Texas Racing Commission

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).

Texas Racing Commission v. Marquez, a recent opinion from the Austin Court of Appeals, involved a horse race where two horses owned by Javier Marquez were inadvertently wearing each other’s saddle cloth numbers. One of the horses suffering from this “wardrobe malfunction” finished second, and the race stewards disqualified both horses and redistributed the race purse.

When the Texas Racing Commission refused to hear Marquez’s appeal of the stewards’ decision, Marquez sued the Texas Racing Commission and its executive director, Charla Ann King.

Marquez won big in the trial court. The trial court declared that Ms. King acted in excess of her statutory authority by refusing Marquez’s appeal, by disqualifying Marquez’s horses, and by redistributing the race purse. The trial court also awarded Marquez his attorneys’ fees under the Uniform Declaratory Judgment Act, and ordered the second place race purse distributed to Marquez. The Racing Commission appealed the decision.

On appeal, the Austin Court of Appeals found that Ms. King did exceed her authority in denying Marquez’s appeal of the stewards’ decision and upheld Marquez’s attorneys’ fees award under the Declaratory Judgment Act. However, the Court of Appeals vacated and dismissed the portion of the trial court’s judgment that awarded the second place race purse to be distributed to Marquez.

The trial court’s logic: TheTexas Racing Commission has exclusive jurisdiction over the issue of the second place race purse. Marquez needs to exhaust his administrative remedies by moving forward with his appeal before the Texas Racing Commission that he fought for in the trial court. 

Ironically, the Texas Racing Commission (the same entity that Marquez sued and fought on appeal) will get to decide whether or not Marquez will get the purse that his horse won when it was wearing the wrong “outfit”. 

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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.