Sports Betting Regulatory Association Announced, HISA Discussed at ARCI Conference

LEXINGTON, KY–The Association of Racing Commissioners International (ARCI) announced the official launch of the Sports Betting Regulators Association (SBRA) during the closing session of the group's 88^th Annual Conference on Safe Horses and Honest Sport.

ARCI president and CEO Ed Martin explained that the formation of the SBRA has been in the works for several years and was organized to meet a growing need to support government agencies assigned with the responsibility of regulating sports betting within their jurisdiction. Sports betting in America continues to expand and has now been legalized in 33 states.

“With some of the sports that people are allowed to wager on, there is no transparency,” Martin explained. “The states have a responsibility to ensure that everything they allow people to wager on is on the up and up. It's a new era and it's an area that horse racing regulators have tremendous experience in. The world has changed in these past couple of years and there's a need. More and more states have gone into the business of regulating sports betting.”

The goal of the SBRA will be to ensure standards and best practices are set in place to promote integrity and transparency in the sports betting field. Martin said that the SBRA will function as an autonomous committee of the ARCI that will be open to all sports betting regulatory entities, including those that are not existing members of the ARCI. SBRA policies will emulate the rules and standards established already by the ARCI in horse and greyhound racing.

“This is an expansion of what the ARCI will work on,” Martin said. “We will not lessen what we do on the horseracing side in any way. The perception is that we're part of the racing industry, but the reality is that we serve the general public. Based on the integrity concerns that are going on in human sport, and when you look at the comparison of what is done in horse racing in regards to transparency of officials and anti-doping, it's that transparency that provides consumer protection for the public that is wagering on and supporting these sports.”

Martin said that the SBRA will conduct its first meeting on July 10 in Boston in conjunction with the National Conference of Legislatures from Gaming States.

Also during Wednesday's session of the ARCI conference, Ben Liebman, a Government Lawyer in Residence at Albany Law School, examined the pending federal court challenges to the Horseracing Integrity and Safety Act.

Liebman looked at the two court cases that have challenged HISA–the federal lawsuit filed by the state of Oklahoma in April 2021 and another lawsuit filed by the National Horsemen's Benevolent and Protective Association (NHBPA) that was dismissed in March 2022 when U.S. District Court Judge James Wesley Hendrix said that while the Court recognized that HISA pushes boundaries of public/private collaboration, the law as constructed stays within the current constitutional limitation.

Liebman said that one of the main issues regarding the case of HISA's constitutionality is the question of to what extent the Horseracing Integrity and Safety Authority is subordinate to the Federal Trade Commission (FTC).

Liebman used an example comparing HISA and the FTC to the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC). FINRA, a private, self-regulatory authority that regulates 624,000 financial brokers, is overseen by the SEC. Liebman explained that before a rule created by FINRA goes into effect, the SEC must approve that rule. The SEC's ability to control and supervise FINRA makes FINRA constitutional.

“You have a very strong belief that because of how FINRA has worked, HISA's authority should have the powers that are accorded FINRA,” Liebman said. “This issue becomes a matter of if the Authority controls racing regulation or if it is controlled by and subordinate to the Federal Trade Commission.”

Liebman added that while the FTC can review and approve rules set forth by HISA and can suggest modifications, it cannot promulgate rules itself and has no power over authority members and their terms. This prompts the question of if the FTC has sufficient authority over HISA. In the NHBPA case, Judge Hendrix said that based on how the law is currently written, HISA is subordinate to the FTC because only the FTC can approve its rules and because the adjudicative process does satisfy due process.

Another question that could come forward in the current court cases concerns anti-commandeering, meaning that Congress cannot take over a state's governing apparatus and force it to do its bid. Liebman said the court must determine if HISA would cause states to lose their ability to fund their racing integrity programs and if it would strip law enforcement agencies into federal service via mandatory cooperation. Liebman admitted that this issue alone will likely not lead to a total invalidation of HISA and its power.

Liebman listed several changes that could be made to HISA to help it defend its constitutionality including ending the mandatory cooperation clause, giving the FTC power over Authority member terms and the ability to remove members, giving the FTC greater authority over rules or even the ability to promulgate rules itself, and making all or nearly all Authority members unaffiliated with the racing industry.

“Even if the higher courts change the concepts of delegation and public control of private regulatory power, it's hard to envision that most of HISA cannot be salvaged because it is so much like FINRA,” he said. “It is unimaginable that a court ruling would take a wrecking ball to the current system of financial regulation in the country. Maybe the Authority doesn't always win and maybe it won't get what it wants, but it is likely that it will get what it needs.”