Major Players Look for Dismissal of CAW Lawsuit

A New York federal district court is considering dismissal of a lawsuit accusing several major players in the horse racing industry of engaging in racketeering and other unlawful activities related to betting by computer-assisted wagering companies.

The putative class action was filed last October. Lead plaintiff Ryan Dickey alleges the lawsuit "arises from a scheme to manipulate the betting pools in horse races throughout the United States."

Motions to dismiss were filed by defendants Churchill Downs Inc., United Tote Company, the New York Racing Association, AmTote International, Elite Turf Club LLC, Elite Turf Club NV, The Stronach Group, and Racing and Gaming Services (St. Kitts). The motions, pending since June, were made public on Pacer, the court's online docket system, Sept. 16. 

The defendants' basic arguments are that the complaint fails to state a complaint upon which relief can be granted as a matter of law; and that the court lacks jurisdiction over the subject matter of the case. A motion brought under these grounds must assume, in the context of the motion, the allegations of the complaint are true.

The defendants' joint motion to dismiss initially couches the plaintiff's complaint as a challenge to "the legality of pari-mutuel wagering." The motion pivots to say, "Their real complaint is not with pari-mutuel wagering itself, but with the lawful and commonplace business practices of Defendants ... which have no impact on whether Plaintiffs’ wagers win or lose."

The complaint alleges the pari-mutuel system is being unfairly and unlawfully manipulated by the defendants and that the system's business structure facilitates its success.

"(T)hey exercised vertically integrated control over every layer of the betting infrastructure," the complaint recites, "The Stronach Group owns racetracks (Santa Anita, Gulfstream), the AmTote totalizator system—processing over $15 billion in wagers annually—advance deposit wagering platforms (Xpressbet, 1/st Bet), and an 80% stake in Elite Turf Club, the most prominent computer-assisted wagering (“CAW”) platform. Churchill Downs owns racetracks (Churchill Downs, Turfway Park, Colonial Downs), the United Tote totalizator system, the TwinSpires ADW platform, and the Velocity CAW platform. NYRA operates Aqueduct, Belmont Park, and Saratoga, owns NYRA Bets ADW, a 20% stake in Elite, and a 49% interest in United Tote. This vertical integration gave Defendants complete control over the pools—and complete power to rig them."

Defendants seek dismissal of the complaint on multiple grounds. They say there is no claim by plaintiff of a factual injury, and thus plaintiffs do not have legal standing to bring the lawsuit; and that blaming defendants for gambling losses is too speculative to allow relief.

"They do not even identify a single wager that they made where CAW was even implicated despite presumably knowing when they wagered and when they thought they should have won more." The motion goes on to say, "Defendants’ conduct is 'so far removed from' Plaintiffs’ purported injuries that they 'cannot establish Article III standing' ... And any change in potential payout cannot reasonably be attributed to any of the Defendants. None of the Defendants place any wagers."

The plaintiffs' case is challenged on multiple other grounds. Defendants argue plaintiffs cannot succeed as a matter of law on a claim under RICO, the federal racketeering statute; claims based upon alleged violations of statutes in seven states must also fail as a matter of law; and common law claims must fail for the same reason.

A hearing on the motions to dismiss is scheduled to take place Oct. 9.