When it comes to the Commodity Futures Trading Commission (CFTC) and state gaming regulations, the courts are divided over whether these federal financial laws can preempt state gaming laws.
In the instance of Churchill Downs challenging the state-level structure of regulation the Michigan Gaming Control Board (MGCB) is trying to exert, the courts are much more unified.
Both parties sued each other in Michigan District Courts after the MGCB revoked Churchill Downs’s advance-deposit wagering license and sent the compoany a cease and desist.
The lower court granted Churchill Downs’ request for an injunction to keep the app running in Michigan while the case moves forward.
MGCB appealed the lower court’s ruling to the Sixth Circuit Court and sought a temporary stay on the lower court’s injunction.
On Aug. 1, the Circuit Court denied the request to stay the injunction and reiterated many of the points made by the lwoer court.
Namely, that preemption is pretty obvious and intentional in the Interstate Horseracing Act (IHA) and MGCB’s attempt to impose rules at the state level that conflict with those rules probably can’t be enforced.
“When ‘Congress enacts a law that imposes restrictions or confers rights on private actors,’ and ‘a state law confers rights or imposes restrictions that conflict with the federal law,’ ‘the federal law takes precedence and the state law is preempted,” the ruling noted.
Michigan argued that the IHA is written to include seeking permission of where the person placing a wager on their horse racing app is located. The state’s argument also asserted that the IHA governs otherwise legal parimutuel wagers and wagers on unlicensed apps in Michigan are illegal in the state’s eyes.
The Sixth Circuit was unmoved by that suggestion:
“Defendants’ alternative interpretation would allow Michigan to regulate wagers on races already committed to the regulation of other states, which flatly contradicts the IHA’s express intent to ‘prevent interference by one State with the gambling policies of another,’ and to ‘“’ensure states will continue to cooperate with one another in the acceptance of legal interstate wagers.’”
A ruling on the stay is not tantamount to a ruling on the case, but it does weigh the chance the appeal has of success along with whether or not the stay might cause irreperable harm or not serve the public interest.
Michigan regulators and an amicus briefs filed from Arizona regulators and several gaming providers in the state of Michigan expressed concern that the “hub and spoke” concept of Churchill Downs’s partner in Oregon serving as the location of where all ADW bets on TwinSpires are accepted could undermine state regulations across the country.
Nonetheless, the court concluded it would put TwinSpires at an unfair disadvantage if offlined and that it benefits the public to maintain and enforce “Congress’s efforts to exercise its exclusive authority where permitted.”
Both parties have filed briefs in response to the appeal and amicus groups responded siding with the MGCB as well. On Jul 31, MGCB also filed its response brief, where it broke down arguments made by Churchill Downs. In theory, Churchill Downs can respond to that response, but it is not required to do so.
In the meantime, the court is trying to determine a date for oral arguments in the appeal.
