USTA obtains legal advice that HISA is unconstitutionalSeptember 14, 2020,
Editor’s Note: USTA President Russell Williams has issued the following statement regarding the analysis of the Horseracing Integrity and Safety Act (HISA) by Gibson Dunn, the law firm that successfully argued for the United States Supreme Court to strike down a federal law prohibiting the states from permitting and regulating sports betting.
“The United States Trotting Association has obtained legal advice that the Horseracing Integrity and Safety Act (HISA) is unconstitutional.
“HISA purports to create a national, uniform program regulating medication in horse racing. Only Thoroughbreds are mentioned in the bill, but it contains language providing for Standardbreds to inevitably be swept in. A private, ‘self-regulatory’ corporation called the Horseracing Integrity and Safety Authority would develop and implement the program.
“According to Gibson Dunn’s research, the bill suffers from several serious constitutional flaws.
“One is the ‘non-delegation doctrine.’ Congress may not grant regulatory authority to private entities, yet HISA does exactly that in numerous ways. To describe a few, the bill delegates to the Authority the power to determine the identity of racing participants to be regulated, to commence actions in federal court to enforce its regulatory activity, and to issue subpoenas and carry out searches and seizures. These are public functions historically carried out by public agencies. If this kind of thing were legal, our entire lives might now be regulated by private, ‘self-regulatory’ corporations.
“The Gibson Dunn report states another constitutional violation is that the Due Process Clause prohibits an economically self-interested private actor from wielding regulatory power over other private parties.
“The (HISA) governing body and standing committees supporting the Authority’s activities would have bare majorities made up of disinterested persons. The rest would be representatives of ‘equine constituencies’ exerting regulatory power over other equine constituencies throughout the sport.
“Moreover, the Authority’s initial funding is designed to come from loans (which racing participants would have to repay), creating an incentive to act in accordance with the wishes of lenders.
“The bill contains conflict of interest (COI) rules aimed at controlling some of these problems. COI policies tend to work well in business, but not so well when constitutional protections are at stake. It only prohibits present conflicts, without reference to previous or future activities. Thus, it is subject to the same influence concerns as the situation where a legislator retires from office and becomes a lobbyist.
“In addition, HISA’s COI only applies to equine industry involvement, entirely overlooking other competing industries, the gaming industry being a conspicuous example.
“Finally, no COI rules would apply to the Authority’s employees, or to the lenders on whom the Authority would initially be financially dependent.
“To the objection that HISA gives unfettered regulatory authority to a private company, the answer would undoubtedly be that HISA also gives the Federal Trade Commission (FTC) a supervisory role. As with the COI rules just discussed, it is important to remember that when we enter the realm of constitutional protections, the rules become more stringent. Exalted brooding over the Authority’s activities is not nearly enough.
“First, the bill gives the Authority important powers that would be free from FTC oversight. Chief among these are actual law-enforcement powers and other powers ‘of the nature and scope exercised by state racing commissions.’ Some of the most important powers that the bill purports to award to the Authority are outside the FTC’s purview.
“Second, because of the sensitivity of constitutional protections, the federal courts have developed a line of authority holding that, regardless of the mention in a statute of the FTC or any other government agency, the constitutional test is whether the Authority could cause enough administrative trouble for the regulated parties that the latter would `face powerful incentives to obey.’
“In HISA, agreeing to comply with the Authority’s program is a precondition to eligibility to participate in racing. Thereafter, the Authority’s power to issue and enforce subpoenas and perform searches and seizures, backed by sanctions from fines up to lifetime exclusion, makes it obvious that it is at the Authority level, not at the FTC level, that the rubber meets the road in this scheme.
“The white paper explains that the courts could decide, based on a line of cases about private organizations being given enormous regulatory power, that the Authority is actually a public government agency. If this happened, the bill would violate both the Appointments Clause, which requires that appointments to public agencies be made only by the Executive Branch, and Article II, which holds agency members accountable by making them subject to removal by the Executive.
“The drafters of HISA and its predecessors faced many problems, and predictably so. One of these was what if the states, which are already doing the things that the Authority now seeks to do, refuse to cooperate? The drafters solved this problem the simple way. HISA says, `State law enforcement authorities shall cooperate and share information with the Authority.’ The constitutional problem here, known as the anticommandeering principle, is that the U.S. Supreme Court held two years ago that Congress `may not issue direct orders to the governments of the States.’ Congress ‘may not command the States’ officers, or those of their political subdivisions, to administer or enforce a federal regulatory program.’
“The anticommandeering principle has the highest importance in our Constitution. To paraphrase the Supreme Court, it provides a structural protection of liberty by diffusing power, ensuring that voters know whom to credit or blame for a particular regulatory program (accountability), and preventing Congress from shifting the costs of regulation to the states. This principle, implicit in the constitutional structure and underscored by the Tenth Amendment’s reservation of rights to the states, ensures that the states do not become “mere political subdivisions of the United States.”
“From a constitutional point of view, HISA stands out as a real patchwork of fixes designed to get around multiple constitutional prohibitions.
“The most important of several troubling themes is the Authority’s lack of accountability. We could debate how to get better performance out of our state racing commissions. But there is no question that the state commissions are answerable to the executive and, ultimately, legislative branches of their state governments. They are accountable, and if we don’t like the job they are doing, we can do something about it. The Authority is not accountable.
“The FTC’s role is passive: it was only mentioned so there would be a government agency somewhere in the bill. It would literally take an act of Congress, as the old saying goes, to do anything about the Authority’s malfeasance or wrongheadedness. Abdicating our destiny to this `self-regulatory’ private entity would be a tragic step to take.
“If this bill becomes law, there will certainly be litigation. As the white paper concludes, ‘The constitutional concerns raised by HISA are substantial and pervasive. Those concerns embrace the structure and powers of the regulatory body at the heart of the bill and extend even to the bill’s more peripheral provisions. We predict that enactment would lead to extensive litigation and the possible invalidation of the statute.’”
To read the Sept. 11 story, “USTA Opposes Horseracing Integrity and Safety Act of 2020 (HISA)” click here.