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Update: Fifth Circuit Again Reins in HISA

The Fifth Circuit Court of Appeals on Jan. 31 denied motions by the Horseracing Integrity and Safety Authority (HISA) and the Federal Trade Commission (FTC) to vacate or rehear the Court’s November 2022 ruling, which held that the Horseracing Integrity and Safety Act (Act) violated the private-nondelegation doctrine and was thus facially unconstitutional. This ruling comes after some challenging months for the FTC and HISA and a flurry of litigation in multiple federal courts. See GT Alert, July 2022.

In the wake of the Court’s November ruling that the Act was unconstitutional, proponents of the Act added language to the Consolidated Appropriations Act of 2023, passed in December, in an attempt to address the constitutional infirmities the Court raised in its November order. This new legislation replaced the FTC’s interim-final rulemaking power with the general rulemaking power to “abrogate, add to, and modify” rules promulgated under the Act “as the Commission finds necessary or appropriate to further the purposes of the Act.” 15 U.S.C. 3053 (e). In the wake of this legislative fix, HISA and the FTC filed their motions, arguing the new legislation addressed the Court’s constitutional concerns. The Court rejected these arguments and issued its Mandate to the District Court for the Northern District of Texas for further proceedings.

Furthermore, the Sixth Circuit Court of Appeals heard oral arguments in December 2022 on similar constitutional changes to the Act and has asked the parties for supplemental briefing “addressing the recent amendments to the (Act) including whether the private delegation claims are now moot.” The case has been heard and all briefing submitted. Expectations are for a ruling shortly, and if the Sixth Circuit rules contrary to the Fifth Circuit, a trip to the Supreme Court may await.

Additional complications also arise from these appeals as they pertain to HISA’s resubmission of the Anti-Doping and Medication Rules and the publication of the rule in the Federal Register on Jan. 26. HISA issued the following statement Jan. 31: “In the aftermath of the recent Congressional amendment, and without opining on the newly amended HISA law, the Fifth Circuit has sent the case back to the district court. Outside Louisiana and West Virginia, the Authority will continue enforcing the Racetrack Safety Program and preparing for the implementation of it Anti-Doping and Medication Control Program on March 27, subject to the Federal Trade Commissions’ approval of the rules.”

Approval by the FTC is far from certain. On Dec. 12, 2022, in response to the first submission of the Anti-Doping Rule by HISA, the FTC disapproved the proposed rule, stating “that its disapproval arises from the legal uncertainty arising from a recent decision by the U.S. Court of Appeals for the Fifth Circuit, which declared the (Act) unconstitutional.” In a joint letter to FTC Chair Lina Khan Jan. 25, signed by five senators and five congressmen, the authors urged that the proposed rules be rejected again: “To avoid continued industry-wide confusion and potential inequitable enforcement, it is imperative that you again disapprove the proposed Rule until after the constitutionality of HISA has been resolved.” The Fifth Circuit’s Jan. 31 ruling may strengthen these arguments.