Constitutional questions persist for the Horseracing Integrity and Safety Act (HISA) after the United States Court of Appeals for the Fifth Circuit found that the law’s enforcement provisions violate the private nondelegation doctrine.

The tribunal affirmed much of the United States District Court for the Northern District of Texas’ judgment that “Congress remedied the offending provisions.” However, it reversed “one important aspect.”

“The statute empowers the Authority to investigate, issue subpoenas, conduct searches, levy fines, and seek injunctions — all without the [Federal Trade Commisson’s (FTC)] say-so,” according to the ruling from the fifth circuit. “That is forbidden by the Constitution. We, therefore, declare that HISA’s enforcement provisions are facially unconstitutional on that ground. In doing so, we part ways with our esteemed colleagues on the Sixth Circuit. See Oklahoma v. United States, 62 F.4th 221 (6th Cir. 2023) (rejecting nondelegation challenge to HISA’s enforcement provisions).”

Daniel Suhr, of the Center for American Rights and lead counsel for the National Horsemen’s Benevolent & Protective Association (NHBPA), lauded the court’s decision.

“This is a huge victory for horsemen and for the rule of law in this country,” he says. “Our Constitution protects our freedom by ensuring regulatory power is exercised through transparent and accountable government agencies. The Constitution does not allow HISA to run a private police department that enforces federal law.”

The ruling comes just weeks after the Supreme Court refused to hear a challenge to the Sixth Circuit Court decision that HISA is constitutional.

“We are disappointed with the court’s decision, particularly in light of the Sixth Circuit’s strong endorsement of HISA’s constitutionality,” according to a statement from Lisa Lazarus, CEO of the Authority. “While the judicial review process continues, it is critical for all racing participants to know HISA is still the law of the land, its rules are still fully in effect and will remain so for the foreseeable future. We continue to focus on our mission of protecting the safety and integrity of Thoroughbred racing.”

The Ruling

The National Horsemen’s Benevolent & Protective Association (NHBPA) argues that HISA provides the Horseracing Integrity and Safety Authority the power to enforce HISA “that is effectively unreviewable” by the FTC. The Authority asserts that challenges to HISA’s enforcement power can be raised “if and when it does.” The fifth circuit disagrees.

“It is unnecessary to wait for the Regulation to be applied in order to determine its legality,” according to the court, citing several sources of the case law including Contender Farms. v. USDA, National Environment Developmental Association’s Clean Air Project v. EPA and Susan B. Anthony List v. Driehaus.

Although the Authority contends that NHBPA’s challenge is premature since it has not attempted to enforce HISA against them, the court disputes this claim.

“[T]he record shows several instances in which the Authority has enforced HISA against the Horsemen,” according to the ruling. “For example, the Authority has threatened one of the Horsemen’s members with sanctions if it did not repair a racetrack railing. Additionally, the Authority has both threatened and actually barred member racetracks in Texas from broadcasting races out of state because they failed to register with the Authority. More generally, the Horsemen represent some 30,000 members and, when the parties filed their briefs, the Authority’s website already listed hundreds of enforcement actions — and that number has now grown to over 1,500. So, at a minimum, the Horsemen have shown a credible threat that the Authority will bring enforcement actions against their members in the future.”

The heart of the constitutional question hinges on whether HISA is enforced by the FTC or a private entity. In this case, the Authority.

“The Act’s plain terms permit only one conclusion: HISA is enforced by a private entity, the Authority,” the court states. “The Authority decides whether to investigate a covered entity for violating HISA’s rules. The Authority decides whether to subpoena the entity’s records or search its premises. The Authority decides whether to sanction it. And the Authority decides whether to sue the entity for an injunction or to enforce a sanction it has imposed.”

The panel also explores what is not included in the law.

“It does not empower the FTC to decide whether to investigate a covered entity, whether to subpoena its records, whether to search its premises, whether to charge it with a violation, or whether to sanction or sue it,” according to the decision. “Nor does the Act empower the FTC to countermand any of the Authority’s investigatory or charging decisions (or, more precisely, [U.S. Anti-Doping Agency’s] decisions). Nor does it require the Authority or USADA to seek the FTC’s approval before investigating, searching, charging, sanctioning, or suing. All these actions are enforcement actions, and, by the plain terms of the Act, they can be done by the private entities without the FTC’s involvement. The inescapable conclusion is that the Authority does not ‘function subordinately’ to the FTC when enforcing HISA. That is not permitted under the private nondelegation doctrine.

“A private entity that can investigate potential violations, issue subpoenas, conduct searches, levy fines, and seek injunctions — all without the say-so of the agency — does not operate under that agency’s “authority and surveillance.”

The Authority argues that the FTC “at least partially supervises the Authority.” The court acknowledges that it’s “the Authority best argument for why its enforcement power is subordinate to the FTC.” Yet, the court rules that the argument doesn’t hold water.

“Suppose the Authority sanctions a horse owner for a doping violation, but the sanction is later reversed by the FTC,” the court suggests. “Does that make the Authority’s enforcement power subordinate to the agency? No, it does not. Consider everything the Authority was permitted to do up to that point: launch an investigation into the owner, subpoena his records, search his facilities, charge him with a violation, adjudicate it, and fine him. Each and every one of those actions is ‘enforcement’ of HISA. Each can occur under HISA without any supervision by the FTC.”

The case could be headed to the Supreme Court.

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Read the full decision by the Fifth Circuit Court.