Churchill Downs Inc. and the New York Racing Association have filed a joint lawsuit against the Horseracing Integrity and Safety Authority alleging that the organization has not adhered to its own rule determining funding assessments. The federal lawsuit, which was filed Wednesday night in U.S. District Court for the Western District of Kentucky, alleges that the two racetrack operators – which are the largest in the country, based on combined handle at their tracks – have been overcharged for their assessments because the authority “unlawfully” adopted a rule basing assessments partially on the size of a racetrack’s purses, in contradiction to the authority’s 2020 enabling legislation. According to the lawsuit, the legislation only allows HISA to use the number of starts in a state to determine the fees. The suit specifically alleges that CDI and NYRA were allowed to remit their fees to HISA in 2022 and 2023 under the statutory formula based on starts. However, that changed in the present year, the suit states, when HISA’s “ever-increasing budget and fiscal mismanagement prompted it to change course.” “When CDI and NYRA refused to accede to the authority’s unlawful demands, the authority commenced enforcement actions against CDI and NYRA, threatening to prohibit them from conducting any horse races until the fees due under the authority’s illegal assessment methodology are paid in full,” the suit states. In a statement in response to the lawsuit, HISA said that it intends to “aggressively defend itself,” and it noted that the current fee-assessment methodology was approved by the Federal Trade Commission, HISA’s federal overseer. The statement said that CDI and NYRA were the only two racing organizations “subject to this rule” that have refused payment. “CDI and NYRA have both benefited greatly from HISA’s uniform safety rules, expertise, and oversight, particularly over the past two years,” Lisa Lazarus, chief executive of HISA, said in a statement. “That uniformity must extend to cost assessments as well. To do otherwise would be unfair to other track and industry participants who are paying their fair share.” Unlike other lawsuits filed against HISA in the past two years challenging its constitutionality, the CDI/NYRA lawsuit was filed by two heavy supporters of the legislation that created the authority. Both have remained solidly in HISA’s corner on philosophical and regulatory grounds. In fact, the legislation creating HISA languished in the U.S. Congress for five years until Churchill Downs gave its go-ahead to Sen. Mitch McConnell, the then-Senate Majority Leader, to pursue its passage in 2020. Pat McKenna, a spokesman for NYRA, said that the association remained “strongly supportive of the Horseracing Integrity and Safety Authority’s regulatory mission” and praised the work that HISA has done to align rules among racing states. The lawsuit, McKenna said, was a “last resort.” :: Get the Inside Track with the FREE DRF Morning Line Email Newsletter. Subscribe now.  “This lawsuit narrowly targets the unlawful, excessive, and disproportionate financial assessments that HISA is attempting to impose on NYRA,” McKenna said. HISA’s funding mechanism has been a source of friction among other racing constituencies, including several horsemen’s groups. Earlier this year, two Iowa horsemen filed a lawsuit challenging the funding mechanism, largely on constitutional grounds that argued that HISA’s enabling legislation could not delegate the power to levy fees to a private company. HISA adopted the present formula for fees as a way to mollify tracks and horsemen in states that run a large number of races but do not distribute massive amounts of purses. Under the split formula, those states, such as Pennsylvania, West Virginia, and Louisiana – which all use casino subsidies for the vast majority of their purse distributions – would pay a lower fee per start than the states with first-tier circuits, such as New York and Kentucky. (Ironically, a separate lawsuit has allowed West Virginia and Louisiana to forego HISA’s jurisdiction.) Although several racetrack companies have joined in suits challenging HISA’s constitutionality, horsemen’s groups have been the primary drivers of litigation seeking HISA’s invalidation. Those challenges have resulted in conflicting U.S. District Court rulings, and the U.S. Supreme Court is expected to consider the issues in play in those two rulings during its current session. The CDI/NYRA lawsuit seems instead to be resolvable through the courts without threatening the existence of HISA, a point the suit raises in a section that alleges HISA “illegally” issued the enforcement actions against CDI and NYRA instead of using its “statutory power to bring a civil action in federal court to compel payment of any legitimate fee assessments.” “Interpreting the Act to permit the Authority to determine for itself whether CDI and NYRA owe it millions of dollars and impose sanctions based on its own findings would violate [HISA’s enabling legislation] and Article III of the Constitution, which require that such disputes between private entities be adjudicated in federal courts – not within administrative agencies and certainly not within private, unaccountable corporations,” the suit says. “And it would also violate the fundamental due-process principle that no person may serve as a judge in his own case.” The suit is seeking an injunction that would prevent HISA from taking any enforcement actions against CDI and NYRA while the fees dispute is litigated. The court where the suit was filed is located in Louisville, where CDI is based. The company has had success in the court in the recent past in arguing that it has the right to bar individual trainers from its racetracks. :: Want to learn more about handicapping and wagering? Check out DRF's Handicapping 101 and Wagering 101 pages.