Racing giants Churchill Downs, NYRA sue HISA after it threatens shutdown over fees

LOUISVILLE, Ky. (WDRB) -- Churchill Downs, the largest entity in American thoroughbred racing (by profit) and the New York Racing Association, the third largest, have filed a federal lawsuit against the Horseracing Integrity & Safety Authority, alleging that the legislatively established body is unlawfully demanding higher fees than it is entitled to under its founding statutes.

The suit, filed in U.S. District Court in Louisville, says HISA is "threatening to prohibit CDI (Churchill Downs Inc.) and NYRA from conducting any horseraces until they pay the Authority millions in illegally imposed fees."

At issue is nearly $2 million HISA says Churchill owes in back fees. Churchill says it has only paid what it is required to pay by law and that the authority is threatening to stop racing at Churchill Downs and Ellis Park if the amount isn't paid.

Co-defendants in the suit include members of the HISA board of directors, including HISA Chief Executive Officer Lisa Lazarus, former Kentucky Gov. Steve Beshear, former Keeneland CEO Bill Thomason, former Breeders’ Cup president D.G. Van Clief, as well as The Federal Trade Commission and its chair Lina Khan, among others.

Churchill argues that the HISA statute does give the body the authority to collect fees but points out that the statute itself reads that those fees are to be based on "the annual budget of the Authority for the following calendar year, as approved by the Board; and ... the projected amount of covered racing starts for the year in each State."

Instead, the suit alleges, HISA is asking for fees based on purse values at each venue, leaving entitles like CDI and NYRA owing much larger fees. The Federal Trade Commission, which oversees HISA, has approved its assessment of fees based on purse values. The lawsuit is challenging the legality of that.

In response to the suit, HISA released a statement on Thursday.

"HISA was established with a clear mission: to create uniformity and consistency across Thoroughbred racing. Our rules, including the Assessment Methodology Rule, were developed after thorough consideration and many opportunities for input from racing participants, and have been approved by the Federal Trade Commission," the statement says. "Despite this, CDI and NYRA are refusing to comply with the assessment methodology, which is designed to ensure HISA is adequately funded and able to effectively oversee the Anti-Doping and Medication Control Program and the Racetrack Safety Program, as required under the Horseracing Integrity and Safety Act.

"CDI and NYRA have both benefited greatly from HISA’s uniform safety rules, expertise and oversight, particularly over the past two years. That uniformity must extend to cost assessments as well. To do otherwise would be unfair to other tracks and industry participants who are paying their fair share. HISA will continue to uphold the standards of the sport with integrity and fairness for all racing participants. Our mission is clear, and we will not allow any parties to pick and choose which rules they follow. Every racetrack, including CDI and NYRA, must operate under the same paradigm. No one is exempt."

Churchill argues that it isn’t seeking an exemption, only that HISA abide by the rules created for it. For two years, the suit says, Churchill and NYRA paid HISA according to the racing dates assessment model, not the purse values at its tracks.

In the suit, correspondence from Lazarus to CDI chief executive officer Bill Carstanjen quotes her as saying that, "I agreed to accept payment on the basis of pure starts until such time as that legal question is resolved by the courts."

In its suit, Churchill says that HISA has become more aggressive in seeking payment in recent months, threatening to take enforcement action

"The Authority endorsed this arrangement for nearly two years, until its ever-increasing budget and fiscal mismanagement prompted it to change course and demand that CDI and NYRA immediately remit all fees due under the illegal purse-based methodology," the complaint reads. "When CDI and NYRA refused to accede to the Authority’s unlawful demands, the Authority commenced enforcement actions against CDI and NYRA, threatening to prohibit them from conducing any horseraces until the fees due under the Authority’s illegal assessment methodology are paid in full."

Churchill and NYRA also are taking issue with HISA’s insistence on enforcement actions being deliberated internally instead of being argued in federal court, which it claims is a further violation of the HISA statute.

At stake is the ability of HISA to oversee the sport with the kind of broad authority it says it needs. That authority is already has been challenged with two circuit courts splitting on the question of HISA’s constitutionality. Several parties from those cases have petitioned the U.S. Supreme Court for a ruling. The crux of the argument is over whether Congress can delegate governmental power to a private entity, such as HISA.

HISA has argued, with success in at least one venue, that it is operating under oversight from a federal body – the FTC – and that satisfies constitutional concerns.

Churchill and NYRA are seeking judgement against HISA’s purse-based fee practice, and an inunction against HISA’s enforcement actions, including the halt of racing at Churchill Downs-owned and NYRA-sanctioned racetracks.

A ruling against HISA either in this case or in a Supreme Court decision could affect the body’s ability to fund and operate itself, and could throw the latest attempt at national regulation on the highly factionalized sport into question.

Churchill Downs just completed its 2024 fall meet over the Thanksgiving weekend, and is not scheduled to resume racing until Kentucky Derby week next year, with Opening Night on Saturday, April 26.