Background
Congress enacted the Horseracing Integrity and Safety Act of two thousand and twenty to create nationwide rules for thoroughbred horseracing. The Act established a private nonprofit corporation known as the Horseracing Integrity and Safety Authority to create and enforce these rules under the oversight of the Federal Trade Commission. In a prior decision, the Fifth Circuit held the Act unconstitutional because the Authority’s rulemaking was not subordinate to the agency. Congress amended the Act to grant the Federal Trade Commission power to abrogate, add to, or modify the Authority’s rules. On remand, the district court found the amendment cured the rulemaking defect but upheld the Authority’s enforcement powers. The plaintiffs appealed, arguing the enforcement powers remain unconstitutional.
The court’s reasoning
The court analyzed the private nondelegation doctrine, which requires that a private entity wielding government power must function subordinately to a government agency with authority and surveillance over it. The court agreed that the congressional amendment cured the defect in the Authority’s rulemaking power because the Federal Trade Commission now has the discretion to approve, disapprove, or modify the rules. However, the court found that the enforcement powers are different. The Authority decides whether to investigate, issue subpoenas, conduct searches, levy fines, and seek injunctions without the Federal Trade Commission’s say-so. The court held that the Federal Trade Commission’s ability to review sanctions after the fact does not make the enforcement power subordinate because the private entity acts independently during the investigation and adjudication phases. The court concluded that the plain terms of the Act delegate executive power to a private entity without the required agency supervision.
What it means going forward
The ruling invalidates the enforcement mechanisms of the Horseracing Integrity and Safety Act, preventing the private Authority from investigating, fining, or suing participants without federal agency involvement. This decision creates a circuit split with the Sixth Circuit, which upheld the enforcement provisions, and may prompt further Supreme Court review.