Churchill Downs continued its undefeated streak against the Michigan Gaming Control Board (MGCB) in the legal battle over advance-deposit wagering (ADW) apps. The Sixth Circuit Court sided with the horse racing company in a Tuesday ruling, agreeing that the Michigan regulators were out of bounds in trying to add regulations related to ADW racing in the state.
The lawsuit began when Churchill Downs briefly lost its racetrack partner for its TwinSpires ADW app in the state, Northville Downs. MGCB informed all of the ADW apps that, since the only active track in the state was closing, they would need to cease operations. Other operators complied, but Churchill Downs did not, leading MGCB to suspend its license.
Churchill Downs then sued, arguing that it does not need state regulatory approval to operate an ADW in the state since ADWs are regulated by the federal Interstate Horse Racing Act (IHRA).
The Western Michigan District Court granted Churchill Downs’ request for a preliminary injunction to stay online as the case moves forward, which the regulator appealed in the Sixth Circuit. The two parties presented arguments to the Sixth Circuit in October.
Where an ADW bet is placed still matters
In its written ruling, the panel of three judges upheld the lower court’s decision. However, the particulars of the ruling still leave room for unanswered questions, as the decision was rooted in procedural decisions as opposed to a sweeping decision about whether or not the IHRA preempts state horse racing regulations.
During oral arguments, Churchill Downs argued that the horse regulations of the state where the person placing the bet are irrelevant and even a bettor in a state like Utah should be able to legally use an ADW app. To support this, Churchill Downs pointed to the IHRA text, which explicitly references the need for consent of the track where the race is running, the racing commission where the race is taking place and the off-track racing commission where the bet is being accepted. There is no mention in that section of the commission of the state where the wager is being placed.
The judges pushed back at this idea by suggesting that, though it is not explicitly mentioned in the section regarding racetrack consents, the IHRA explicitly mentions where the bet is placed in its definition of interstate off-track wagering.
This concern over where the bet is placed returned in the final opinion, but was not germane to the decision because Michigan regulations did not seek to regulate the bettor—they sought to regulate the ADW app.
“If Michigan banned interstate horserace wagering outright, the ban’s generality might insulate it from accusations of targeting the federal scheme,” the judges noted. “But that’s not what Michigan did. It intruded into the federal scheme by regulating how betting platforms accept wagers. Legitimate regulation of its residents’ gambling conduct came second.”
Court says Michigan’s demands went beyond state boundaries
Essentially, because the regulations demanded that the operators accepting these wagers in another state partner with a track in Michigan in order to operate, the panel said these onerous demands were a “tailor-made addition to the IHA.”
Michigan tried to argue that the IHRA had to allow states to dictate what is allowed within their borders and that its regulations rendered what Churchill Downs’s TwinSpires betting app was offering was not legal under Michigan law.
Again, the panel disagreed. Since horse racing overall is legal in the state, as is betting on it, the regulator cannot exclude a segment of that activity based on this onerous burden that goes beyond state borders.
The case continues to move forward in the Western Michigan District Court and TwinSpires can continue to stay online as it does. In the meantime, Churchill Downs has won in the sense that the ruling went in its favor, but the argument that no state laws about horse racing apply in the state where an ADW app user is located is one that clearly did not carry much weight with the Sixth Circuit panel.
