Notice2024-24567
Horseracing Integrity and Safety Authority Assessment Methodology Rule Modification
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 23, 2024
Issuing agencies
Federal Trade Commission
Abstract
As required by the Horseracing Integrity and Safety Act of 2020, the Federal Trade Commission publishes a proposed modification of the Horseracing Integrity and Safety Authority's rules addressing horseracing in the United States. The proposed rule modification would amend the Rule 8500 Series, the Assessment Methodology Rule, which establishes a methodology for determining assessments described in the enabling statute. This document contains the Authority's proposed rule modification's text and explanation, and it seeks public comment on whether the Commission should approve the proposed rule modification.
Full Text
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<title>Federal Register, Volume 89 Issue 205 (Wednesday, October 23, 2024)</title>
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[Federal Register Volume 89, Number 205 (Wednesday, October 23, 2024)]
[Notices]
[Pages 84600-84607]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-24567]
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FEDERAL TRADE COMMISSION
[File No. P222100]
Horseracing Integrity and Safety Authority Assessment Methodology
Rule Modification
AGENCY: Federal Trade Commission.
ACTION: Notice of Horseracing Integrity and Safety Authority (HISA)
proposed rule modification; request for public comment.
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SUMMARY: As required by the Horseracing Integrity and Safety Act of
2020, the Federal Trade Commission publishes a proposed modification of
the Horseracing Integrity and Safety Authority's rules addressing
horseracing in the United States. The proposed rule modification would
amend the Rule 8500 Series, the Assessment Methodology Rule, which
establishes a methodology for determining assessments described in the
enabling statute. This document contains the Authority's proposed rule
modification's text and explanation, and it seeks public comment on
whether the
[[Page 84601]]
Commission should approve the proposed rule modification.
DATES: The Commission must approve or disapprove the proposed
modification on or before December 23, 2024. If approved, the proposed
rule modification would be effective 30 days following the date of the
Commission's order approving the modification. Comments must be filed
on or before November 6, 2024.
ADDRESSES: Interested parties may file a comment online or on paper by
following the instructions in the Comment Submissions part of the
SUPPLEMENTARY INFORMATION section below. Write ``HISA Assessment
Methodology Rule Modification'' on your comment and file your comment
online at <a href="https://www.regulations.gov">https://www.regulations.gov</a> by following the instructions on
the web-based form. If you prefer to file your comment on paper, mail
your comment to the following address: Federal Trade Commission, Office
of the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex
H), Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Sarah Botha (202-326-2036), Attorney
Advisor and Acting HISA Program Manager, Office of the Executive
Director, Federal Trade Commission, 600 Pennsylvania Avenue NW,
Washington, DC 20580.
SUPPLEMENTARY INFORMATION: The Horseracing Integrity and Safety Act of
2020 \1\ (the ``Act'') recognizes a self-regulatory nonprofit
organization, the Horseracing Integrity and Safety Authority (``HISA''
or the ``Authority''), which is charged with developing proposed rules
on a variety of subjects. Those proposed rules and later proposed rule
modifications take effect only if approved by the Federal Trade
Commission (``FTC'' or the ``Commission'').\2\ The proposed rules and
rule modifications must be published in the Federal Register for public
comment.\3\ Thereafter, the Commission has 60 days from the date of
publication to approve or disapprove the proposed rule or rule
modification.\4\
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\1\ 15 U.S.C. 3051 through 3060.
\2\ 15 U.S.C. 3053(b)(2).
\3\ 15 U.S.C. 3053(b)(1).
\4\ 15 U.S.C. 3053(c)(1).
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Pursuant to section 3053(a) of the Act and Commission Rule 1.142,
notice is hereby given that, on October 4, 2024, the Authority filed
with the Commission a proposed Assessment Methodology Rule modification
and supporting documentation as described in Items I, II, III and IX
below, which Items have been prepared by the Authority. The Office of
the Secretary of the Commission determined that the filing complied
with the Commission's rule governing such submissions.\5\ The
Commission is publishing this document to solicit comments on the
proposed rule modification from interested persons.
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\5\ 16 CFR 1.140 through 1.144; see also FTC, Procedures for
Submission of Rules Under the Horseracing Integrity and Safety Act,
86 FR 54819 (Oct. 5, 2021).
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I. Self-Regulatory Organization's Statement of the Background, Purpose
of, and Statutory Basis for the Proposed Rule Modification
a. Background and Purpose
The Act recognizes that the establishment of a national set of
uniform standards for racetrack safety and medication control will
enhance the safety and integrity of horseracing. The Assessment
Methodology Rule is established in the Rule 8500 Series, the
``Assessment Methodology Rule.'' \6\ The Rule 8500 Series was published
in the Federal Register on February 18, 2022,\7\ and subsequently
approved by the Commission by Order dated April 1, 2022.\8\ The
Authority filed a proposed rule modification to the Rule 8500 Series on
October 20, 2022. The modification was published in the Federal
Register on November 10, 2022,\9\ and approved by the Commission by
Order dated January 9, 2023.\10\
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\6\ The Assessment Methodology Rule is also referred to herein
as the ``Cost Methodology Rule'' or ``Rule 8500 Series.''
\7\ See FTC, Notice of HISA Assessment Methodology Proposed Rule
(``2022 Proposed Rule Notice''), 87 FR 9349 (Feb. 18, 2022).
\8\ FTC, Order Approving the Assessment Methodology Rule
Proposed by the Horseracing Integrity and Safety Authority (Apr. 1,
2022), <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/Order%20re%20HISA%20Assessment%20Methodology.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/Order%20re%20HISA%20Assessment%20Methodology.pdf</a>.
\9\ See FTC, Notice of HISA Assessment Methodology Proposed Rule
Modification, 87 FR 67915 (Nov. 10, 2022).
\10\ FTC, Order Approving the Assessment Methodology Rule
Modification Proposed by the Horseracing Integrity and Safety
Authority (Jan. 9, 2023), <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/order_re_hisa_assessment_methodology_modification_not_signed_002_0.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/order_re_hisa_assessment_methodology_modification_not_signed_002_0.pdf</a>.
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The Authority now proposes modifications to several provisions in
the Rule 8500 Series. The proposed rule modifications are described in
detail in Item II of this document. As set forth below, the proposed
modifications seek to eliminate consideration of the Projected Purses
Paid from the current assessment equation and instead base assessments
solely on Projected Starts. In addition, the proposed rule
modifications establish by rule the equitable allocation among Covered
Persons of the applicable fee per racing start for the Assessment
Calculation for each Racetrack. Finally, several modifications are
proposed to clarify the language of several rules for greater
precision.
The proposed modifications are consistent with the requirements of
the Act in that they further the purpose of properly and equitably
allocating the costs of the Authority's operations to the State racing
commissions and/or Covered Persons involved with Covered Horseraces, as
mandated by 15 U.S.C. 3052(f). The cost allocations ensure that the
Authority is adequately funded and able to effectively implement and
enforce the horseracing anti-doping and medication control program and
the racetrack safety program, as required under the Act. Successful
implementation of the Act and the two programs operates to ensure and
enhance the safety, welfare and integrity of Covered Horses, Covered
Persons, and Covered Horseraces. The proposed modifications have been
crafted to address specific issues in the most precise manner possible,
and no reasonable alternatives presented themselves for consideration.
The Act requires that the Authority provide to each State racing
commission an estimated amount required from the State to ``(I) to fund
the State's proportionate share of the horseracing anti-doping and
medication control program and the racetrack safety program for the
next calendar year; and (II) to liquidate the State's proportionate
share of any loan or funding shortfall in the current calendar year and
any previous calendar year.'' \11\ A State's proportionate share is to
be based on ``(aa) the annual budget of the Authority for the following
calendar year, as approved by the Board; and (bb) the projected amount
of covered racing starts for the year in each State.'' \12\ The Act
further instructs the Authority to ``take into account other sources of
Authority revenue'' as part of this calculation.\13\
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\11\ 15 U.S.C. 3052(f)(1)(C)(i).
\12\ 15 U.S.C. 3052(f)(1)(C)(ii).
\13\ Id.
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Any State racing commission may elect to remit fees directly to the
Authority.\14\ If a State racing commission does not elect to remit
fees pursuant to 15 U.S.C. 3052(f)(2), then the Authority is required
to ``not less frequently than monthly, calculate the applicable fee per
racing start multiplied by the number of racing starts in the State
during the preceding
[[Page 84602]]
month.'' \15\ This calculation is required to be allocated equitably
``among covered persons involved with covered horseraces pursuant to
such rules as the Authority may promulgate'' and collected ``according
to such rules as the Authority may promulgate.'' \16\
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\14\ 15 U.S.C. 3052(f)(2).
\15\ 15 U.S.C. 3052(f)(3)(A).
\16\ 15 U.S.C. 3052(f)(3)(B), (f)(3)(C)(i).
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On September 18, 2024, HISA representatives shared a draft of the
proposed rule modification with a number of interested stakeholders for
input. Those interested stakeholders included: Racing Officials
Accreditation Program; Racing Medication and Testing Consortium
(Scientific Advisory Committee); National Thoroughbred Racing
Association; The Jockey Club; The Jockeys' Guild; Thoroughbred Racing
Association; Thoroughbred Owners of California; California Horse Racing
Board; National Horsemen's Benevolent and Protective Association;
Thoroughbred Owners and Breeders Association; Kentucky Thoroughbred
Association; American Association of Equine Practitioners; American
Veterinary Medical Association; Stronach Racing Group (2 thoroughbred
racetracks); Churchill Downs (6 thoroughbred racetracks); Keeneland;
Del Mar; Association of Racing Commissioners International; Kentucky
Racing Commission; Maryland Racing Commission; Delaware Racing
Commission; Ohio Racing Commission; Thoroughbred Horsemen's
Association; Thoroughbred Safety Coalition; New York Racing
Association; Breeders' Cup; and ROCO.
Additionally, on September 18, 2024, the rule modification proposal
was made available to the public for review and comment on the HISA
website at <a href="https://www.hisaus.org/">https://www.hisaus.org/</a>. Several comments were received from
various stakeholders, which are outlined in Item III of this document.
Attached to this document is Exhibit A, which includes copies of all
comments received concerning the rule modification proposal.
With the review, input and ultimate approval of the Authority's
Board of Directors, the proposed rule modification to the Rule 8500
Series enhances the procedures for the Cost Methodology Rule
promulgated by the Authority.
b. Statutory Basis
The Horseracing Integrity and Safety Act of 2020, 15 U.S.C. 3051
through 3060.
II. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Modification
Rule 8510, Definitions, sets forth defined terms for the Rule 8500
Series. The modification in Rule 8510(a) amends the definition of
``Annual Covered Racing Starts'' effective January 1, 2026. This change
is discussed below in connection with the modification of Rule
8520(c)(2). The modification in Rule 8510(e) amends the definition of
``Projected Purse Starts'' to ``Projected Purses Paid'' and clarifies
that the total amount of purses paid for Covered Horseraces includes
all purse supplements included in the Equibase result chart.\17\ The
underlying principle of the current assessment methodology is to focus
on purses actually paid. It is of no consequence whether the purses
paid consist of money from purse funds or from purse supplements. This
modification simply reinforces the principle behind the current Cost
Assessment Rule. The deletion in Rule 8520(a) deletes language that was
operative only in 2022 and is now no longer necessary.
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\17\ The proposed modifications posted for public comment stated
that the total amount of purses paid for Covered Horses shall
include ``all purse supplements of any kind.'' A commentator raised
the question of whether ``including all purse supplements of any
kind'' was too broad. See Exhibit A, Comment from Christopher
McErlean, PENN Entertainment, Inc. (``Penn'') (``Not all supplements
are paid as part of the advertised purse at same time as payment of
race purse is made, but are determined or calculated on amount of
purse money earned and paid at a future date; such funds are not
always disclosed or known by a Racetrack with no ability to
track.''). This definition has been revised in response to this
comment and now reads as follows: Projected Purses Paid means: (i)
the total amount of purses paid for covered horseraces (including
all purse supplements included in the Equibase result chart) in the
previous twelve (12) months as reported by Equibase (not including
the Breeders' Cup World Championships Races), after taking into
consideration alterations in purses paid for the relevant State(s)
for the following calendar year.
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The addition set forth in Rule 8520(b) simply makes explicit the
existing practice of calculating and distributing the estimated amount
required from each State by Racetrack. Moreover, this new language
corresponds to the new definition of ``Annual Covered Racing Starts''
effective January 1, 2026.
The proposed modifications in Rule 8520(c)(1) are not substantive.
The proposed changes remove unnecessary language and correct subsection
and definition references.
The proposed modifications in Rule 8520(c)(2) change the method of
calculation for determining the amount of assessment owed from each
State. Currently, the Cost Methodology Rule determines the assessment
based on Projected Starts and Projected Purses Paid. Under the proposed
modification, beginning January 1, 2026, the Cost Methodology Rule will
calculate the assessment solely based on Projected Starts. In a
response to comments posted to the Federal Register in 2022 regarding
the proposed rule establishing the methodology for determining
assessments, the Authority committed to ``review[ing] the Methodology
Rule Proposal on an annual basis to ensure that the formula that forms
the basis of the assessments is equitable and as a part of this review,
the Authority will consider the comments that argue otherwise.'' See
March 14, 2022 letter to Secretary April J. Tabor (the ``March 14, 2022
Letter'').\18\ Since making that commitment, the Authority has
thoroughly reviewed and reconsidered the Cost Methodology Rule.
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\18\ This letter is available on the docket for the 2022
Proposed Rule Notice at <a href="https://www.regulations.gov/docket/FTC-2022-0014/document">https://www.regulations.gov/docket/FTC-2022-0014/document</a>.
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Although the current Cost Methodology Rule was the appropriate rule
when the Act was implemented in 2022, the Authority has been regularly
analyzing whether it continues to be the appropriate rule and now
concludes that beginning January 1, 2026, the more appropriate and
equitable approach is to base assessments on Projected Starts only. The
Authority is now in a position to review the successful operation of
its Racetrack Safety program for more than two years and its Anti-
Doping and Medication Control (``ADMC'') program for over one year.
Before the programs went into effect, the Authority anticipated:
that stakes races and graded stakes races will have higher testing
costs and that horses that compete in such races will be subjected
to more vigorous out-of-competition testing, which is an expensive
element of a vigorous drug testing program. In addition, it is
anticipated that drug disqualifications in stakes races will result
in higher enforcement costs. Currently, much of the protracted and
costly litigation in the states concerns drug positive
disqualifications in stakes races. See e.g., Kentucky Horse Racing
Commission v. Motion, 592 SW3d 739, 744 (Ky. App. 2019) (litigation
over a drug positive in a 2015 stakes race did not conclude until
the Kentucky Supreme Court denied discretionary review in 2020).
See March 14, 2022 Letter.
Actual experience with the implementation of the Act has shown
these budgetary predictions did not come to fruition. Due to the
automatic Disqualification of race results for any established Presence
violation under ADMC Program Rules 3212 or 3312, and the inability to
avoid this sanction (even
[[Page 84603]]
if a Covered Person is found to have No Fault or Negligence under ADMC
Program Rules 3224 or 3324 or No Significant Fault or Negligence under
ADMC Program Rules 3225 or 3325), Covered Persons are less likely to
litigate potential Program violations based solely on purse amounts.
Instead, proceedings are more likely to occur based on the
classification of the Prohibited Substance involved. Cases involving
Banned Substances, which have a default sanction of a two-year period
of Ineligibility, have a much greater chance of being litigated,
regardless of the place in which the Covered Horse finished or the
category of the race at issue. While the grade of the race is a
consideration for the selection of Covered Horses for Out-of-
Competition testing, it is only one factor. Such testing is also driven
by risk assessment (as required by the ADMC Program Rules), which can
include intelligence received about the Covered Horse or Covered
Person, Testing history, and the movement of the Covered Horse. It
should also be noted that laboratory analysis costs are not affected by
the grade of the race at issue or whether the test is Post-Race or Out-
of-Competition. Quite simply, the Authority's expenses after the
initial implementation period have turned out to be closely correlated
to starts and not to purse amounts or the grade of a race. Therefore,
the Authority has determined that going forward the most appropriate
and equitable approach is to base the assessments solely on Projected
Starts, and the modifications in Rule 8520(c)(2) implement that
approach.
It should also be noted that numerous stakeholders have initiated
litigation against the Authority over the use of paid purses in the
Cost Methodology Rule. In fact, many of these entities benefit from the
use of purses in the assessment formula but nevertheless believe that
actual starts should be the sole basis for calculating the assessments.
For example, in a Federal action filed by various West Virginia and
Louisiana governmental and horseracing entities, including the
Louisiana and West Virginia racing commissions, the court ruled:
Because the FTC acknowledged that HISA's methodology includes
``a metric that is not part of the Act's basis of calculation of
fees--purses,'' this Court finds that Plaintiffs have shown a
likelihood that the Assessment Methodology Rules are unlawful. While
there is limited discretion given to HISA for determining funding,
it cannot go outside the authority given to it in Sec. 3052(f). By
adding this additional metric, HISA went outside the bounds of the
Act and its authority for calculations. Plaintiffs are likely to
succeed on the merits on their claim that the Assessment Methodology
Rules exceeds HISA's statutory authority.
Louisiana v. Horseracing Integrity & Safety Auth. Inc., 617 F. Supp. 3d
478, 498 (W.D. La. 2022) (the ``Louisiana Action'').
After remand from the United States Court of Appeals for the 5th
Circuit, the following entities filed an Amended Complaint in the
Louisiana Action: the State of Louisiana, the Louisiana State Racing
Commission, the Louisiana Horsemen's Benevolent and Protective
Association 1993, Inc., Louisiana Thoroughbred Breeders Association,
the State Of West Virginia, the West Virginia Racing Commission, the
State Of Oklahoma, the Oklahoma Horse Racing Commission, the State of
Nebraska, Nebraska Racing and Gaming Commission, the State Of Arkansas,
the State Of Mississippi, Arizona Horsemen's Benevolent and Protective
Association, Arkansas Horsemen's Benevolent and Protective Association,
Illinois Horsemen's Benevolent and Protective Association, Iowa
Horsemen's Benevolent and Protective Association, Indiana Horsemen's
Benevolent and Protective Association, Kentucky Horsemen's Benevolent
and Protective Association, Minnesota Horsemen's Benevolent and
Protective Association, Nebraska Horsemen's Benevolent and Protective
Association, Ohio Horsemen's Benevolent and Protective Association,
Oklahoma Horsemen's Benevolent and Protective Association (``Oklahoma
HBPA''),\19\ Pennsylvania Horsemen's Benevolent and Protective
Association, Washington Horsemen's Benevolent and Protective
Association, Charles Town [West Virginia] Horsemen's Benevolent and
Protective Association, Tampa Bay Downs [Florida] Horsemen's Benevolent
And Protective Association, Fonner Park [racetrack in Nebraska] and
Horsemen's Park [racetrack in Nebraska]. The Amended Complaint seeks to
have the Cost Methodology Rule vacated and enjoined because it includes
purses in the assessment formula. The Amended Complaint states that
purses cannot be utilized in the assessment formula and that the
formula should be based on starts. Although the Authority believes its
current Cost Methodology Rule is consistent with, and in accordance
with the Act, the proposed modification will remove the threat and cost
of litigation on this issue. As is evident from the list of plaintiffs
in the proffered Amended Complaint, many of the States that benefit
from the purses paid portion of the assessment calculation reject this
benefit as being inconsistent with the Act.
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\19\ Officers and board members of the Oklahoma HBPA have filed
a separate lawsuit in Federal court in Oklahoma claiming that the
assessment formula should only utilize starts. See Joe Offolter, et
al. v. Horseracing Integrity and Safety Authority, Inc., et al.,
Case No. CIV-24-749-D (W.D. Okla.).
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Proposed Rule 8520(e)(1) addresses the process for collecting the
assessment if a State racing commission does not elect to remit fees
pursuant to 15 U.S.C. 3052(f)(2) or has remitted a partial payment
under Rule 8520(a). The changes contained in Rule 8520(e)(1) make
explicit the current practice of calculating and distributing the
estimated amount required from each State by Racetrack. The other
modifications in Rule 8520(e)(1) clarify the formula that is used to
calculate the applicable fee per racing start. And finally, a new
subsection (v) is added to Rule 8520(e)(1). Subsection (v) states that
underpayments, overpayments and past due amounts shall be equitably
adjusted in the succeeding calendar year. This modification provides
clear direction on the calculation of the applicable fee per racing
start and specifies that underpayments, overpayments and past due
amounts shall be adjusted in the succeeding calendar year.
Under current Rule 8520(e)(3), the Authority determines how the
Assessment Calculation is allocated among Covered Persons. The proposed
Rule 8520(e)(3) establishes the equitable allocation for the applicable
fee per racing start for the Assessment Calculation for each Racetrack
as follows: Racetrack: 50%; Owners: 43.50%; Trainers: 5.00%; and
Jockeys: 1.50%.\20\ In addition, the proposed rule permits the
applicable horsemen's group to agree to pay the applicable starter fee
for the owners, trainers and jockeys from the purse account or other
sources \21\ and that such payments shall be deemed to be equitably
allocated among the owners, trainers and jockeys.
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\20\ Under the current rule, unless the Racetrack and the
applicable horsemen's group agreed otherwise, the Authority
established the equitable allocation for the applicable fee per
racing start for the Assessment Calculation for each Racetrack 50%
to the Racetrack and 50% to the horsemen. In most instances, the
horsemen have agreed to pay their share out of the purse account.
The proposed allocation of Owners: 43.50%; Trainers: 5.00%; and
Jockeys: 1.50% is a reasonable estimation of the overall percentage
amount Owners, Trainers and Jockeys receive out of the purse funds.
\21\ Penn noted that the phrase ``other sources'' should be
added.
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The proposed Rule 8520(e)(3) also allows the horsemen's group and
the Racetrack to mutually agree to the allocation of the applicable fee
per racing start. And finally, the proposed
[[Page 84604]]
Rule 8520(e)(3) permits a Racetrack to voluntarily assume a larger
percentage of the applicable fee per racing start than set forth in the
rule. These modifications will establish by rule how the Assessment
Calculation is allocated among Covered Persons. The remainder of the
modifications memorialize current practices among the horsemen's groups
and the racetracks.
It should be noted that the current Rule 8520(e)(3) is the subject
of a court challenge. See Kelly et al., v. Horseracing Integrity and
Safety Authority et al., Civ. No. 4:24-cv-00264 (S.D. Iowa). Although
the Authority believes it can successfully defend the litigation, it
does not believe it is prudent to utilize resources to defend the
current rule when the modified rule achieves the same result and
eliminates the risk, cost, and expense of litigation.
The modifications in Rule 8520(f) remove the objection procedure
for objecting to relevant Equibase numbers. The modified definition of
Projected Purses Paid and the new parenthetical in Rule 8520(f) make
clear that only purses paid to the racing participants are counted in
the assessment formula. The critical attribute of the use of paid
purses under the current assessment formula was to gauge racing
industry strength by the purse amounts paid to the participants
(regardless of the source of these funds). The Equibase result chart
provides the actual amount paid to the racing participants (regardless
of the source of the funds). These objection procedures are no longer
necessary and have also been the subject of a court challenge. See
Kelly et al., v. Horseracing Integrity and Safety Authority et al.,
Civ. No. 4:24-cv-00264 (S.D. Iowa). Although the Authority believes it
can successfully defend the litigation, it does not believe that
utilizing resources to defend an unnecessary rule is prudent.
The modification in Rule 8520(h) recognizes that the Authority's
address may change and incorporates the Authority's address located on
the Authority's website for all future notices required to be given to
the Authority pursuant to the Act and the associated regulations.
Proposed Rule 8520(i) is a new subsection. This new provision
imposes interest on past due amounts. The imposition of interest on
past due amounts ensures that prompt payments are made. Interest
imposed on past due amounts is common throughout commercial and
government practices across the country.
III. Self-Regulatory Organization's Summary of Comments Received Pre-
Submission and Its Responses to Those Comments
The substance of various comments received, and the Authority's
responses are summarized below. Comments were received from eleven
individuals and groups in the horseracing industry.\22\ Two of the
commentators supported the modifications in Rule 8520(c)(2) that will
now base the assessment calculation solely on Projected Starts.\23\
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\22\ Diane Hain (``Ms. Hain''), Phil Ziegler, President of
Emerald Downs (``Mr. Ziegler''), the Minnesota Racing Commission
(``MRC''), California Horse Racing Board (``CHRB''), 1/ST Racing
(``1/ST''), Penn, Canterbury Park (``Canterbury''), Ohio Horsemen's
Benevolent and Protective Association (``Ohio HBPA''), Churchill
Downs Inc. (``CDI''), Washington Horse Racing Commission (``WHRC'')
and National Horsemen's Benevolent and Protective Association
(``NHBPA'').
\23\ 1/ST (We are generally in support of this methodology for
determining assessments at the various racetracks across the
country. We believe that it is a fair way to apportion the costs of
HISA. Particularly because the costs for many of the aspects of
HISA, such as drug testing, are fixed irrespective of the purse
level at a racetrack.'') and CHRB (``the funding formula seems
fine'').
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Eight commentators objected to the proposed modifications to Rule
8520(c)(2).\24\ All of these comments have been considered. The
assessment calculation has been the subject of an ongoing debate since
the original rule was proposed in 2022. See, e.g., March 14, 2022
Letter at n. 10. The Authority has considered both sides of the debate
and has concluded that--for the reasons set forth above--the most
appropriate and equitable approach going forward is to base the
assessments solely on Projected Starts. It should be noted that the
Ohio HBPA is taking a different view on the assessment rule in its
comment than it is taking in litigation. The Ohio HBPA claims that the
modification is ``a blatant attempt to shift HISA fees from the large
tracks running short meets with large purse structures, which arguably
can afford to pay those fees, to smaller tracks who run more racing
days with much smaller purse structures who almost assuredly cannot
afford them.'' This claim is in direct contravention of the position
the Ohio HBPA is taking in the Louisiana Action, in which the Amended
Complaint states that consideration of any factor but starts is
contrary to the Act.\25\
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\24\ Ms. Hain (modified rule would place an unfair burden on
small racetracks); Mr. Ziegler (same); WHRC (same); Penn (same);
Ohio HBPA (same); NHBPA (same); MRC (modified rule would place an
unfair burden on small racetracks and estimates that the racetrack's
assessment in Minnesota would rise from $883,327 to $1,049,000);
Canterbury (same).
\25\ It should also be noted that the NHBPA is taking a position
directly contrary to numerous of its State affiliates.
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Three commentators addressed comments to other aspects of the Rule
8500 Series.\26\ As noted previously, Penn's comment regarding the
Projected Purses Paid definition was incorporated in the modification.
Penn also offered additional comments. Penn stated that use of the
condition book in Rule 8520(e) is not a reliable guide for estimation
of races because the condition book can overestimate ``the number of
races in order to allow for a variety and cross section of potential
races to be used.'' The Authority recognizes that the condition book
could overestimate the number of races. This is the reason that the
estimate is based on historical data from Equibase in addition to the
condition book. The condition book will specify the planned number days
of racing, and this information combined with the historical data will
lead to the best estimate.
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\26\ NHBPA, CDI and Penn.
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In addition, Penn states that the assessment calculation in Rule
8320(e) ``should be paid on a 30-day, net basis which is traditional
payment rate for most businesses.'' The Authority has adopted that
suggestion in the proposed rule. Finally, Penn states that the interest
rate charge ``should not have additional points added'' and
``Racetracks should not be charged interest on amounts owed by other
Covered Persons who have not paid pursuant to the Regulations.'' \27\
After consideration of the comment, the rule has been modified to
charge interest at prime rate without additional points.
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\27\ Penn also asserts that a ``Racetrack should not be
responsible, or liable, for any payments due from other Covered
Purses required to pay a portion of the Assessment'' and that
``Racetracks should not be required to collect and remit funds from
Owners/Trainers/Jockeys.'' These comments relate to portions of the
rule that are unchanged from the current rule.
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The NHBPA argues that ``[o]ften times covered hoses may run in a
race where they are not entitled to any of the supplements offered
beyond the guaranteed purse, thus the added purse structure does not
apply to all horses and therefore should not be added to the
determination of funding methodology.'' The revised definition
addresses this concern. As discussed above, the Equibase result chart
reports the money actually paid to the race participants. The remainder
of the comments of the NHBPA are directed at portions of the Rule 8500
Series that have not been modified.
[[Page 84605]]
CDI claims that the Authority is not authorized to collect
interest. The Authority disagrees. Proposed Rule 8520(i) is fully
consistent with the Act, which authorizes HISA to assess a fee owed to
HISA and ``collect such fee according to such rules as the Authority
may promulgate.'' 15 U.S.C. 3052(f)(3)(C)(i). Requiring an interest
rate on amounts past due for assessments is necessary to incentivize
timely payments and ensure HISA has the cash flow required to sustain
its operations. CDI also objects to the removal of the objection
process related to Equibase data in proposed Rule 8520(f). It is
important to note that to date, no racetrack has lodged an objection,
and the example of steeplechase racing offered by CDI is a non
sequitur. Lastly, CDI argues that by modifying Rule 8520(b) to permit
the estimated amount required from each State to be broken down by
Racetrack, the Authority is not complying with the Act. This argument
is not well-founded. In permitting the Authority to provide the
estimated amount owed by Racetrack, the rule does not alter the State's
right to opt to pay the assessment and its right to ``determine . . .
the method by which the requisite amount of fees . . . shall be
allocated, assessed, and collected.'' Instead, the rule as modified
will simply provide full transparency to the industry of the details of
the assessment calculations if a State racing commission chooses to not
pay the assessment.
The changes advanced in the proposed Cost Methodology Rule
Modification are intended to enhance the Rule 8500 Series in a manner
that is consistent with the Act. The proposed rules are carefully
tailored to the unique character of horseracing and to the
organizational structure of the Authority.
IV. Legal Authority
This rule is proposed by the Authority for approval or disapproval
by the Commission under 15 U.S.C. 3053(c)(1).
V. Date of Effectiveness
If approved by the Commission, this proposed rule modification
would be effective 30 days following the date of the Commission's order
approving the modification.
VI. Request for Comments
Members of the public are invited to comment on the Authority's
proposed rule modification. The Commission requests that factual data
on which the comments are based be submitted with the comments. The
supporting documentation referred to in the Authority's filing is
available for public inspection on the docket for this matter at
<a href="https://www.regulations.gov">https://www.regulations.gov</a>.
The Commission seeks comments that address the decisional criteria
provided by the Act. The Act gives the Commission two criteria against
which to measure proposed rules and rule modifications: ``The
Commission shall approve a proposed rule or modification if the
Commission finds that the proposed rule or modification is consistent
with--(A) this chapter; and (B) applicable rules approved by the
Commission.'' \28\ In other words, the Commission will evaluate the
proposed rule for its consistency with the specific requirements,
factors, standards, or considerations in the text of the Act as well as
the Commission's rules.
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\28\ 15 U.S.C. 3053(c)(2).
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Although the Commission evaluates the Authority's proposed rule for
its consistency with the Act and the Commission's rules, the Commission
may consider broader questions--about the health and safety of horses
and jockeys, the integrity of horseraces and wagering on horseraces,
and the administration of the Authority itself--in another context:
``The Commission . . . may abrogate, add to, and modify the rules of
the Authority promulgated in accordance with [the Act] as the
Commission finds necessary or appropriate to ensure the fair
administration of the Authority, to conform the rules of the Authority
to requirements of [the Act] and applicable rules approved by the
Commission, or otherwise in furtherance of the purposes of [the Act].''
\29\ The Commission may exercise this rulemaking power on its own
initiative or in response to a petition from a member from the public.
If members of the public wish to provide comments to the Commission
about its use of the rulemaking power, they are encouraged to submit a
petition requesting that the Commission issue a rule addressing the
subject of interest. The petition must meet all the criteria
established in the Rules of Practice (part 1, subpart D); \30\ if it
does, the petition will be published in the Federal Register for public
comment. In particular, the petition for a rulemaking must ``identify
the problem the requested action is intended to address and explain why
the requested action is necessary to address the problem.'' \31\
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\29\ 15 U.S.C. 3053(e) (as amended by the Consolidated
Appropriations Act, 2023, H.R. 2617, 117th Cong., Division O, Title
VII (2022)).
\30\ 16 CFR 1.31; see FTC, Procedures for Responding to
Petitions for Rulemaking, 86 FR 59851 (Oct. 29, 2021).
\31\ 16 CFR 1.31(b)(3).
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VII. Comment Submissions
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before November 6,
2024. Write ``HISA Assessment Methodology Rule Modification'' on your
comment. Your comment--including your name and your State--will be
placed on the public record of this proceeding, including the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website.
Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we strongly encourage you
to submit your comments online. To make sure the Commission considers
your online comment, you must file it at <a href="https://www.regulations.gov">https://www.regulations.gov</a>,
by following the instructions on the web-based form.
If you file your comment on paper, write ``HISA Assessment
Methodology Rule Modification'' on your comment and on the envelope,
and mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Mail
Stop H-144 (Annex H), Washington, DC 20580. If possible, please submit
your paper comment to the Commission by overnight service.
Because your comment will be placed on the public record, you are
solely responsible for making sure that your comment does not include
any sensitive or confidential information. In particular, your comment
should not contain sensitive personal information, such as your or
anyone else's Social Security number; date of birth; driver's license
number or other State identification number or foreign country
equivalent; passport number; financial account number; or credit or
debit card number. You are also solely responsible for making sure your
comment does not include any sensitive health information, such as
medical records or other individually identifiable health information.
In addition, your comment should not include any ``[t]rade secret or
any commercial or financial information which . . . is privileged or
confidential''--as provided in section 6(f) of the FTC Act, 15 U.S.C.
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)--including, in
particular, competitively sensitive information such as costs, sales
statistics, inventories, formulas, patterns, devices, manufacturing
processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule 4.9(c), 16 CFR 4.9(c).
In particular, the written
[[Page 84606]]
request for confidential treatment that accompanies the comment must
include the factual and legal basis for the request and must identify
the specific portions of the comment to be withheld from the public
record. See FTC Rule 4.9(c). Your comment will be kept confidential
only if the General Counsel grants your request in accordance with the
law and the public interest. Once your comment has been posted publicly
at <a href="https://www.regulations.gov">https://www.regulations.gov</a>--as legally required by FTC Rule 4.9(b),
16 CFR 4.9(b)--we cannot redact or remove your comment, unless you
submit a confidentiality request that meets the requirements for such
treatment under FTC Rule 4.9(c), and the General Counsel grants that
request.
Visit the FTC website to read this document and any news release
describing it. The FTC Act and other laws that the Commission
administers permit the collection of public comments to consider and
use in this proceeding as appropriate. The Commission will consider all
timely and responsive public comments it receives on or before November
6, 2024. For information on the Commission's privacy policy, including
routine uses permitted by the Privacy Act, see <a href="https://www.ftc.gov/siteinformation/privacypolicy">https://www.ftc.gov/siteinformation/privacypolicy</a>.
VIII. Communications by Outside Parties to the Commissioners or Their
Advisors
Written communications and summaries or transcripts of oral
communications respecting the merits of this proceeding, from any
outside party to any Commissioner or Commissioner's advisor, will be
placed on the public record. See 16 CFR 1.26(b)(5).
IX. Self-Regulatory Organization's Proposed Rule Language
The following language reflects the Assessment Methodology Rule
with the proposed modifications incorporated. A redline version that
shows every way in which the previously approved Assessment Methodology
Rule would be modified by the proposed rule modification is available
as Exhibit B on the docket at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
8500. Methodology for Determining Assessments
8510. Definitions
For purposes of this Rule 8500 Series:
(a) Annual Covered Racing Starts has the meaning set forth in Rule
8520(c)(1) through December 31, 2025. Effective January 1, 2026, Annual
Covered Racing Starts shall have the meaning set forth in Rule
8520(c)(2).
(b) Covered Horseraces has the meaning set forth in 15 U.S.C.
3051(5).
(c) Covered Persons has the meaning set forth in 15 U.S.C. 3051(6).
(d) Projected Starts means the number of starts in covered
horseraces in the previous twelve (12) months as reported by Equibase,
after taking into consideration alterations in the racing calendar of
the relevant State(s) for the following calendar year.
(e) Projected Purses Paid means: the total amount of purses paid
for covered horseraces (including all purse supplements included in the
Equibase result chart) in the previous twelve (12) months as reported
by Equibase (not including the Breeders' Cup World Championships
Races), after taking into consideration alterations in purses paid for
the relevant State(s) for the following calendar year.
(f) Racetrack has the meaning set forth in 15 U.S.C. 3051(15).
8520. Annual Calculation of Amounts Required
(a) If a State racing commission elects to remit fees pursuant to
15 U.S.C. 3052(f)(2) for any calendar year, the State racing commission
shall notify the Authority in writing on or before thirty (30) days
from the receipt of the estimated amount provided to the State racing
commission pursuant to Rule 8520(b). A State racing commission may be
permitted to pay a portion of the estimated amount provided to the
State racing commission pursuant to Rule 8520(b). In such case, the
remaining portion of the estimated amount provided to the State racing
commission pursuant to Rule 8520(b), shall be paid pursuant to Rule
8520(e).
(b) Not later than November 1 of each year, the Authority shall
determine and provide to each State racing commission the estimated
amount required from each State pursuant to the calculation set forth
in Rule 8520(c) below. The estimated amount required from each State
shall also include the estimated amount broken down by each Racetrack
in the jurisdiction based on each Racetrack's proportionate share in
the Projected Purses Paid in covered horseraces in the State over the
applicable year (the ``Assessment Calculation for each Racetrack'').
Notwithstanding the preceding sentence, effective January 1, 2026, the
Assessment Calculation for each Racetrack shall be based on each
Racetrack's proportionate share in the Projected Starts in covered
horseraces in the State over the applicable year.
(c)(1) Upon the approval of the budget for the following calendar
year by the Board of the Authority, and after taking into account other
sources of Authority revenue, the Authority shall allocate the
calculation due from each State pursuant to 15 U.S.C. 3052(f)(1)(C)(i)
proportionally by each State's respective percentage of the Annual
Covered Racing Starts. The proportional calculation for each State's
respective percentage of the Annual Covered Racing Starts shall be
calculated as follows: (i) the total amount due from all States
pursuant to 15 U.S.C. 3052(f)(1)(C)(i) shall be divided by the
Projected Starts of all covered horseraces; then (ii) fifty percent
(50%) of the quotient calculated in (c)(1)(i) is multiplied by the
quotient of (aa) the relevant State's percentage of the total amount of
Projected Purses Paid divided by (bb) the relevant State's percentage
of the Projected Starts; then (iii) the sum of (aa) the product of the
calculation in (c)(1)(ii) and fifty percent (50%) of the quotient
calculated in (c)(1)(i) is multiplied by the Projected Starts in the
applicable State. Provided however, that no State's allocation shall
exceed ten percent (10%) of the total amount of Projected Purses Paid
for covered horseraces as reported by Equibase in the State (not
including the Breeders' Cup World Championships Races). All amounts in
excess of the ten percent (10%) maximum shall be allocated
proportionally to all States that do not exceed the maximum, based on
each State's respective percentage of the Annual Covered Racing Starts.
(c)(2) Notwithstanding Rule 8520(c)(1), effective beginning with
the 2026 budget of the Authority, upon the approval of the budget of
the Authority by the Board of the Authority, and after taking into
account other sources of Authority revenue, the Authority shall
allocate the calculation due from each State pursuant to 15 U.S.C.
3052(f)(1)(C)(i) proportionally by each State's respective percentage
of the Annual Covered Racing Starts. The proportional calculation for
each State's respective percentage of the Annual Covered Racing Starts
shall be calculated as follows: (1) the total amount due from all
States pursuant to 15 U.S.C. 3052(f)(1)(C)(i) shall be divided by the
Projected Starts of all covered horseraces; multiplied (2) by the
Projected Starts in the applicable State.
(d) Pursuant to 15 U.S.C. 3052(f)(2)(B), a State racing commission
that elects to remit fees, shall remit fees on a monthly basis and each
payment shall equal one-twelfth (1/12) of the
[[Page 84607]]
estimated annual amount required from the State for the following year.
(e) If a State racing commission does not elect to remit fees
pursuant to 15 U.S.C. 3052(f)(2) or has remitted a partial payment
under Rule 8520(a):
(1) The Authority shall on a monthly basis calculate and notify
each Racetrack in the State of the applicable fee per racing start for
the next month based upon the following calculations:
(i) Calculate the amount due from the Assessment Calculation for
each Racetrack as if the State had elected to remit fees pursuant to 15
U.S.C. 3052(f)(2) (after taking into account any partial payment under
Rule 8520(a)).
(ii) Estimate the number of starts in covered horseraces for the
applicable Racetrack for the applicable year based on historical data
as reported by Equibase and the condition book for the applicable
Racetrack (the ``Total Estimated Starts'').
(iii) Calculate the number of starts in covered horseraces for the
applicable Racetrack in the previous month that the applicable
Racetrack conducted covered horseraces as reported by Equibase (the
``Monthly Starts'').
(iv) The applicable fee per racing start shall equal (1) the
quotient of Monthly Starts divided by Total Estimated Starts; (2)
multiplied by the Assessment Calculation for each Racetrack; and (3)
such product divided by the Monthly Starts.
(v) If the applicable fee per racing start results in an
overpayment or underpayment of the Assessment Calculation for each
Racetrack for the applicable year or there are any past due amounts of
the Assessment Calculation for each Racetrack, such overpayments,
underpayments and/or past due amounts shall be equitably adjusted to
account for such differences in the succeeding calendar year.
(2) Each Racetrack shall pay the Assessment Calculation for each
Racetrack to the Authority within thirty (30) days from receipt of the
applicable invoice.
(3) Pursuant to 15 U.S.C. 3052(f)(3)(B), the applicable fee per
racing start for the Assessment Calculation for each Racetrack shall be
equitably allocated among covered persons as follows: Racetrack: 50%;
Owners: 43.50%; Trainers: 5.00%; and Jockeys: 1.50%. Provided, however,
if the horsemen's group that represents the majority of owners and
trainers racing at the applicable Racetrack (the ``Horsemen's Group'')
agrees to pay the applicable starter fee for the owners, trainers and
jockeys from the purse account or other sources, such payments shall be
deemed to be equitably allocated among the owners, trainers and
jockeys. In such case, the Horsemen's Group and the Racetrack may
mutually agree to the allocation of the applicable fee per racing start
and such mutually agreed allocation shall be deemed equitably allocated
among covered persons. Notwithstanding anything contained herein to the
contrary, if a Racetrack voluntarily assumes a larger percentage of the
applicable fee per racing start than set forth in this section, such
allocation shall be deemed equitably allocated among covered persons.
The Racetrack shall collect the applicable fee per racing start from
the applicable covered persons involved with covered horseraces.
(f) Not later than March 1 of each year, the Authority shall
calculate the actual number of starts in covered horseraces as reported
by Equibase for the previous calendar year and the actual total amount
of purses paid (including all purse supplements included in the
Equibase result chart) for covered horseraces as reported by Equibase
for the previous calendar year and apply such amounts to the
calculations set forth in Rule 8520(c) instead of the projected amounts
utilized in the calculation of the estimated amount provided to the
State racing commission pursuant to Rule 8520(b) for the relevant
calendar year (the ``True-Up Calculation''). The allocation due from
each State in the current year shall be equitably adjusted to account
for any differences between the estimated amount provided to the State
racing commission pursuant to Rule 8520(b) for the previous year and
the True-Up Calculation.
(g) In the event that any court of competent jurisdiction issues an
injunction that enjoins the enforcement of the Rule 8500 Series based
on the use of purses paid in the Assessment Methodology Rule, the
applicable States, Racetracks and Covered Persons, as the case may be,
shall pay the allocation due from each State pursuant to 15 U.S.C.
3052(f)(1)(C) and 15 U.S.C. 3052(f)(3)(A)-(C) proportionally by the
applicable State's respective percentage of Projected Starts (the
``Alternative Calculation''). In the event that such injunction is
reversed by a court of competent jurisdiction and such reversal is
final and non-appealable, the Authority shall adjust the allocation due
from the appliable States, Racetracks and Covered Persons, as the case
may be, in the current calendar year to account for the overpayment or
underpayment created by the use of the Alternative Calculation made
during the time that the injunction was in force.
(h) All notices required to be given to the Authority pursuant to
the Act and these regulations shall be in writing and shall be mailed
to the Authority's address listed on the Authority's website and
emailed to <a href="/cdn-cgi/l/email-protection#472d2e2a692026332234072f2e3426323469283520"><span class="__cf_email__" data-cfemail="0e64676320696f7a6b7d4e66677d6f7b7d20617c69">[email protected]</span></a>.
(i) Interest shall accrue on all past due amounts hereunder at an
interest rate equal to the prime rate published in the Wall Street
Journal on the date the payment is due, compounded annually, on such
amount from the due date of the payment until such amount is paid.
By direction of the Commission.
April J. Tabor,
Secretary.
[FR Doc. 2024-24567 Filed 10-22-24; 8:45 am]
BILLING CODE 6750-01-P
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</html>Indexed from Federal Register on October 23, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.