred racing programs, consider HISA to be the law of the land unless something changes.

The Fifth Circuit's appellate jurisdiction extends to Louisiana, Texas, and Mississippi. The decision by that court's three-judge panel is not final yet, and the lay of the land is less certain for now, pending possible motions for a hearing by the full court and/or a petition for writ of certiorari to the United States Supreme Court. In a piece published at Thoroughbred Daily News, law professor Lucinda Finley suggested that since it is settled and the only valid rules in place are HISA rules, state regulators would have to enforce those rules if their racing is to avoid a complete Wild West with no rules.

To aid in our further understanding, we look at the current posture of the cases from the Fifth and Sixth Circuits along with two other, more obscure cases, and where things might lead.

Following the Sixth Circuit decision last year, the states of Oklahoma, Louisiana, and West Virginia and others asked the Supreme Court to review the matter via what is called a petition for writ of certiorari. The high court exercised its discretion by denying the petition in an order issued two days before the recent Fifth Circuit ruling was published. By implication, the Supreme Court could have been signaling it saw no reason to disagree with the Sixth Circuit opinion in favor of HISA—or it could mean the high court saw no reason to visit the issues in the absence of a contrary outcome in another circuit.

Now that the Fifth Circuit has provided just such a contrary outcome, this could increase the chance the high court would grant a review of that case, setting in motion a final resolution to the question of the legality of HISA's enforcement powers.

The Eighth Circuit Court of Appeals, which has appellate jurisdiction in Arkansas, Iowa, Minnesota, Nebraska, North Dakota, and South Dakota, has taken under advisement an appeal in another HISA challenge brought by the Iowa Horsemen's Benevolent and Protective Association and others in an Arkansas federal district court. In April 2023 the Iowa HBPA sought a preliminary injunction against HISA. The injunction was denied, leading to an appeal.

During 39 minutes of oral arguments June 12, the most prominent issue became whether the FTC lacks independent rule-making power and is thus subservient to the Authority created by HISA. At that time the Sixth Circuit had already ruled in favor of HISA on the issue, and since then the Fifth Circuit has gone the same way. A member of the three-judge panel prominently questioned why anti-HISA litigants were repeatedly filing essentially the same case in different jurisdictions.

Another piece of this puzzle lies with a federal district court in Louisiana that granted a preliminary injunction against HISA in favor of the states of Louisiana and West Virginia based not on constitutional grounds but on an alleged violation of the federal Administrative Procedures Act. An appeal of the order was denied, and HISA has been out of business in the two states since. Nothing is likely to happen in that case unless and until after the Fifth Circuit order striking down HISA's enforcement powers becomes final.

Finally, there are no cases emanating from or involving states in other racing jurisdictions, including states with major venues such as New York, Florida, and California. HISA is the law of the land in those states.

Informed estimates predict another 18 months elapsing before the legal issues confronting HISA are resolved. In the meantime, racing in Kentucky and Ohio look to continue under HISA rules and enforcement; in the short term, racing in Louisiana and West Virginia may or may not be conducted under HISA rules but without HISA enforcement; states under the umbrella of the Eighth Circuit Court of Appeals are waiting for a ruling in the case brought by the Iowa HBPA but for now operate under HISA; and the remaining racing jurisdiction states will operate under HISA rules and enforcement until further notice.