Monday, June 23, 2008

Time for The Feds to Step In?

Last Thursday, the House of Representatives Sub-Committee on Commerce, Trade and Consumer Protection held four hours of hearings on "Breeding, Drugs and Breakdowns: The State of Thoroughbred Horse Racing and the Welfare of the Thoroughbred." That hearing may well be the opening wedge in an effort to establish federal regulation of racing. And that may be the best thing that's happened to racing in decades.

(The transcripts of witnesses' opening statements at the hearing -- including no-show Dick Dutrow -- and podcasts of the actual hearing are available online.)


For years, racing has been run as a conglomeration of independent fiefdoms. Each of the 38 states that hosts racing has its own regulatory commission, with different licensing standards, different drug rules, and different standards for punishing violators. For example, you want to use Bute on race day? Go to Kentucky or California. You want to race where Bute isn't allowed on the day of the race? Then try any of the other 36.

Very few people in racing think there's anything odd or even unnecessary about this concatenation of contradictory regulations, because the racing business itself is equally fragmented. Horsemen -- owners and trainers -- have their own organizations in each state, or sometimes more than one in a single state, as in New York where one group represents horsemen at NYRA tracks and another group represents the horsemen at Finger Lakes. And then there's California, where owners and trainers each have a separate organization. There are a couple of supposedly national organizations, competing for membership and recognition, advancing some goals that are similiar, some that aren't. And then there are a dizzying multitude of special-purpose organizations, established to support track vets, or retired horses, or jockeys, or all of the above, or something else again.

Racetrack ownership is even more fragmented. The big three -- Churchill Downs, Inc., Magna Entertainment and NYRA, probably account for somewhere between half and two-thirds of total handle in the US, but there are hundreds more tracks out there, many of them practically mom and pop operations. The kinds of ownership vary, too. Churchill Downs and Magna are the most obvious examples of corporate ownership, intent on getting those race tracks to make a profit for the shareholders. NYRA is, ostensibly, a not-for-profit organization, as is Keeneland, though the latter certainly makes a lot of money from its sales operation, which then goes to fund high purses at its boutique race meets and to support a variety of equine charities.

Years ago, life was simpler. When thoroughbred racing, at least at major tracks, was done mostly by the truly wealthy, it was their organization, the Jockey Club, that ran things. If the aristocrats of the Jockey Club didn't like you, you'd be ruled off the track with no right of appeal. A number of American trainers and jockeys ended up in Europe, Russia and even farther afield because of a Jockey Club ban. But today, the Jockey Club, though still primarily controlled by the rich folks at the top of the racing pyramid, has much more limited functions. It maintains the stud book and registers thoroughbreds, and it has vestigial functions in New York, registering stable names and colors. And that's about all.

No single organization today has the power that the Jockey Club had a century ago. Instead, there are lots of other organizations in the picture, all doing pieces of what the Jockey Club once did. Or, in case of the National Thoroughbred Racing Association (NTRA) and its partner-affiliate Breeders Cup Ltd. -- trying to mount a national day (now, some would say unfortunately, a national two-day) of racing, something that the old Jockey Club never did. And then there are the ad hoc organizations that spring up in response to each crisis in the industry, dealing with such issues as auction-sale integrity, drug testing, or racehorse safety.

Fragmented as the racing industry is, the various parts of it can, every now and then, agree on a course of action and even act on it. Today is one of those moments when just about everyone in the racing business seems to agree that it is time to implement some reforms -- and even to agree on what those reforms need to be. The Racing Medication and Testing Consortium -- yet another ad hoc group -- has proposed a model rule that would restrict, though not completely eliminate, anabolic steroid use in horses in training, and most of the major racing states will have some variant of that rule in place by the end of the year. In addition, Big Brown's owners, IEAH, have unilaterally declared that all their horses will be running free of all medications except Lasix by October 1st, and IEAH has challenged other owners to do the same. It'll be interesting to see how many significant owners go along, not to mention the vets and the trainers.

In addition, the major auction sales companies are moving toward a steroid-free environment. That'll be good news for all those buyers who have bought a good-looking horse at the sales only to find that the horse falls apart as soon as you bring it home, losing weight and muscle tone as soon as its steroids injections are stopped.

All that is definitely progress, but can we really be trusted to police ourselves in all areas? Unlike other major sports, racing doesn't have a single commissioner's office or the equivalent. Because gambling is involved, we're subject to state regulation, unlike baseball, football and basketball, which, of course, no one ever bets on! The NTRA was originally intended, at least by some of its proponents, to be a sort of commissioner's office, with broad powers over a wide range of issues. But the NTRA never overcame the opposition of its own members to ceding any of their power. So we're left with an environment in which some issues can be addressed on a kind of consensus basis, like the pending steroid ban. But other issues, like a fair division of the takeout on simulcast bets among sending and receiving tracks, or a coherent stakes schedule that doesn't have tracks constantly competing with each other, or, perhaps most important, some restrictions on the breeding of ever-weaker race horses, aren't even addressed, let alone acted on.

It's not that the industry couldn't take steps on its own. Take breeding as an example. The Jockey Club could, if it were so minded, institute all manner of restrictions on breeding. It could limit stallion books to, say a mere 80 a year (40 used to be the norm, before the rise in the past 30 years of commercial breeding aimed at the yearling and two-year-old sales). It could decline to register foals whose sires were less than five years old at the time of breeding, thus helping to keep race horses on the track for another season or two. It could refuse to register foals sired by demonstrably unsound stallions. But don't hold your breath waiting for this to happen. Any of those restrictions would upset significant economic interests. Just think of Coolmore, the inventor of the 300-matings per year stallion. Or all those breeders of horses with three, four or five crosses of Raise a Native in the pedigree -- fast but oh so fragile.

So the Congressional hearing last week at least opens the door for a kind of regulation that almost no one in racing says they want, but that may be the last best hope of getting a coherent structure for our industry. Here's how it could work:

The Interstate Horse Racing Act of 1978 is what makes simulcasting possible. Without that specific federal authorization, betting across state lines on horse racing, would, like all other kinds of interstate betting, be illegal under the Federal Wire Act. The Interstate Horse Racing Act carved out an exception for horse racing. But what the feds give, they could take away. It would be easy to add a provision to the Act requiring US racing to have an empowered, centralized governing body as a condition of maintaining the simulcast exemption. It would even be possible to impose specific regulatory conditions like breeding restrictions, anti-drug rules, or retirement requirements. After all, the feds impose conditions on grants to state and local governments for housing and highways (remember the 55 mph speed limit?). So why not in racing?

Another precedent is the securities industry. In response to numerous scandals in that industry in the 1930s, the feds stepped in and did two things: first, the Securities and Exchange Commission, the Federal Reserve Board and other agencies set minimum standards of behavior for everyone involved in the stock market. And second, they empowered centralized governing bodies, like the National Association of Securities Dealers, to maintain and enforce standards across state lines. Anyone see he parallel with racing? Of course, in the laissez-faire-for-the-rich environment that has been the federal government under George II, there hasn't been all that much enforcement. But, at least the structure is in place, for when a more rational government comes into office.

We've pretty much proven that we can't really reform ourselves. Why not let the feds have a shot at it.



2 comments:

Winston said...

Thanks for this window to the industry.

thoroughbredbrief said...

Wow. It's so nice to read a piece about horse racing written by someone who actually understands how the system works. I try, but I've got a long way to go.

Doesn't the DOJ still think the Interstate Horse Racing Act is illegal?