CDI Prevails Over HISA in Fee Assessment Litigation

In a case brought by Churchill Downs Inc., a federal court in Kentucky ruled the Horseracing Integrity and Safety Authority acted outside the law when it assessed fees for Thoroughbred tracks based partially on purse sizes. The opinion was handed down April 1 in Louisville, Ky., by Judge Benjamin Beaton of the United States District Court for the Western District of Kentucky. The Authority, a private corporation authorized by an act of Congress, and its government umbrella agency, the Federal Trade Commission, adopted a way to charge fees to fund its operations in 2022 and subsequent years. The calculus included not only the number of projected starts per track, but also the size of the track's purses. Beaton found the assessment methodology ran afoul of a statutory mandate to assess fees “based on racing starts.” "The Authority sits outside the contours of Article II, answering to a board rather than the President or a principal officer. Yet it enjoys the power to make and enforce legislative rules for the industry—and fills its coffers not through appropriations but by assessing fees against those it regulates," Beaton wrote. "Congress authorized the Authority to reimburse its own costs through the States 'based on' their number of racing starts and their proportionate share of the Authority’s costs. The Authority opted to allocate these fees... 'equitably'—based not only on starts, but also on purse sizes, which it viewed as a proxy for which States’ racing outfits could or should pay more." According to Beaton's opinion, CDI objected to HISA's assessments from the start. It refused to pay its full assessments for 2023, 2024, and 2025. Before last year, CDI chose to pay under a starts-only model, and then made no payments at all in 2025 for the tracks it operates across the country. Calling HISA's stance "arbitrary and capricious," Beaton came down in favor of CDI. "Churchill is right that Congress hasn’t given the Authority freewheeling license to redistribute costs based only its own notions of fairness—or any number of other considerations," Beaton wrote. "And the Authority’s alternative justification for its formula—that purse sizes could serve as reasonable proxies for its own operating costs—bears at least a colorable connection to the statute. "But (this), too, ignores the principle espoused by Congress: the Authority must allocate its costs to States on a proportionate basis according to the State’s share of drug-testing and track-safety costs. For that reason, the Authority’s interstate purse-weighted assessment formula is unlawful." Churchill Downs issued a release critical of what it called the Authority's "fiscal mismanagement." "We are pleased with the Court’s decision in our favor," said Bill Carstanjen, CEO of CDI. "It’s unfortunate that HISA wasted so much time and resources, forcing us to go to such lengths to prove a very clear point. This is indicative of HISA’s ongoing fiscal mismanagement, which is a distraction from our joint mission of equine health, and safety. By finding that HISA continuously exceeded its authority, the Court reiterated why it was necessary to bring this legal action." Beaton was also critical of the FTC's oversight, or lack thereof, heading one section of his decision, "The Commission abdicated its duty to check the Authority’s work," and asking rhetorically, "Is it really that easy for the Authority to launder its own arbitrary choices at the Commission?" Although it lost the case, the Authority issued a statement emphasizing CDI did not prevail on all the legal theories it pursued and included a reminder that beginning this year, it is assessing tracks only based on racing starts. "Today’s district court decision is narrow: It rejects a prohibition on using factors beyond racing starts in fee assessments, rejects Churchill’s equitable and contract-based theories, and declines to vacate the prior purse-weighted assessment rule," a HISA spokesperson wrote in a statement sent to BloodHorse. "Instead, it orders limited declaratory relief to Churchill, for past years only, based on the FTC’s failure to adequately explain its approval. As the industry moves forward under the racing-starts-only rule that went into effect in 2026, HISA remains focused on advancing its safety and integrity mission." The HISA spokesperson did not respond to a question whether the judge's ruling would affect a partial settlement reached between the parties March 24. Prior to that agreement, a three-person HISA panel had issued an order requiring CDI to pay approximately $5.27 million or face the suspension of racing at CDI-owned tracks Churchill Downs, Turfway Park, Ellis Park, and Presque Isle Downs. That $5.27 million tally was based on a starts-only methodology, plus interest, rather than on the assessment structure Beaton found unlawful. Churchill Downs did not file the federal lawsuit until December 2024. Does that mean it has to pay prior HISA assessments? According to Beaton's ruling, the answer is no because "the Authority’s purse-weighted methodology is contrary to law... and arbitrary and capricious. …. The purse-weighted formula set forth in the Commission’s 2022, 2023, and 2024 (assessments) therefore may not be enforced against Churchill." The New York Racing Association was a co-plaintiff with CDI when the lawsuit was filed. NYRA settled with HISA in 2025 on terms that have not been disclosed.