Federal Judge Rules Twinspires.com Cannot Accept Bets from Texas

The United States District Court of the Western District of Texas (Austin Division) recently held that Churchill Downs subsidiary website, Twinspires.com, is prohibited from accepting wagers from persons living in Texas.

Churchill Downs brought action against the Texas Racing Commission seeking a declaration that the Texas Racing Act’s in-person requirement, under which only a person inside the enclosure where a race meeting was authorized may wager on a race, violated the dormant Commerce Clause. The dormant Commerce Clause precludes states from enacting laws or regulations that excessively burden interstate commerce. 

The Texas Racing Commission is a state agency charged with enforcing the statutory and regulatory provisions of the Texas Racing Act. Churchill Downs moved for permanent injunction to prevent the Texas Racing Commission from enforcing the Act to prohibit Texans from placing wagers on Twinspires.com. The in-person requirement has been on the books in Texas since 1986.  Nevertheless, Twinspires.com continued to accept wagers from Texans through its website.

The court, Judge James R. Nowlin, presiding, found that the Act did not violate the dormant Commerce Clause and entered judgment for the Texas Racing Commission. With respect to the legitimate state interests furthered by the in-person requirement, Judge Nowlin remarked,

[E]very regulatory challenge that gambling has always posed to the state has been made that much more daunting by the advent of the internet. Gambling has always been addictive, but before the internet, at least the addicts had to go to the trouble of driving somewhere to place his bet. The internet allows the addict to get his fix 24/7/365, all without leaving the comfort of his own home . . . Along the same lines, underage patrons looking to get in on the action have always tried to evade detection with fake IDs and the like, but with the advent of the internet, all they need to place a bet is Dad’s credit card and date of birth . . . Finally, gambling—especially horse racing—has always attracted crooked individuals hoping to clean their money. With the advent of the internet, though, criminal elements are better able to hide behind the anonymity afforded by the computer screen.”

Churchill Downs has appealed this case to 5th Circuit Court of Appeals.

Case InformationChurchill Downs, Inc. v. Trout, No. 1:12-CV-00880-JRN, 2013 WL 5799694 (W.D. Texas Sept. 23, 2013).

2011 Equine Law Year in Review

Happy New Year, Equine Law Blog readers!  Here's to the hope that you and yours find all opportunities for joy and happiness, as well as prosperity in abundance in 2012.

2011 brought a number of significant legal events / changes that will affect many people involved in the Texas horse industry.  The "Top Seven of 2011" (it rhymes!), are as follows:

1.  The Texas Supreme Court decided a case involving the Texas Equine Limitation of Liability Act.

  • Loftin vs. Lee was the case.  The opinion was handed down on on April 29, 2011.
  • The Supreme Court upheld the defendant's immunity pursuant to the Act.
  • This was the first time the Texas Supreme Court has taken up a case concerning the scope of the Act.
  • Related blog post

2.  The Texas Legislature expanded the immunities provided under the Texas Equine Limitation of Liability Act to cover all farm animals and expanded immunity to cover veterinarians.

  • Governor Perry singned the bill into law on June 17, 2011, and it became effective immediately upon signing.
  • Warning signs should be updated to reflect the new law.
  • The new law is called the Texas Farm Animal Limitation of Liability Act.
  • Related blog posts can be found here and here.
     

3.  The Texas Legislature passed a new sales tax exemption certificate requirement for the purchase of tax-exempt agricultural goods.

  • The bill was passed during 2011 legislative session, but first became effective on January 1, 2012.
  • All persons purchasing tax-exempt ag supplies must now apply for a registration number with the Texas Comptroller.
  • Horse and feed sales are still exempt without a number, but some training and boarding businesses may not qualify for a registration number that is now required to purchase other goods.
  • Related blog post.

4.  The Texas Legislature passed a bill affecting equine dentistry.

  • There is (as of September 1, 2011) a licensing requirement for lay dentists in Texas.
  • Related blog posts can be found here and here.
     

5.  Congress and President Obama passed a budget bill that removed ban on federal funding of horse slaughter inspectors.

  • Bill was signed by the President on November 18, 2011.
  • Horse slaughter is, by virtue of this bill, again a possibility in some U.S. states.
  • Related blog post.
     

6.  100% Bonus Depreciation ended on December 31, 2011

  • Some believe this tax benefit caused a surge in sales for yearling markets last year.
  • For new goods or qualified horses purchased on January 1, 2012 and after, 50% bonus depreciation will be available instead of the 100% rate that was available in 2011.
  • Related blog post.

7.  New medication rules were adopted by a number of horse organizations

  • Performance and race horse medications were a hot topic in 2011.  Among other organizations, the Breeders' Cup decided to phase out the use of Lasix, and NRHA initiated random testing protocols and adopted a new medications rule in 2011.
  • Related blog posts can be found here and here.

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Texas Attorney General Opinion on Lone Star Sale a Little Late

This entry was updated and revised on August 9, 2011. 

On December 10 2010, Rolando B. Pablos, Chair of the Texas Racing Commission (TRC) sent a written request for an opinion to Attorney General Greg Abbott on whether or not the Texas residency requirements found in the Texas Racing Act concerning race track licenses in Texas were unconstitutional. 

The sale referenced in the request letter was undoubtedly the October 2009 winning bid of $47.8 million on Lone Star Park by Global Gaming LSP, LLC (i.e. the Chickasaw Nation of Ardmore, Oklahoma), which was approved by a Delaware bankruptcy court in October 2009. It was taking the TRC forever to approve the Chickasaws' purchase of Lone Star, and people were getting nervous.  For reasons unknown to me, TRC waited over 1 year after the bankruptcy court's approval of the winning bid to inquire of the Attorney General questions regarding the constitutionality of the Racing Act's residency requirements.

In his request letter, Mr. Pablos implored the Attorney General’s office to provide an opinion before February 15, 2011, which was the date of the next Meeting of the TRC. Presumably tired of waiting on the Attorney General, the TRC went ahead and approved the sale of Lone Star to the Chickasaw Nation at its meeting on May 13, 2011.  The TRC determined that Global Gaming met the Texas Racing Act's residency requirements, regardless of whether those requirements are constitutional or not. 

The Attorney General Opinion was just released this Monday on August 1, 2011. A copy can be found here, but it sheds no light on whether the Racing Act's residency requirements are constitutional.  Basically, the Attorney General stated that he could not provide an opinion because doing so would involve answering questions of fact, which the AG cannot do.

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Note:  I would like to thank the Texas Racing Commission for reading the republication of this entry in Horseback Magazine's online publication and pointing out some items that may warrant clarification.  I would like to clarify that the Attorney General is a statewide elected official and is not appointed by the Governor.  The TRC commissioners are appointed by the Governor with the advice and consent of the Senate, but are responsible for their own decisisions and exercise independent judgment in addressing the issues that come before the Commission. 

Nothing in the blog entry that went live on August 4, 2011 was intended to imply that there is any question as to the legality of the sale of Lone Star Park to Global Gaming or the TRC's approval of Global Gaming's license.  

Breeder's Cup to Ban All Race Day Drugs by 2013

Owners of world-class Thoroughbreds and their trainers now have one more rule to comply with and will face liability for non-compliance. The Breeder’s Cup has announced that the administration of Lasix will be prohibited for 2 year-olds at Breeder’s Cup races in 2012, and all race-day drugs will be banned for all Breeder’s Cup races in 2013.

Breeder’s Cup has not yet named the host site for the 2012 Breeder’s Cup, but the organization is considering Belmont Park, Churchill Downs, and Santa Anita Park.

Lasix is a drug used to treat bleeding in the lungs. Some people believe the drug enhances performance because studies have shown that horses who are administered Lasix on race day outperform horses who do not receive the drug.

More than 90% of all North American race horses receive a race-day injection of Lasix, and it is exceedingly rare here to see a horse taken off the drug while racing. However, no other racing jurisdiction outside of North America allows the use of race day drugs.

Most horses who come from overseas jurisdictions to run the Breeder’s Cup are administered Lasix on race day, which is believed to “level the playing field” in races where North American horses are also entered.

Some believe that the move by Breeder’s Cup will spur other racing jurisdictions to implement similar race day drug bans. U.S. Rep. Tom Udall of New Mexico issued a statement praising the move.

One thing is clear…unless other North American tracks and events also ban Lasix on race day for the 2012 season, the new Breeder’s Cup Lasix ban might present complications for handicappers who will have to take into consideration the impact of taking a horse off Lasix after a horse has been racing and training on the drug.

Get the full story from the Blood-Horse here, and from ESPN here.

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