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Fifth Circuit Cites Nondelegation Doctrine in Declaring Horseracing Regulation Body Unconstitutional

By Joseph Fawbush, Esq. on December 02, 2022

Largely unnoticed in the huge COVID relief bill Congress passed in 2020 was a law intended to finally regulate horse racing in the U.S. The Horseracing Integrity and Safety Act of 2020 did not, however, create uniform rules governing horse racing. Neither did it delegate the promulgation of those rules to a federal agency. Congress instead vested the power to create and enforce rules to a private entity, the Horseracing Integrity and Safety Authority (HISA), under the oversight of the Federal Trade Commission. Under the law, the FTC would have to sign off on all regulations but would not play a role in their creation.

Patchwork Horseracing Regulation in the U.S.

Horse racing has existed since before the U.S. federal government. But until 2020, the industry was largely regulated by state and local governmental bodies. The push for uniform regulations came after the public became aware of significant problems afflicting the sport, including the death of 30 racehorses in just one park in 2019 and numerous allegations of doping. In 2021, the trainer for Kentucky Derby winner Medina Spirit was banned from Churchill Downs for two years after a post-race drug test called the horse's win into question. Medina Spirit, the horse who won, died in 2021 after a workout. He was three years old.

Pushing the Boundaries of Public-Private Collaboration

In the wake of these scandals, a bipartisan push sought to protect the integrity of horse racing and the health of the horses involved. This is easier said than done, however, as numerous sports have had issues regulating performance-enhancing drugs. To accomplish this difficult task, Congress left it to industry insiders (who make up HISA), provided the FTC signed off on all regulations.

The problem is that a private entity cannot act with the powers of the federal government, according to the private non-delegation doctrine. In 2021, several horseracing industry organizations sued to declare the law an unconstitutional violation of this once-dormant doctrine. The district court sided with the government. On appeal, however, the Fifth Circuit unanimously declared the law in violation of the private non-delegation doctrine (you can read the full opinion on FindLaw). In essence, the Fifth Circuit said that while nominally the FTC was in charge, it was HISA who was truly "in the saddle" and that this generous delegation of authority essentially left a private organization in charge instead of any actual government organization.

The Public vs. Private Nondelegation Doctrine

The Fifth Circuit did not, however, revive the long-deceased corpse of the public non-delegation doctrine, an idea that has been gaining traction in some circles over the last several years.

Courts have consistently held that federal government agencies can issue regulations without violating the separation of powers. In fact, the U.S. Supreme Court has not used the public nondelegation doctrine to invalidate anything since 1935. The Fifth Circuit did not touch on this, writing in a footnote that "[Plaintiffs] also claimed HISA was unconstitutional under the public non-delegation doctrine and the Appointments Clause. The district court did not rule on those claims and so they are not before us."

Instead, the Fifth Circuit focused on the much less clear private nondelegation doctrine, which calls into question the role private entities can play in self-regulating industries. The prime example is the Financial Industry Regulatory Authority (FINRA), a nonprofit, private organization that regulates broker-dealers under the supervision of the Securities and Exchange Commission. FINRA has repeatedly been upheld as constitutional, something the district court cited in its opinion upholding the Horseracing Integrity and Safety Act.

That the Fifth Circuit used the private nondelegation doctrine to invalidate HISA is a win for many libertarian organizations (the Liberty Justice Center represented the plaintiffs in the case). It also raises the specter of a revival of this once-dormant doctrine. Will courts begin to check the power of Congress to delegate regulation to private organizations? Will we even see the potential for the public nondelegation doctrine to come back from the dead?

It's an interesting trend to note. Meanwhile, Congress will have to try again to regulate the horseracing industry. And if you made it this far into a blog about administrative law, feel free to reward yourself with a mint julep.

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