Churchill Downs Inc. and the New York Racing Association (NYRA) have initiated legal action against the Horseracing Integrity and Safety Authority (HISA), questioning the legality of its fee assessment practices. Filed in a Kentucky federal court, the lawsuit represents a significant challenge to the national body’s authority and financial model, which underpins its regulatory framework for horseracing safety and integrity.

Churchill Downs and NYRA challenge HISA’s fee structure in court:

Churchill Downs, known for the Kentucky Derby, and NYRA, which oversees three major New York tracks, allege that HISA has violated federal law, the U.S. Constitution, and the Administrative Procedure Act by imposing millions of dollars in fees. Central to their complaint is HISA’s alleged threat to prohibit the two organizations from conducting races if payments are not made.

The lawsuit argues that HISA’s assessment methodology, which combines racetrack starts and prize money (purses) to calculate fees, is flawed. Plaintiffs contend that this structure deviates from the Horseracing Integrity and Safety Act, which they claim mandates a fee model based solely on racing starts. Churchill Downs and NYRA assert that the purse-based calculations unfairly increase their financial burden, with NYRA estimating that its 2024 fees would drop from $8.33 million to $4.69 million under a per-start-only model.

Additionally, the plaintiffs accuse HISA of bypassing constitutional requirements by adjudicating disputes through its internal disciplinary system rather than federal courts. They cite Article III, which reserves such adjudication to the judiciary, and the private non-delegation doctrine, which limits Congress’s ability to grant regulatory powers to private entities without significant government oversight.

“Disputes between private entities,” the lawsuit states, “must be adjudicated in federal courts—not within administrative agencies and certainly not within private, unaccountable corporations.”

Broader implications:

HISA’s budget relies heavily on fees from major racetracks, with assessments from Churchill Downs and NYRA accounting for a substantial portion of its funding. The authority recently acknowledged that NYRA owes $3.9 million and Churchill Downs $1.9 million, totaling $5.8 million in disputed fees, according to Horse Racing Nation, with figures reported first by Daily Racing Form. HISA has defended its methodology as necessary for equitable cost allocation, noting that it has received approval from the Federal Trade Commission (FTC).

Lisa Lazarus, HISA’s CEO, emphasized that the assessment structure was carefully considered and designed to sustain its programs, including anti-doping and racetrack safety initiatives. “The methodology ensures HISA is adequately funded,” she stated, “to oversee programs critical to the sport’s integrity and safety.”

Churchill Downs and NYRA remain key supporters of HISA’s regulatory mission despite the dispute. As reported by Sportico, NYRA’s vice president of communications, Pat McKenna, reiterated this support, stating that the lawsuit aims to address “unlawful, excessive, and disproportionate financial assessments” rather than challenge the organization’s broader goals.

This case could significantly impact HISA’s regulatory framework and funding model. Conflicting rulings in previous cases challenging HISA’s constitutionality suggest that this lawsuit may ultimately reach the U.S. Supreme Court. The stakes are high, with both sides standing to face substantial financial and operational consequences.