The Federal Trade Commission has approved a set of rules drafted by the Horseracing Integrity and Safety Authority that includes a formula for determining the funding responsibilities of racing states, with the formula based on the number of races held in the state and the “size of the purses” in the state. Under the rules, 50 percent of the funding responsibility for a racing state will be determined by the gross number of races held in the state, with the other half based on the relative size of purse distributions in each state. A release from HISA late Friday did not contain an example of the actual formula as it would be applied in a specific state, and HISA representatives did not immediately respond to a request for clarity on the formula. Since HISA was formed last year, the lack of a specific formula to determine funding responsibilities of racing states has been a major source of irritation to many racing commissions. HISA supporters have acknowledged that the costs of the authority will exceed the amount that racing commissions currently spend to regulate racing and conduct drug testing and investigations in their states, but the exact amount that the racing states will be required to contribute to HISA’s budget has not been made clear, representatives of many racing commissions have said. HISA was created late in 2020 by enabling legislation supported by a broad swath of racing constituencies. Under the legislation, HISA was granted the power to draft and enforce rules that will be applied to racing states across the United States, replacing the patchwork state-by-state system of regulation currently in place. Its authority to enforce the rules was set by the legislation to begin July 1. HISA announced the approval of the funding formula one day after a federal judge in Texas dismissed a challenge to the authority’s enabling legislation that was brought by horsemen’s groups. The judge ruled that the act did not violate nondelegation provisions of the U.S. Constitution, as the horsemen’s groups had contended in their suit. The rules approved by the FTC state that the decision to use two weighted criteria to calculate the funding share of each racing state would avoid an “inequitable allocation of costs,” citing the disparity between some states that run a large amount of races but do not distribute a large amount of purses, such as West Virginia or Pennsylvania. “If all starts in all races at all tracks were treated equally, West Virginia would have a larger proportionate share than Kentucky, even though the purses and entry fees generated by the Kentucky races dwarf those generated by the West Virginia races,” the FTC’s federal register states. The rules also say that no state will be required to fund more than 10 percent of HISA’s annual budget. If the calculation for a state’s funding responsibilities exceeds 10 percent of the budget, “all amounts in excess of the 10 percent maximum shall be allocated to all states that do not exceed the maximum,” the rules say. Although the rules envision that racing commissions will be responsible for collecting and remitting the fees to HISA on a monthly basis, the rules also say that if a racing commission forgoes that responsibility, then racetracks in the state will be required to submit the fees. The rules do not delineate how the fees can be raised. Horseplayers have raised concerns since the legislation was passed that racing commissions or racetracks may seek to generate their share of HISA funding by raising the takeout, which is the amount of money withheld from the distribution of winnings in each parimutuel pool. Earlier versions of the enabling legislation that did not pass included provisions that prohibited takeout increases to provide funding for HISA, but the bill that passed in 2020 did not include that restriction.