Debate Over Federal Intervention in Racing

It wasn’t quite like the old joke about a hockey game breaking out at a fight, but a lively mini-debate over what role the federal government should have in legislating horse racing sprang up April 29 at the 25th National Conference on Equine Law in Lexington.

In the middle of updating nearly 200 attendees on legislative lobbying efforts of the American Horse Council, AHC president Jay Hickey voiced the opinion that contrary to the beliefs of some, racing doesn’t need more intervention from federal government.

“The problem with federal regulation of racing is the process,” said Hickey while speaking at the morning session. “First of all, getting the industry to agree with either amendments to the Interstate Horseracing Act or a whole new provision, as to what would be included, would be very difficult. And then getting that legislation through Congress would be very difficult.

“It’s easy to say, ‘We need a czar, we need this or that, we need federal legislation,’ but the actual watching of the sausage being made is a whole different ballgame,” he continued. “This would be big legislation. Everyone would be looking at it, and racing would be under the microscope.”

And then there is the prospect of higher taxation on the industry, Hickey said. “The feds need money and the states need money: ‘OK, we’ll change the whole thing, but we need a 10% tax on racing.’ So you are going to increase the takeout even more, which makes everything more difficult.”

Hickey said he was compelled to respond to comments made the previous day by New York Times journalist Joe Drape, who was the keynote speaker at the conference’s opening-day luncheon. Drape, who did not attend the April 29 session, often uses his employer’s prominent platform to write about industry ethics and issues. The writer suggested to the luncheon group of mostly attorneys that the current way of doing things in racing clearly wasn’t working.

“I didn’t call for federal legislation, but I said at one point, ‘What you have now is worse than federal legislation,’ ” Drape told The Blood-Horse in a telephone interview. “Losing $3 billion in handle over a three-year period shows that customers are turning away from the core product.”

Drape also spoke of reducing the number of racetracks and the amount of horses running—a point with which Hickey didn’t necessarily disagree.

“But instead of 175 racetracks, you will have five or 10 or 15, and that’s going to be a real contraction in terms of the breeders, a real contraction in terms of trainers, a real contraction in terms of jockeys—and that is probably what will happen in terms of market effects,” Drape said.

Then, using the industry for which Drape works for as an analogy, he added, “You might say newspapers are having some problems, so we really don’t need that many newspapers, so we are going to close half the newspapers. That’s fine if you are in those newspapers (that survive).”

Hickey also nodded to his right at Louisville, Ky., attorney Joel Turner, saying the long-time chair of the annual conference likely disagreed with his view of federal intervention. Turner said while he agreed with many of the concerns espoused by Hickey, he feels there has been lots of talk but little action in his 25 years working for and in the racing industry.

“If we had a federal mandate that said if you as an industry want to continue to enjoy the benefits of the IHA and the exemptions that it and the Wire Act provide for pari-mutuel wagering, then you—racing, as a business—must establish or form a national governing body that addresses at a minimum uniform rules for medication, uniform rules for takeout, uniform rules for wagering and security, uniform rules for safety, and uniform approaches to the integration of alternative forms of wagering at racetrack into the system, the economic model,” Turner said.

“I don’t think racing has the resolve or the will to do it on its own without some sort of drop-dead date, maybe established by the federal government: ‘You’ve got 24 months to do this, or we are going to jump in.’ And that might be enough of a threat to get racing off its derriere and get something done,” he added.

Debates aside, Hickey said there were many positive things taking place legislatively for the equine industry. Among them were efforts to streamline efforts to legitimize foreign workers into the U.S. labor force, including the AHC-backed AgJOBS bill pending in both the House and Senate. The legislation would, in part, create a “blue card” program that would give temporary legal status to undocumented workers who previously worked 150 days in agriculture over a two-year period. Card holders would then be allowed to apply for a green card after three more work years and other criteria.

But Hickey emphasized comprehensive immigration reform will likely always be a hot-button topic, even with the immediate prospect of Democrats unveiling a new bi-partisan outline for such legislation.

“This is going to be a very difficult challenge,” he said. “If you remember what happened in June 2007, it was disaster.” He said reform talk about security fences, machine guns, and identification programs are one thing, “but to choose a way to legalize the 14 million…workers, that’s when it explodes. We hope this is going to happen, but I won’t hold my breath. This makes health care (reform) look easy.”

Hickey also updated the status of tax changes, equine welfare situations, recreational-use agendas, pending legislation on diseases and interstate movement of horses, and gaming issues. Hickey is hopeful the 25% tax withholding on winning wagers of $5,000 (at 300-1 odds or more) will be repealed this year.

“If that money was kept in circulation, and they could continue to re-bet it that day or the next day, it would be great for the tracks,” said Hickey, citing the axiom of winning money being churned three times through the system. “We are going to have to wait for a bigger tax bill—a larger train as they say—but that would be great to have that taken up.”