Monday, December 17, 2012

The Taxman Cometh

With the "fiscal cliff" looming in the not-so-distant future, Washington lawmakers' thoughts naturally turn to the most defenseless among us. As former Louisiana Senator Russell once famously said, "don't tax you, don't tax me, tax that fellow behind the tree." And, from inside the Beltway, that fellow behind the tree could well be a degenerate gambler.

Specifically, there seems to be a growing consensus that a "fiscal cliff" deal will involve some sort of cap or limitation for itemized deductions. Whether that cap takes the form of an absolute limit, barring deductions in excess of, say, $17,000, $25,000 or even $50,000, or whether it takes the somewhat more complicated form of allowing deductions to generate only 28% in tax benefits, even if a taxpayer is in the 35 or perhaps 39.6% bracket, the cap is bad news for horseplayers. In particular, it's bad news for those of us who play the horses at the track or online or who participate in handicapping tournaments, but still have a day job, or at least a regular retirement income. The rest of this post explains why.

The key provision, which has been a part of the Internal Revenue Code forever, and is now codified as IRC Section 165(d), provides that "losses from wagering transactions shall be allowed only to the extent of the gains from such transactions."

To understand that section, one has to understand what the Internal Revenue Service means by "gains" and "losses." If I bet $2 on a 4-1 shot to win and get back $10, my "gain" for tax purposes is $8. If I bet $2 on each of the next four races and lose, then I have an offsetting loss of $8 and I'm even, in both cash and for tax purposes.  Things get more complicated in exotic bets. If I put $1,500 (750 $2 bets) into a Pick Six carryover and hit it for, say, $20,000, then I have a gain of $19,998 on my one winning ticket and a partially offsetting loss of $1,498 for all the tickets that didn't hit (assuming, for simplicity, that I didn't have any five-winner consolation  tickets). In other words, each bet is a separate "wagering transaction" for tax purposes; 750 bets on my hypothetical Pick Six, six bets on a three-horse exacta box, and so on.

Now let's construct an Average Joe gambler. Joe runs a software company, which pays him a net $250,000. His office has three TV screens, tuned most afternoons to TVG, HRTV and the local NYRA racing channel. He makes his bets on the NYRA Rewards network, because he knows that way more of the takeout from his bets goes to the track and the purse account (did I mention that Average Joe is also a partner in my Castle Village Farm partnership operation, and very much wants his horses to earn as much purse money as possible?).

Let's say that Joe is a pretty good handicapper, but not quite good enough to beat the takeout.  In a typical year, he'll wager perhaps $50,000 and have net winnings of $45,000, for an overall loss of $5,000.

Because Joe is not in the "trade or business" of gambling, the tax rules require that he list his wagering gains -- all $45,000 -- as income and then take an itemized deduction for $45,000, thus eliminating any taxable income attributable to gambling, which, of course, he didn't have. So he gets no tax benefit from the net $5,000 loss for the year, but in Joe's view it's a reasonable outcome. And he can't escape reporting that income, because his wagering account keep strack of it in endless detail.

Now Joe also has some other itemized deductions. Let's say he pays $20,000 a year in mortgage interest, $20,000 in state income tax and local property taxes, $5,000 in charitable contributions and $5,000 in medical expenses above the statutory threshold. That's a total of $50,000 in itemized deductions before we even get to his gambling losses.

So, to take the simplest case, let's say that the "fiscal cliff" settlement raises Joe's marginal tax rate from 35% to 39.6% and, in addition, caps his itemized deductions at $50,000. All of a sudden, Joe has an extra $45,000 of income -- his winning bets -- that can no longer be offset by an itemized deduction for his losses. At the new 39.6% top marginal rate, Joe now has an additional tax bill of $17,820, attributable entirely to completely imaginary income.

Joe might have been content to lose $5,000 a year, but now he's losing almost $23,000. Wonder how long he's going to keep making those oh-so-reportable bets on his NYRA Rewards account?

Things are different if our hypothetical bettor -- let's call him Ernie Dahlmann -- is in the "trade or business" of gambling. In tax-speak, "trade or business" doesn't necessarily mean full-time, but it does mean something more than recreational betting. Being ensconced in a suite at a Las Vegas hotel and putting $50,000 or more through their race book every day probably qualifies. For these professional gamblers, wagering losses are not itemized deductions subject to whatever cap Washington eventually imposes. Instead, a professional gambler reports gambling activity as a trade or business on a Schedule C. Wagering losses can be deducted from wagering gains up to the point that the Schedule C reports zero net income, and the professional gambler can still take whatever other itemized deductions -- mortgage interest, state and local taxes, etc. -- are available. And if the professional gambler has a loss for the year that he can't deduct against other income, well, he's not much of a professional gambler.

The NTRA and the American Horse Council, the principal lobbying groups for the racing industry, have taken up the issue, but it's hard to tell if they, and Sen. Mitch McConnell (R-Horse Racing) have much influence in the "fiscal cliff" pressure cooker. If they don't succeed in carving out an exception from the deduction cap for wagering losses, it might be time to stop betting on the ponies and start betting on something where losses are fully deductible, like, say, pork bellies.

Gamblers may not be the powerful interest group that, say, assault-weapon owners are, but still, it couldn't hurt if we all get in touch with our Senators and Congress members on the deduction-cap issue. Just might mean the death knell for race track gambling if it passes.

(For those who want to explore the invidious tax treatment of gambling in more detail, I wrote about it in "The Federal Income Tax Treatment of Gambling," 49 Tax Lawyer 1 (1995). More recently, the February, 2001 Gaming Law Review has an article by Charles Blau on "Tax Treatment of Gambling: the Pros and Cons." Alas, neither of these articles seems to be available for free on the web. Consult your local friendly law library.)

Wednesday, December 12, 2012

NYRA's Quarterly Results: Transparency Plus Good News

For the first time in living memory, the New York Racing Association (NYRA) has voluntarily released its financial data. The NYRA balance sheet as of September 30, 2012, plus the quarterly results for July through September of this year can be found here.

Historically, NYRA has strenuously resisted disclosing its finances. Both former CEO Charlie Hayward and the current incumbent, Ellen McClain, initially responded to to earlier state government requests for finances by saying no way, only to reverse themselves soon after, under public and political pressure. But now, on the eve of the first meeting of the "New NYRA" Board of Directors, with a majority appointed by New York Governor Andrew Cuomo and other state politicos, NYRA has released to the public something that looks very much like an ordinary corporate quarterly report. High time, and let's hope the practice continues.

The report itself is full of positive news, and in particular shows the positive effect of video lottery terminals, which opened last November, on NYRA's financial health.

Despite a doubling of legal costs, largely attributable to the Pick Six takeout scandal that cost Charlie Hayward and General Counsel Pat Kehoe their jobs, NYRA's operating income for this year's 3rd quarter was $24.8 million, more than double the figure for last year's 3rd quarter, whiuch was the last before the arrival of VLT money. But even without the VLT funds, NYRA turned in an improved performance. Here are some of the specifics:

  • NYRA purses, fueled by the slots, increased from $37 million in last year's 3rd quarter to $55 million. That 48% increase means it's no longer impossible for a horse owner to break even -- just difficult. But it's a huge plus. And, although NYRA accounted for only 4% of US race days in the quarter, it offered 16% of all the purse money on offer nationally. In other words, racing your horse in New York is four times more lucrative than the US average. Wondering why every stall at Belmont and Aqueduct isn't filled.
  • Total handle, including on-track, OTB, account wagering, simulcastiung, etc. jumped to $839 million from last year's $737 million. That's a healthy 13.9% increase in handle, at a time when handle in the rest of the US is flat or declining.  The increase was fueled in part by a gain in average field size, from 8.08 horses per race last year to 8.47 this year. The 3rd quarter, of course, includes Saratoga and the Belmont Fall meet, the highlights of the season, son these numbers won't necessarily repeat in the Aqueduct quarters, but still, the gain in year-to-year comparable numbers is impressive. NYRA's handle represented almost 30% of all betting on US Thoroughbreds during the quarter, even though NYRA had only 4% of US race days. NYRA's is clearly the industry's premier racing product.
  • in the "bang for a buck" category, each dollar of purses offered at NYRA generated $15 of handle. That's nearly double the national average of $8 in handle for each dollar of purse money.
  • The Aqueduct VLTs, running at a "net win" of $388 per machine per day, generated $23.8 million for racing during the quarter -- $11.4 million for purses, $5.3 million for NYRA's operating budget, and $7.0 million for NYRA's capital budget.
  • On the capital-investment front, NYRA spent $3.5 million during the 3rd quarter. A good chunk of that went to concrete wash pads in the barn areas, to comply with environmental rules. Also, there was spending for some "patron area improvements" at all tracks (though on a recent visit to Aqueduct, I'm not sure that the closing of the Man 'O War Room and related areas, albeit for asbestos removal, and some new paint and chairs really merits the name "improvement"). Installing wi-fi at all three tracks is certainly useful, and the front-side improvements at Saratoga should yield results next year.
  • NYRA Rewards account wagering continued to gain slowly, rising 13% compared to last year. This is important because all the takeout from NYRA Rewards wagering goes back to NYRA and to the purse account, while takeout from other wagering platforms (e.g., Churchill's Twin Spires) has to be shared with them. I'd love to see even more aggressive promotion of NYRA Rewards in the future.
  • For those who still think the New York OTB system ihas anything to do with racing, the report is instructive. Total revenue to NYRA from all five surviving OTB systems in the state was a mere $8.4 million for the quarter, a mere 9% of NYRA's total revenue from wagering. In contrast, On-track (including NYRA Rewards) wagering accounted for almost 50%, and other simulcast-based revenue for 40%. The OTBs are of no value to racing; rather than let Catskill OTB into New York City, as a pending bill would do, it would be better to shut down the whole patronage-laden system and use NYRA as the platform for all horse-race betting in the state. As of September 30, the OTB system was $8.0 million in arrears to NYRA, the biggest chunk of that attributable to the twice-bankrupt Suffolk County OTB operation.
  • Of particular concern to horsemen is NYRA's "purse cushion." That's the amount of money that NYRA has earned from betting and is designated by state law for purses, but has not yet been paid. When NYRA went into bankruptcy some years ago, the "cushion" exceeded $20 million; in other words, NYRA had been taking money earmarked for purses and using it to pay salaries and turn on the lights. One result of the bankruptcy proceeding was an agreement with the horsemen, subsequently enacted into law, calling for a gradual reduction in the cushion. The 3rd quarter financial report shows that NYRA, to its credit, is way ahead of schedule. As of September 30th, the "cushion was down to $4.5 million. Kudos to NYRA for that.
  • The report also shows that NYRA has achieved a measure of stability, at least compared to the bad old bankruptcy days, in its cash position. This important measure of liquidity is leveling off around $20 million, probably still too low for a corporation of NYRA's size, but a great improvement on prior years.
So, while there's still much to be done on the operating side, NYRA, and especially its financial team, including Ellen McClain, Susanne Stover and Dave O'Rourke, deserve credit for turning things around financially. Yes, the VLTs were a necessary part of that turnaround, but the new financial report shows that someone is, in fact, minding the store.

And it's nice to see the information out there in public, where it belongs.

Friday, November 16, 2012

What Were They Thinking? High-Priced Mares at F-T and Keeneland

Now that the fall bloodstock sales are done (look here and here for full results), perhaps it’s time to ask just what was going on at the high end of the market.  While overall results were roughly comparable to last year, correcting for the high-end bump in 2011 from the Edward Evans and Palides dispersals, the top of this year’s market was stratospheric.

Horse of the Year Havre de Grace sold for an astonishing $10 million at the Fasig-Tipton boutique sale, to Mandy Pope of Whisper Hill Farm in Florida, who also bought Grade 1 winner Plum Pretty at Keeneland for $4.2 million. And those weren’t the only extravagant prices. Between the two sales, six mares sold for $4 million or more, and a total of 12 for more than $2 million, not counting the $2.2 million high bid for In Lingerie, who didn’t meet her reserve. 

By contrast, in 2011, only one mare, champion and potential horse of the year Royal Delta, sold for more than $4.2 million (she drew a top bid of $8.5 million, and looked every penny of it at this year’s Breeders Cup), and only five, not counting the Evans dispersal, for $2 million or more.

Multi-million-dollar deals for stallion prospects are nothing new, but a stallion can pump 200 or more babies out onto the market every year. For a mare, in contrast, there are no economies of scale. One year, one baby. And that's if all goes well, which it often doesn't.

So, what were the buyers of those $2 million-and-up mares this year thinking? Is there any way they can reasonably expect to make a profit on their purchases? How much would the mare’s owner have to sell her babies for to get a positive rate of return?

Let’s make some assumptions.  In the interest of simplifying reality, I set up a spreadsheet for the trophy-mare business. Just for the sake of putting some numbers on paper (well, on the screen anyway), here are the basic data:

The breeder insures the mare for a 4% annual premium, starting at the auction value and then reducing the insured value by 10% a year as the mare ages;

Taking care of the mare, including board, vet and other costs, is $25,000 a year;

The average stud fee paid is $75,000, payable when the foal stands and nurses (I may be too conservative here; some of these trophy-mare owners are going to go to the $100,000-plus stallions, but perhaps they’ll get a deal);

The mare has foals in three of every four years, for a total of 12 foals;

Care of the weanling is $10,000 a year;

Care of the yearling, up to the sales, is $10,000 a year;

Sale costs, including the consignor’s and auction company’s cut, sales prep, etc., are 10% of the sale price.

Any one of those assumptions is likely to be way off in any given year, but taken together they’re a reasonable representation of the US cost structure for a high-end mare. So, if that’s the framework, how much would the babies have to sell for in order for the breeder to get her money back?

Let’s start with Havre de Grace. At $10 million, her babies would have to average $1.5 million in the sales ring. And that would be a paltry internal rate of return of 2%. Ain’t gonna happen. So I hope that Mandy Pope didn’t make that purchase in the expectation of turning a profit. And it’s a good thing that the Internal Revenue Service asks all of us in the business to show a profit in only two years out of every seven to overcome the presumption that it’s a hobby. Thank you Sen. Mitch McConnell (R-Horse Racing).

What about those mares that were only in the $4 million-plus range, like Plum Pretty ($4.2 million) and Pure Clan ($4.5 million)? At Plum Pretty’s $4.2 million price tag, all the breeder has to do to break even is sell the yearlings for an average of just over $600,000. Piece of cake, right? And to get a reasonable return on investment, say an internal rate of return of 5%, all the breeder needs is an average yearling price of $900,000. So, municipal bonds are safer, more profitable and more reliable, but, damn, they sure don’t look as pretty as those Thoroughbreds racing across the paddock.

At $2 million or so, it might even be possible that the purchase of a top-level mare could be a sensible economic decision. At that price, the break-even number for average yearling sales prices is about $365,000, and an average of $600,000, which is break-even for Plum Pretty, would represent a healthy 8% rate of return for a $2 million mare.

So why did all those folks pay all that money: 12 mares for more than $2 million? One reason may be that the economics are different outside the US.  Of the 12 mares that sold for more than $2 million this year, only four were bought by Americans: Havre de Grace and Plum Pretty by Mandy Pope's Whisper Hill Farm; Cry and Catch me ($3.5 million) by Charlotte Weber’s Live Oak Plantation, and Grace Hall (($3.2 million) by agent Reynolds Bell for a New York client. The rest are headed to Japan, Ireland and elsewhere in Europe, although Goncalo Borges Torrealba of Brazil, who paid $4.5 million for Pure Clan, apparently will leave the mare in Kentucky, now that he’s entered into a partnership with major US stallion station Three Chimneys.

So the economics of breeding may be different elsewhere; certainly the high purses in Japan suggest that a cash-flow projection might look rosier there than in the US. But for the handful of Americans who paid those top prices, it can’t be about the money. It’s got to be about love of the game. And that’s not necessarily a bad thing.

Friday, September 7, 2012

Dutrow, NYRA and the Law

Back in November, 2010, investigators for the New York State Racing and Wagering Board found three syringes, loaded with the sedative/analgesic xylazine, in trainer Dick Dutrow desk at Dutrow's Aqueduct barn. The same month, one of Dutrow's horses, Fastus Cactus, tested positive for butorphanol, an opioid pain reliever often used together with xylazine. By that time, Dutrow had accumulated a variety of violations in at least nine states and at least 15 race tracks.

In the fullness of time (i.e., by October, 2011), the NYSRWB suspended Dutrow's training license for 10 years, but the suspension was stayed pending his appeal to the courts. On July 19, 2012, the Appellate Division of the New York Supreme Court unanimously rejected the appeal, but still Dutrow continues to train from his Aqueduct base while his lawyers pursue an all-but-certain defeat in the Court of Appeals, the state's highest court. Kentucky, meanwhile, rejected Dutrow's application for a trainer's license there in April of 2011, but unlike license suspensions, mere refusals to license are not honored by other states.

In the press and to the public, Dutrow is the bad boy of Thoroughbred racing, the guy who just can't bring himself to play by the rules. And the seemingly interminable legal process just adds to the frustration of those, including most owners and trainers, who desperately want to clean up racing's image. As we approach the second anniversary of Dutrow's dual violations, he continues near the top of the trainer standings, meet after meet.

So what could have been done? NYRA could, and should have denied Dutrow stalls, at a minimum, and possibly barred him from entering horses. That could have been done promptly, with adequate due-process protection for Dutrow, but without the years-long delay that the NYSRWB proceeding has involved. Here's how and why, but for the ineffectiveness (at best) of NYRA's legal department, it should have happened.

[Note: much of the legal background to what follows is contained in Bennett Liebman's invaluable article, "The Supreme Court and Exclusions by Racetracks," published in the Villanova Sports and Entertainment Law Journal in 2010. I've been unable to find a freely available copy online, but lawyers can access it through WestLaw and Lexis.]

As is generally known, race tracks have historically enjoyed a broad right to exclude persons from the track, as long as the grounds for exclusion weren't illegal. The principle was blessed by no less than Chief Justice Oliver Wendell Holmes in the 1913 US Supreme Court decision, Marrone v. Washington Jockey Club. Under Marrone, which still retains its legal vitality in many respects, most race track managements can do pretty much whatever they want in determining whether a patron (i.e., fan, bettor) can be barred from the track. In the case of licensees like trainers and jockeys, though, the track's options are somewhat limited -- though not so much that NYRA couldn't act to deny stalls to Dutrow.

The key New York precedent is Jacobson v. NYRA, a 1973 Court of Appeals case involving Howard "Buddy" Jacobson, father of current NYRA trainer David Jacobson. (For some background on Buddy Jacobson's colorful career, both on and off the track, click here. The Court of Appeals decision can be found here for those without WestLaw or Lexis.) Jacobson's license had been restored after a suspension, but NYRA nonetheless denied him stalls at the track. Jacobson argued that NYRA couldn't deprive him of his livelihood without due process, and the court agreed, holding both (1) that NYRA, because of its exclusive franchise, monopoly position and extensive regulation by the state, was essentially a "state actor," in other words, just the same as a government agency, and (2) that NYRA was therefore required to provide due process to anyone that it deprived of property interests.

But that decision also said that due process would be satisfied if NYRA offered a hearing, and commented that at such a hearing, "it would be [the trainer's] heavy burden to prove that the denial of stall space was not a reasonable discretionary business judgment but was actuated by reasons other than those relating to the best interests of racing generally."

The Jacobson decision is still good law, and was applied in the 1983 case of Larry Saumell, a jockey who somewhat carelessly let a "battery" slip to the ground near the starting gate, where the track vet picked it up and was promptly and literally shocked. To exclude a licensee, like a trainer or jockey, who has not (yet) been suspended by the NYSRWB, NYRA must indeed offer due process, including a hearing, with a reasonable time for the licensee to present evidence, but once that due process has been provided, there's no absolute barrier to excluding the bad actor.

Similar standards have been adopted by courts in California, Illinois and New Jersey. In addition, some cases have held that a race track cannot use exclusion as a means of defaming a licensee or tortiously interfering with a licensee's business. But, despite these limitations, it still seems entirely doable for a track to deny stalls to a perceived bad actor, so long as, in Ben Liebman's words, it can provide a "reasonable justification" for the exclusion.

To be sure, NYRA is now, even more than it was in 1973, an arm of the state, given the recent state takeover of the NYRA Board of Directors. So perhaps an exclusion by NYRA, even if based on reasonable justification and after a hearing, could be challenged in court. But still, NYRA should at least have tried.

Undoubtedly, NYRA's lawyers -- the same people who gave former CEO Charlie Hayward such bad advice about the 1% takeout overcharge and about whether NYRA could keep its budget secret from state officials -- feared that any attempt to bar Dutrow would land them in court, perhaps a place where they're not altogether comfortable. But if all of us are serious about cleaning up racing, this was the place to start. It's a pity they didn't make the effort.

Thursday, July 26, 2012

NYTHA Report on Lasix

Dear Readers:  in view of the escalating debate on whether to ban Lasix from US racing, I'm reprinting the submission on Lasix that the New York Thoroughbred Horsemen's Association submitted to the New York State Racing and Wagering Board in May of this year. I am a member of the Board of Directors of NYTHA and was the principal author of the report, with substantial contributions from NYTHA President Rick Violette and NYTHA staffers Jim Gallagher and Andi Belfiore. The report represents the official view of NYTHA. To my knowledge, although these comments are a public document, they';re not available through the NYSRWB website.

Footnotes are at the end of the report. It's not possible to post the 500 or so pages of exhibits here on my blog, but those interested in reviewing the actual studies cited should contact NYTHA.



Submitted by

New York Thoroughbred Horsemen’s Association

May 14, 2012


Introduction                                                                                      1

I.             The Case for Lasix                                                                2
A.   Lasix is not like other medications                                    3
B.    The vast majority of horses bleed; it’s inhumane
to withhold therapeutic medication                                   5
C.   Lasix does not mask the presence of other medications       5
D.   Horse racing already has the strictest medication rules of
any sport                                                                       6
E.    The use of Lasix does not have a significant effect
on the marketability of North American-bred horses           8

II.           Cost-Benefit Analysis of Lasix Use                                        10
A.   The annual cost of Lasix usage                                        10
B.    The costs of alternatives to Lasix                                    11
C.   The impact of racing without Lasix on horses and on
fan perception.                                                             13

III.         How could a Lasix ban be introduced?                                  14
A.   Two-year-olds only                                                        15
B.    Beginning with foals of a specified year                           15         
C.   Stakes races                                                                 16
D.   Reduction in allowable dosage levels                               16
E.    “Grandfathering” in horses currently racing on Lasix          17
F.    Alternatives for proven bleeders                                     17

IV.         The costs of a Lasix ban                                                      18
V.           Lasix and two-year-olds: the prophylactic effect of
early Lasix administration.                                                  18

VI.         Racing fans’ perceptions of Lasix and other medication use     18

VII.       Likely trainer reaction to a Lasix ban                                    19
A.   Medication alternatives                                                  19
B.    Non-medication alternatives; withholding water and
nutrition                                                                       19
C.   Ease of detection for Lasix alternatives                            20

VIII.     Beyond Lasix: recommendations on overall medication policy 20
A.   NYTHA’s position on recommended changes                     20
B.    Owner and breeder responsibility for violations                22
C.   Mandatory recovery periods                                           22
D.   Use of painkillers during training                                     23

Conclusion                                                                                       23


On April 30, 2012, the New York State Racing and Wagering Board (the “Board”) requested comments regarding the use of furosemide (marketed for equine use under the trade name Salix, but generally referred to in the industry as “Lasix”) for racehorses and on equine medication policy in general.[1] Specifically, the Board issued an advance notice of proposed rulemaking regarding Lasix and seeking comment on seven specific questions about Lasix in particular and equine medication policy in general.[2] Briefly, the Board’s questions address the following issues:

1.    Cost-benefit analysis of Lasix use;
2.    Possibilities for introducing a ban on Lasix without causing major hardship;
3.    Costs of a ban or limitation on Lasix, and who should bear those costs;
4.    Prophylactic effects of Lasix use;
5.    Impact of Lasix use on racing fan support;
6.    Possible trainer reaction to a Lasix ban and likely substitutes for Lasix; and
7.    Other medication policy changes that might be implemented.

The New York Thoroughbred Horsemen’s Association (“NYTHA”) is the officially designated representative of Thoroughbred owners and trainers racing at tracks operated by the New York Racing Association (“NYRA”). This submission represents the official view of the horsemen and women who race at Aqueduct, Belmont and Saratoga and who provide the product on which New York’s reputation as the premier racing jurisdiction in the United States is based.

We urge the Board to consider the views of the members of the industry with the utmost seriousness, and to take into account the wealth of scientific evidence attached to this submission, documenting the therapeutic benefits of Lasix use, the significant negative impact of a ban on Lasix, and the other medication policies that the Board could adopt to improve racing’s image as well as the fairness of racing, while at the same time attending to the welfare of the horse.

Not all medications are the same. The call for “drug-free” racing misses the point. What we should be seeking is racing that is safe, for both horses and riders, that is fair, and in which no one has the opportunity to gain an advantage through the use of illegal, performance-enhancing medications. By all means, the Board should go after the cheaters, but it should not harm the horse in the process.

In fact, NYTHA itself has put forward a plan for further curtailing the use of true performance-enhancing drugs on the racetrack. In our letter of April 13th, 2012,[3] addressed to NYSRWB Chairman Sabini, we advocated three new rules limiting the use of painkillers, clenbuterol and corticosteroids. We also advocated codifying the existing practices of having Lasix administered on raceday only by veterinarians employed by the racetrack or the State and continuing to ban all “adjunct” bleeder medications, permitting only Lasix. These proposals address real issues to protect the health and welfare of the horse and to reduce the use of artificial performance-enhancing medications.

The Case for Lasix

Race horses bleed. We’ve known this since at least the early 18th century, when a brother of the foundation stallion Flying Childers was given the nickname “Bleeding Childers” because of his propensity to bleed from the nose after exercise.[4] And they bleed without regard to geography; bleeding is not limited to North America.[5] Without Lasix, some amount of bleeding occurs in a minimum of nearly four out of five horses.[6] Other studies put the percentage of horses showing evidence of bleeding after exercise at 90% or more.[7] Some investigators put the percentage of horses that will show some evidence of EIPH over their careers at virtually 100%.[8] With Lasix, the percentage of horses showing even slight bleeding drops to 57%, and the severity of bleeding decreases in virtually all cases, reducing the likelihood that bleeding will prevent a horse from performing to the best of its natural ability and that severe bleeding will prove fatal to the horse.[9]

More specifically, bleeding, or exercise-induced pulmonary hemorrhage (“EIPH”), interferes with oxygen exchange between a horse’s respiratory system and its bloodstream. Decreased oxygenation of the horse’s blood can result in decreased oxygen supply to various organs and contribute to fatigue, organ damage, metabolic disturbances and, ultimately, breakdowns on the racetrack, when fatigued muscles can no longer cushion and absorb the shock that is increasingly placed on the tendons, ligaments and musculo-skeletal system of the horse.[10]

It’s not just Thoroughbred racehorses. Bleeding affects quarter horses, standardbreds, barrel racers, in short, any horse that is asked for short-term extreme performance. A Thoroughbred, especially when racing more than six furlongs, goes into “oxygen debt” as the race progresses. In these circumstances, even minor pulmonary bleeding can substantially interfere with a horse’s ability to run its race.

A.   Lasix is not like other medications

Lasix works. According to the definitive South African Study,[11] horses that were treated with a placebo (saline solution) were 7 to 11 times more likely to exhibit Grade 2, 3 or 4 EIPH than horses treated with Lasix. That represents a very significant increase in the likelihood that, without Lasix, a horse will not be able to perform up to its natural ability. In New York, episodes of external bleeding have declined by more than 76% since Lasix was introduced in 1995.

Lasix does not artificially improve a horse’s performance above what the horse could naturally accomplish. Rather, the use of Lasix permits a horse to perform to the best of its natural ability – not to perform above that ability. “No amount of Lasix can make a horse run faster than its natural ability,” according to Dr. Scott Palmer, speaking at the “Lasix Summit” at Belmont Park in June, 2011.

The use of Lasix actually benefits a horse’s health and its improves potential for a longer career on the racetrack. As detailed below, the effect of EIPH is almost certainly cumulative. Each episode of bleeding both creates scar tissue, reducing the horse’s oxygen-carrying ability, and increases the risk of future bleeding. With each rupture of the capillaries in a horse’s lungs, scar tissue forms, rendering the horse more exercise intolerant and more and more likely to bleed with each successive exertion. Thus, a horse treated with Lasix from the beginning of its career will necessarily have a greater chance of running more races than either a horse that is never treated with Lasix or one that is not treated with Lasix until it has shown clinical signs of bleeding.[12]

The question of whether a particular medication is therapeutic (i.e., treats a physical condition) or performance-enhancing (i.e., makes a horse run faster or further) is misleading. The answer is almost always – both. Science has shown that horses suffering Grade 2 EIPH can have their performance impaired by 2.3 to 6.1 lengths compared to those running without bleeding. Thus, if the use of Lasix reduces the level of EIPH from Grade 2 to Grade 1, as the South African study shows it can, the horse is likely to run several lengths faster than when it raced and bled without Lasix. It is clear that the use of Lasix is performance-enabling, not performance enhancing. Horses don’t run faster because of Lasix; they run slower due to bleeding

Except for narcotics and other substances possessing no therapeutic value whatsoever, the dichotomy of “therapeutic” vs. “performance-enhancing” is a false one. Racing regulators, relying on the best available scientific findings and advice, must find an appropriate balance between preserving a horse’s health and facilitating that horse’s ability to safely compete. Generally, in North America, that balance has been found by permitting raceday Lasix and banning raceday painkillers. We believe that is the right balance.

Lasix does improve the performance of horses; it alleviates EIPH, which then allows the horse to run to its full potential.

B.   The vast majority of horses bleed; it’s inhumane  to withhold therapeutic medication.

As indicated above, the vast majority of Thoroughbred racehorses bleed as a result of exercise at or near their physical limits. When a horse bleeds to even a moderate degree, well short of epistaxis or visible bleeding from the nose, it will suffer internal distress, struggling to get sufficient oxygen. In extreme cases, horses have been shown to die from EIPH[13] – deaths that can be averted through the use of Lasix. When a horse dies on the track, the incident endangers its jockey as well as other horses and riders in the race; with Lasix, that danger is effectively eliminated. In the “gold-standard” Jockey Club-sponsored South African study cited earlier,[14] not a single horse that received Lasix before racing showed visible evidence of Stage 3 or 4 EIPH, the levels that are generally considered to represent immediate danger to the horse. In New York, since raceday Lasix use was approved in 1995, the incidence of epistaxis, or visible bleeding, has declined by 76%.

In the light of the proven discomfort to the horse and the proven link between extreme EIPH and equine mortality, the use of Lasix represents a compassionate response to the needs of most horses. To withhold a proven therapeutic remedy could well be seen as cruelty to animals. The leading North American organization of equine veterinarians, the American Association of Equine Practitioners (“AAEP”) fully accepts this reasoning, and has adopted an official position supporting the use of raceday Lasix.

C.   Lasix does not mask the presence of other medications

In the past, critics of Lasix use have argued that Lasix hides or masks the presence of other medications in a horse’s system, thereby compromising post-race drug testing. While this may have been true at the time that Lasix use was first introduced in North American racing in the 1980s, such is not the case today. Leading veterinary testing experts now agree that the sensitivity of modern testing methods has increased enormously. As Dr. Thomas Tobin, one of America’s most distinguished pharmacologists and toxicologists, stated in a letter to NYTHA President Richard Violette, “Lasix does not in any way interfere with plasma concentrations of drugs, and as such does not in any way interfere with the testing process in blood.” Moreover, even in those jurisdictions that test only urine, not blood or plasma, Dr. Tobin notes that “under the Lasix [testing] protocols in place today, there is no significant interference whatsoever with urine testing for drugs.”[15]

With the strict guidelines for administration of Lasix that are now in place – Lasix is administered only by NYRA veterinarians and not closer than four hours to race time – there is no possibility that Lasix will “mask” or interfere with testing for other substances.

D.   Horse racing already has the strictest medication rules of any sport

In the major racing jurisdictions like New York, equine testing labs analyze samples from the racetrack for the presence of more than 900 separate chemical compounds. With advanced technology, such as the spectrometer that NYTHA paid for and donated to the state’s official testing lab, run by Dr. George Maylin, toxicologists can now identify virtually all known performance-enhancing drugs.  As Dr. Tobin noted, there is no interference with such drug testing as a result of Lasix use. The challenge for equine toxicologists today is not to detect other medications despite the presence of Lasix; that’s already been accomplished. Rather, the challenge is to develop tests for emerging new drugs, such as synthetic EPO, gene therapy and the like. To focus on Lasix as a testing problem would be to ignore the very real issues in contemporary drug use. Like the Board, NYTHA wants to eliminate the cheaters in racing. But the way to do that has nothing whatsoever to do with Lasix. Rather, as noted below, it turns on developing scientifically valid testing protocols, adapting regulations to the actual science, and then adopting firm, consistent enforcement guidelines.

A recent report by the Association of Racing Commissioners International (RCI)[16] makes the point that Thoroughbred racing in North America is already subject to the most aggressive drug testing program of ANY professional sport, testing for more substances, with greater sensitivity, than baseball, football, or even the often-praised World Anti-Doping Agency standards for international athletics. Yes, Lasix is not permitted in many other sports, but those sports are contested by humans, not horses. The difference in physiology thoroughly justifies a difference in medication classification.[17]

Compared to New York, which tests for over 900 different substances, post-race drug testing in Europe and elsewhere is rudimentary. The European Scientific Committee’s list of prohibited raceday medications and detection times[18] includes barely two dozen drugs, compared to the 900-plus that New York tests for. To claim that European racing is “drug-free” misstates the reality, which is that European and other international racing, with a few exceptions, is largely test-free.
According to the RCI, "In 2010, 324,215 biological samples were taken and tested. Lab results show that 99.5% of those samples were found to contain no foreign or prohibited substance. In other words, only 1/2 of 1% of samples tested was found to have contained a substance in violation of the rules. An examination of racing commission data also reveals that, in those relatively rare instances when a violation of a medication rule does occur, most were associated with a legal substance administered in the normal course of equine care by a licensed veterinarian and cannot be characterized as 'horse doping' or as indicative of a 'drugging.' Those substances that could legitimately be construed as a 'horse doping' (RCI Classification Categories I and II) represent just 47 instances out of 324,215 samples tested in 2010. That represents 0.015% of all samples tested. The use of terms like 'rampant,' 'endemic,' 'widespread,' 'chemical warfare,' or 'racing's drug addiction' do the sport and the tens of thousands of families who rely on it a great disservice."
"Horse racing's anti-doping program tests for more substances at deeper levels than any other professional sport. These facts are inexplicably ignored by many who wish to opine on this matter and have been successful in drawing attention to their assertions by spinning negative headlines about the sport. The perception created is not consistent with the facts."[19]
The US racing industry as a whole spends more on drug testing -- $35 million annually – than the entire worldwide budget of WADA ($26 million). And these efforts have paid off. Despite ever more sensitive testing, medication violations declined by 20% from 2001 to 2010. Racing regulators and test laboratories are doing an ever better job of catching the cheaters. Forcing the labs to focus on Lasix would represent a step backward in racing’s real war on drugs.

E.   The use of Lasix Does Not have a significant effect on the marketability of North American-bred horses

The Board’s Notice of Advance Rulemaking included the following statement;

Some owners and breeders oppose race day Lasix. Heredity is a factor in EIPH. Lasix keeps horses from being culled from the breeding pool. A single stallion can have a large impact on the breeding pool. The market for race horses is becoming more international than ever. With increasing financial rewards for New York State breeders as a result of VLTs at Aqueduct, the marketability of New York horses is important, and there is worry that American horses are losing their standing and value in the international market.

Contrary to the implications of this statement, North American-bred horses continue to do well. Prices at the recently completed “select” sales of two-year-olds in training were up substantially this year, returning to peaks not seen since the collapse of international financial markets in 2008. While it is true that the quality of stallions standing overseas has improved in the past three decades, that improvement is largely the result of sustained buying of North American-bred stallion prospects by deep-pocketed foreign buyers such as the Coolmore group in Ireland, the royal family of Dubai, and buyers associated with the Japan Racing Association. After 30 years of raiding the American market, these buyers have understandably improved their own stallions and breeding operations. Nonetheless, they continue to buy at the North American sales and, to an increasing extent, to race their horses in North America.

One would expect that, if foreign buyers were shunning North American sales because of the Lasix issue, the effects would be seen most clearly at the annual sales of Thoroughbred breeding stock. But, in fact, foreign buyers continue to be the mainstays of those sales. Lasix has been permitted for raceday use everywhere in North America since 1995, but US exports of Thoroughbreds continue to rise well into the 21st century, right up to the present, with a decline in 2008 that was clearly due to the global economic crisis, not to the presence of Lasix.

Thoroughbred exports to Europe increased 54.3% from 2003 to 2007. While overall volume declined in 2008 and thereafter for a time (early results of 2012 sales indicate the market is returning to its pre-crash levels), the leading sales in the US continue to draw foreign buyers. In 2008, five of the top 10 buyers at the premier Keeneland November bloodstock sale were from outside the US: one from Dubai, two from Japan and two from Saudi Arabia. In 2009, once again, five of the top 10 buyers at the sale were foreigners: one from Ireland, two from France, and two from Australia. And in 2010, again, five of the top 10 buyers were foreign: two from Japan, two from Australia and one from England. At the Keeneland November sale in 2011, two French buyers, two Japanese, one Australian and one Irish buyer all spent more than $1 million for US bloodstock. The continued presence of foreign buyers at the top end of the US bloodstock market, long after US breeding has come to be based almost entirely on horses that raced on Lasix, offers powerful evidence that Lasix use is not an impediment to the commercial breeding industry in North America.

This conclusion is even stronger in the case of breeders based in New York. These breeders have never had a significant presence in the international marketplace. For a variety of reasons, including the incentives provided to race New York-breds in New York, New York-breds appeal primarily to New York and other East Coast horsemen. Also, there are few, if any, proven turf sires standing in New York, and European and Japanese buyers are primarily interested in turf racing; hence, few New York stallions, Lasix or no Lasix, would draw international attention.

Europeans have not, in fact, been supporting their own breeding industry since the start of the global economic crisis. The foal crop in England and Ireland dropped by almost 40% between 2007 and 2010, from a peak of 18,472 in 2007 to 12,253 in 2010, with a further drop to 11,300 estimated for 2011. In a presentation at the Tattersall’s sales company in June, 2011, Weatherby’s executive director Paul Greeves stated that “the speed and quantity of the reduction in numbers [of English and Irish foal crops] is unprecedented in modern times.” He added that there had not yet been a parallel drop in the number of broodmares, but that breeders were, for the time being, choosing not to breed their mares, as no market existed for the foals.

Thus, comments that European buyers are shunning North American bloodstock because of Lasix use in North America miss the mark. The declines in European foals crops, evidently, were due to fundamental economic conditions and had nothing to do with the use of Lasix in some jurisdictions. If Lasix had been a factor, one would have expected that European breeders and owners would have relied more on their own bloodstock, rather than, as they did, continuing their historic ratios of North American to home-grown horses.

Moreover, there is no scientific evidence to support the claim that susceptibility to EIPH is a condition that is being bred into horses, or that horses that have run on Lasix shouldn’t be allowed to go to the breeding shed.[20]

II. Cost-Benefit Analysis of Lasix Use

A.   The Annual Cost of Lasix

Pre-race Lasix administration at NYRA tracks is performed by NYRA veterinarians. NYRA charges the horse owner $20 per injection. In addition, most trainers use Lasix before a scheduled timed workout, or “breeze.” Lasix for breezes is generally administered by private-practice veterinarians, who bill the owner or trainer directly, usually at $25 per dose. Horses will generally breeze about once a week while in training at the track, skipping a week or two after a race. Assume that the average horse starts seven times a year, and that it breezes another 14 times a year. That makes the total cost of Lasix administration approximately $500 per year per horse. In contrast, the total cost of keeping a horse in training at NYRA tracks, even allowing for some time off during the year, is on the order of $35,000-$40,000 per year.[21] To earn even a modest profit on the annual training cost, once one takes into account the trainer’s and jockey’s fees and other costs of racing,[22] a horse needs to earn about $60,000 per year in gross purses.[23]

Against this overall cost of ownership, the actual cost of Lasix is insignificant. $500 per year represents from 1.2%-1.4% of total training costs, much less than the costs of a farrier (perhaps $1,400 per year, and much more if a horse needs glue-ons or other special shoes) or of the non-Lasix charges of veterinarians, which are conservatively estimated at upwards of $3,000 per year and can be much, much higher.[24] The annual cost of Lasix is less, in fact, than the cost of transporting a horse from Belmont to Saratoga and back once a year for the Saratoga meet.

The fact that Lasix is so universally favored by trainers, many of whom are part- or full owners of their horses, is in itself convincing evidence that Lasix is a cost-effective solution to the bleeding issue.

B.   The Cost of Alternatives to Lasix

If Lasix is not permitted on raceday, horsemen would have only three options: (1) find other medications or training techniques that help prevent EIPH; (2) retire those horses that prove unable to compete because of EIPH – estimated at anywhere from 2-5% of all horses; and (3) give horses additional time off between races. None of these are adequate solutions, and all of them impose additional costs on owners, trainers, racetracks and the state, whose income from pari-mutuel wagering would decline as fewer races are run with fewer horses.

First, the training options. At present, some jurisdictions permit “adjunct” medication, such as tranexamic acid or aminocaproic acid, to be administered in addition to Lasix on raceday. If Lasix were banned, presumably such adjunct medications would also be banned. In any event, even if trainers were allowed to use adjunct medications, none of these have proved nearly as effective as Lasix in preventing and reducing the severity of EIPH, nor have a variety of homeopathic remedies that have been used in the past. In contrast to Lasix, none of these homeopathic or so-called “natural” treatments have been proven effective in any scientific test. That leaves these options: First, a trainer could withhold water, and perhaps food, from a horse for 24 hours or more before a race. Before Lasix use was permitted, many trainers did just that, with the result that their horses arrived in the paddock looking “drawn up.” Surely everyone would agree that withholding water and food is an inhumane practice, but, denied recourse to a safe and effective therapeutic medication, trainers might feel they had no choice. Alternatively,  a small minority of trainers would search for some substance that, while banned for use on raceday, might somehow go undetected in post-race samples. In contrast to the proven effectiveness of Lasix, any such unproven substance is certain to be less effective, more dangerous to horses, and more problematic for post-race testing.[25] And, because such substances would be used only by a few cheaters, the relatively level playing field that now characterizes racing at major-league tracks such as NYRA’s would be tilted in favor of the rule breakers.

It is impossible to estimate the costs of these training alternatives. Since we don’t know what alternative medications trainers would turn to, we cannot put a price on them. But they would cost something, and, given the low cost of Lasix use, it is unlikely that the cost of Lasix alternatives could be significantly less than the $500 or so that it now costs to use Lasix. And, because trainers would be unable to use the “public option” of having Lasix administered by NYRA veterinarians on raceday, it is quite possible that higher costs for owners, resulting from greater use of private vets, could be incurred.

In addition, trainers would undoubtedly need to use post-race therapy, including antibiotics and hyperbaric chambers, for horses that bled during races. These therapies would involve significant, if unmeasurable, costs.

The second cost of banning Lasix would be the forced retirement of a certain number of race horses who could not perform effectively without the medication. No one knows how many they might be, or which horses they might be; the forced retirees could include $7,500 claimers or Grade I-winning stakes stars.  In Hong Kong, where Lasix use is not permitted, from 1-2% of horses are retired annually because of bleeds,[26] but Hong Kong treats as bleeders only those horses that present with epitaxis (visible bleeding from the nose) or with serious (Stage 3 and 4) tracheal bleeding. And, in fact, the number of horses reported as bleeding in Hong Kong, even with this limited definition, is far higher than in New York: 6.4% of all starters, compared to 1% in New York, with Lasix use. Hong Kong and Singapore, both non-Lasix jurisdictions, report the highest rates of bleeding of any major racing venues. Remember that, in New York, there has been a 76% reduction in epistaxis (horses bleeding through the nose) since raceday administration of Lasix was first permitted.

Third, horsemen would be forced to drop their horses that bleed to lower competitive levels (e.g., from allowances to claiming races) so that those horses could be competitive while they were bleeding.

C.   The impact of racing without Lasix on horses and on fan perception

When horses race without Lasix, they bleed more. When horses bleed, they are more likely to bleed severely, to the point where they bleed visibly and, on too many occasions, die on the racetrack from bleeding.[27] As Hall of Fame jockey Jerry Bailey noted on this year’s Kentucky Derby telecast, “I’ve never had a horse break down in a race because of Lasix.” The impact on the horse of racing is simple: more horses will bleed, they will bleed more severely, and some of them will die.

The impact on fan perception is hardly more complicated. Most surveys of racing fans’ view of Lasix are marked by seriously flawed methodology. For example, a McKinsey & Co. Thoroughbred racing consumer survey in 2011,[28] commissioned by The Jockey Club, found that only 36% of racing fans thought that “medication is one of the top three issues facing racing,” and that 38% “would bet more if they knew horses were not being given drugs.” Similarly, in a 2009 survey by the Horseplayers Association of North America (“HANA”), only 59% of those surveyed reported that they were “extremely concerned” with the use of illegal medication and drugs.” And in a 2008 survey by the National Thoroughbred Racing Association (“NTRA”), the top three concerns of racing fans were reported as being (1) the health and safety of horses; (2) performance-enhancing medications; and (3) therapeutic overages.

But none of these surveys, nor any others that have been reported in the press, distinguish between illegal medications, or illegal levels of permitted medications, on the one hand, and legal dosages of Lasix on the other. When fans respond to such surveys, explicitly in the case of the McKinsey Report that referred only to illegal drugs (i.e., not Lasix), and implicitly in the case of other studies that just referred to “drugs” without specifying which ones, they are simply not being asked to take a position on Lasix. Thus, the fan surveys relied on by opponents of Lasix prove -- absolutely nothing.

The McKinsey & Co. survey asked questions about drug use in a number of different ways,[29] yet none of its questions differentiated between Lasix and other medications. Without such differentiation, its conclusions are essentially meaningless in the context of a discussion of Lasix alone.

Racing fans and bettors do take drug use seriously. Dedicated handicappers don’t want illegal drug use to interfere with their handicapping. They want the race to be run fairly and transparently. Lasix is not a problem for them; its use is regulated through independent third-party administration of the medication, and the fact that it is being used is available in the racing program and all online handicapping sites. Of far more concern to the bettors is the hidden use of illegal performance enhancers. Serious and consistent enforcement of medication rules already in effect, plus the changes suggested in NYTHA’s five-point plan,[30] would allay the concerns of both serious bettors and casual racing fans. Lasix has nothing to do with their perceptions.

III. How could a Lasix ban be introduced?

The Board’s Notice of Proposed Rulemaking asked for comment on how a ban on Lasix might be introduced, offering a variety of alternatives.[31] NYTHA believes that any ban on Lasix would be detrimental to horses and to the sport of Thoroughbred racing. Nonetheless, we offer the following comments on the various options offered by the Board.

A.   Two-year-olds only

The effect of EIPH is cumulative; the more times a horse bleeds, the more likely it is to suffer pulmonary scarring and to bleed again. It has been conclusively proven that the incidence of EIPH increases with age.[32] The reason appears to be that pathologic changes resulting from EIPH start with mild symptoms at the very back of the lung, then gradually become more severe and affect more of the lung with each new episode.[33]

While some foreign jurisdictions claim that their horses “are not bleeders,” that claim is based on a very different definition of bleeding than the one used in the South African study. A definition that classifies a horse as a bleeder only when it bleeds through the nose (epistaxis) will always result in a very small number of horses being classified as bleeders. This is archaic and barbaric: waiting for a horse to bleed visibly, in crisis, is irresponsible.

Banning Lasix for two-year-olds only would merely expose those horses to additional bleeding episodes, thus increasing the likelihood, and the severity, of bleeding in future years. There seems to be no logic behind a ban on Lasix only for a horse’s two-year-old season; the likely effect would be that fewer horses would race at age two. Since two-year-old racing is a major part of NYRA’s program, especially with the two-year-old graded stakes at the Saratoga meet, such a ban would negatively impact both the quality and the revenue-generating ability of NYRA’s racing program.

B.   Beginning with foals of a specified year

One of the most common proposals for restricting Lasix use involves a rolling ban, starting with foals of a given year (e.g., two-year-olds of 2013). In each successive year, an additional class of foals would be covered by the ban.  Such a proposal has two major problems.

First, for races that are designated as “three-year-old and up” or “four-year-old and up,” the proposal would eventually result in younger horses running without Lasix against older horses running with Lasix.  It is still common to see nine-year-olds running, and running well, at NYRA tracks, so it would be many years before all races were, in fact, Lasix-free. In the interim, one can be certain that trainers would be reluctant to run their non-Lasix horses against older horses. Again, this would reduce field size and, consequently, revenue to the state, NYRA and horsemen.

Second, the rolling ban only deals with Lasix, and not with the reality of EIPH. The horses will not magically stop bleeding because we stop giving them Lasix; the will bleed more.

C.   Stakes Races
A Lasix ban applicable only to stakes races would require trainers to adapt their practices if they merely thought a horse might qualify for stakes company. Currently, if you take a horse off Lasix, you can't run back on Lasix for a minimum of 30 days. Trainers often enter stakes-level horses in allowance races at some point in the season; should they run in the allowance race with or without Lasix? Should they risk letting the horse bleed?
How would horseplayers react to a horse that was running on Lasix one month and off Lasix the next? This certainly would create more guesswork and frustration for a fan base already shrinking due to competition for the gambling dollar.
Because all trainers have the option of using raceday Lasix, it creates a level playing field that will no longer exist if a ban is enacted. As its use and administration is strictly regulated by the NYSRWB, it ensures the welfare of the animal, and the integrity of the race for all competitors and for the betting public. This is important in every race, especially the graded events that are so vital to the breeding industry.

D.   Reduction in Allowable Dosage Studies

The default Lasix dosage in New York is 5 cc, although trainers may specify the dosage in a range going up to a maximum of 10 cc. Generally, the ideal dosage for fillies tends to be somewhat lower than for males. In the South African Study, all horses receiving Lasix were given a dosage of 10 cc.

If Lasix is allowed at all, there would seem to be no point in reducing existing dosage levels. Trainers are the best judges of which dosage level works for their horse; too much will, as a result of Lasix’s diuretic effect, remove too much water from the horse’s system, thus impairing its racing ability. Too little will merely be ineffective in preventing EIPH. This is a case where a little Lasix may be more dangerous than just the right amount.

E.    “Grandfathering” in horses currently racing on Lasix

This proposal is essentially the same as the rolling ban, beginning with a specific foal crop, discussed above. The only difference is that a few unraced two- and three-year-olds would be unable to use Lasix, even though their age peers that have already raced would be allowed to continue on Lasix. For the same reasons discussed above with respect to the rolling ban, this is an impractical idea.

F.    Alternatives for proven bleeders

Since virtually all horses bleed, the meaning of “proven bleeders” needs to be defined before one can discuss alternatives for them. In many jurisdictions that impose mandatory rest periods or that bar horses that “bleed,” the term essentially means horses that display epistaxis, or visible bleeding from the nose. If that definition is applied, then anywhere from 1% to 6% (the latter figure reported in Lasix-free Hong Kong) are classified as bleeders. If Lasix is used, then there are virtually no “bleeders” in that sense.[34]

In the absence of a clear classification, then discussing alternatives for “proven bleeders” makes little sense.

IV.                The costs of a Lasix ban

This topic is fully discussed above, at pp. 11-13. To summarize, there would be substantial additional costs, both in the health of the horse and in dollars spent by owners and trainers, all of which would be unnecessary if raceday Lasix use is permitted to continue.

Additionally, there would be at least a short- and medium-term reduction in field size. Because betting handle is directly proportional to field size, any reduction in field size reduces betting volume, which in turn reduces the amounts received by Thoroughbred owners in purses, by NYRA for its operations, and by the State in the form of taxes.

The most significant cost is the devaluation of the horse. We already have enough physical issues with Thoroughbreds; they are very fragile. To add another issue, bleeding, to the list when we have a scientifically proven remedy does not make sense and will drive owners away in droves.

V.           Lasix and two-year-olds: the prophylactic effect of
early Lasix administration

As stated earlier, the effect of EIPH is cumulative; the more times a horse bleeds, the more likely it is to suffer pulmonary scarring and to bleed again. The incidence of EIPH increases with age. The reason appears to be that pathologic changes resulting from EIPH start with mild symptoms at the very back of the lung, then gradually become more severe and affect more of the lung with each new episode.

The faster a horse runs, relative to its natural ability, the more likely it is to suffer the effects of EIPH. Thus, introducing Lasix from the beginning of a horse’s career is the most effective way to minimize the incidence and severity of EIPH over the horse’s career.

VI.        Racing fans’ perceptions of Lasix and other medication use

This topic is also fully discussed above, at pp. 13-14. Many fans are, quite rightly, concerned with illegal drug use in racing. But no study has shown that fans or bettors are concerned with Lasix per se. What we can be sure of, however, is that fans will react negatively to the sight of a horse lying on the track bleeding to death. And that’s a sight that can be easily avoided by allowing the continued use of raceday Lasix.

VII.      Likely trainer reaction to a Lasix ban

Most trainers play by the rules. As the RCI report on medication violations[35] indicates, the overwhelming majority of horses that are tested are clean. As long as the rules are clear and precise, the Board can expect that almost all trainers will try to comply with them.

A.   Medication alternatives

In most jurisdictions where Lasix is not permitted on raceday, trainers may still use the medication in between races. Where Lasix is not permitted on raceday, trainers still use a variety of other medications. To date, none of these alternative medications have proven nearly as effective at reasonable cost as Lasix. If a better alternative were available, one can be sure that trainers would be delighted to adopt it.

Specifically, the most likely alternatives would be the various “adjunct” medications that are already prohibited in New York, such as tranexamic acid,
or the already illegal “Kentucky Red” (Carbazochrome) that was widely used before Lasix was permitted (and is still used in Dubai, among other jurisdictions).[36]

A ban on raceday Lasix would undoubtedly trigger a rush to find and use substances that have some effect of EIPH, but that are not yet the subject of equine toxicology testing. Such medications would almost certainly be less effective than Lasix while at the same time imposing additional burdens on the testing labs to develop new test protocols, thus diverting funds and resources that could be better used to improve the testing of substances that do have performance-enhancing effects, such as gene therapy and synthetic EPO.

B.   Non-medication alternatives; withholding water and

Prior to the legalization of Lasix, many trainers tried to reduce the incidence of EIPH by withholding water, and sometimes food, from horses scheduled to race in the next 24 to 48 hours. Apart from the obvious cruelty of such an approach, withholding food and water is simply less effective than Lasix and usually results in a horse’s being less able to perform up to the limits of its natural ability.

Another possible approach is the use of external nasal strips to improve breathing. Scientific evidence of the impact of such treatment on EIPH is lacking, and the strips are, at the moment, prohibited in New York. A ban on Lasix would undoubtedly increase pressure for the use of nasal strips in racing.

C.   Ease of detection for Lasix alternatives

As noted earlier, the sensitivity of modern equine toxicology testing is extremely high. Known medications, such as the “adjunct” medications, are already tested for. The testing problem that would result from a Lasix ban concerns the unknown medications – new formulations for which it would be necessary to create new tests. Where an existing medication – Lasix – is safely administered by track or state veterinarians and can be easily monitored, it seems counterproductive to invite a new “arms race” that will require more spending and more staff to police.

VIII.   Beyond Lasix: recommendations on overall medication policy

A.   NYTHA’s position on recommended changes

While NYTHA strongly believes that raceday Lasix use should continue to be permitted, we do urge the Board to take additional steps to further solidify New York’s position as the most drug-free jurisdiction in the US.  As outlined in our letter of April 13th to NYSRWB Chairman John Sabini,[37] we advocate three additional rules, in addition to continuing the current ban on “adjunct” raceday medication and continuing the current NYRA policy of having third-party administration, by either the racetrack or the State, of raceday Lasix.

The three new rules that we recommend are:

1.    Replacing the current withdrawal-time rule for Bute with a 2 mcg threshold testing level;
2.    Instituting a 15-day withdrawal time for Depo-Medrol (methylprednisolone acetate) and a four-day withdrawal time for all other corticosteroids; and
3.    Instituting a seven-day withdrawal time for clenbuterol.

Bute’s anti-inflammatory effect can mask the presence of injury that can lead to musculo-skeletal failure and catastrophic, often fatal, breakdowns. Below certain concentrations, however, Bute simply will not be effective in masking pain. The proposed 2 mcg threshold level is well below the level that would materially affect a horse’s performance and well within current testing capabilities.

Depo-Medrol is a particularly potent and long-lasting corticosteroid, generally administered by injection as an anti-inflammatory to address musculoskeletal conditions, including the pain and lameness associated with acute localized arthritic conditions and general arthritis. It has also been used to treat equine rheumatoid arthritis, osteoarthritis, periostitis, synovitis, tenosynovitis, tendinitis and bursitis. Other corticosteroids, both topical and injectable, are often used to treat arthritis-type conditions and a wide variety of other conditions.

Because corticosteroids are treatments of existing medical conditions, rather than preventatives like Lasix, NYTHA opposes their use on raceday. Generally, a four-day withdrawal period should be adequate to ensure removal of the medications from a horse’s system, although the American Quarter Horse Association and the US Equestrian Federation mandate a seven-day withdrawal period before competing. Because of Depo-Medrol’s long-lasting effect, we would suggest a 15-day withdrawal period.

A majority of trainers use clenbuterol, which is not a steroid, but rather a bronchodilator and decongestant, from time to time in training to ensure that their horses have clean airways.  Because clenbuterol, like other medications that are banned on raceday, treats an existing condition, we support the ban on its use. We believe, based on the veterinary evidence and discussions with Dr. George Maylin, that a seven-day withdrawal period would be adequate to ensure that clenbuterol would have no material effect on raceday.

As these suggestions show, NYTHA fully supports rational, fact-based efforts to limit medication use on the racetrack and to assure a level playing field. What we do not support is making medication decisions based on feelings or intuition that fly in the face of the scientific evidence.

B.   Owner and breeder responsibility for violations

Owner responsibility for drug violations has been suggested at various times as a means of guaranteeing that owners will not patronize trainers who misuse medications; if an owner suffers sanctions, so the theory goes, the owner will be more likely to police the trainer.

We disagree. The owner of a horse that tests positive for illegal medications already suffers the serious consequence of losing the purse money for the race. In most cases, that means the owner will have to dig into his or her pocket, since the positive test report will come well after the purse money has been made available by the horsemen’s bookkeeper. To add additional sanctions on top of losing the purse, such as a suspension of the owner or of the horse, is unlikely to result in any greater vigilance on the part of owners. If owners were in a position to fully police medication use, they would have to be in their horses’ barns as much as the trainers. That is simply unrealistic.

These comments regarding owners apply with even greater force with respect to breeders, who are far removed from involvement in the racing careers of horses that they have bred.

NYTHA does, however, support the concept of having breeders and owners contribute to the safe, healthy retirement of race horses, perhaps by means of mandatory payments for foal registration by breeders and payments by each new owner when a horse changes hands. Such a system would go a long way to address the very real crisis of thoroughbred retirement.

C.   Mandatory recovery periods

The horse is the innocent party in any illegal medication incident. While it is completely appropriate to penalize a trainer for a medication positive, penalizing the horse – and the owner – by imposing a mandatory recovery period on the horse in all cases of medication violations seems unnecessary.

Track veterinarians already have the authority to put horses on the “vet list” when they see evidence of a physical issue with a horse, and to require that the horse breeze in the presence of the vet before being entered again. That solution is the appropriate one, and is more attuned to the specific needs of each horse. While some jurisdictions, e.g., Hong Kong, impose mandatory recovery periods for epistaxis, in our view the better solution is to leave the decision as to whether a horse is fit for racing in the hands of the track veterinarians.

D.   Use of painkillers  during training

Very few jurisdictions bar the use of painkillers during training. The difficulty in imposing a blanket ban is that it is entirely appropriate to treat various injuries with painkillers while the horse remains in the trainer’s barn at the racetrack. As long as the painkillers are not used to mask injury while the horse is being asked for maximum exertion, there is no reason to deny the horse the pain relief offered by medications such as Bute, banamine and certain corticosteroids. Provided, of course, that in all cases, the medications are used far enough before raceday so that no significant amounts remain in the horse’s system at post time.


For all the reasons stated above, NYTHA strongly supports the continuation of the current Lasix rules, including mandatory administration of raceday Lasix by NYRA or State veterinarians at least four hours prior to racing and in dosages within prescribed limits. To change the rules and bar Lasix would be to inflict unnecessary harm on the Thoroughbreds that we care for and to impose unnecessary costs on owners, trainers, NYRA and the State itself.

Respectfully submitted,

Richard A. Violette, Jr., President
New York Thoroughbred Horsemen’s Association


1.   NYSRWB Cover Letter 4/30/12

2.   NYSRWB Request for Comments 4/30/12

3.   NYTHA Letter to NYSRWB RE: Drug Policy 4/13/12

4.   Efficacy of furosemide for prevention of exercise-induced pulmonary hemorrhage in Thoroughbred racehorses  (aka The South African Study – funded by The Jockey Club)
Hinchcliff, Morley and Guthrie.     July 1, 2009

  1. Sudden death attributable to exercise-induced pulmonary hemorrhage in racehorses:  Nine cases (1981-83)
Gunson, Sweeney and Soma                  July 1988



8.   Overview of EIPH, Prevalence and Impact on Horse Health
Ed Robinson/Matilda R. Wilson/College of Veterinary Medicine/Michigan State University

Dr. Thomas Tobin DVM


11.                Exercise –Induced Pulmonary Hemorrhage
Hinchcliff                Kentucky Equine Research           2009

  1. Exercise-Induced Pulmonary Hemorrhage in Horses: the Role of Pulmonary Veins
Derksen, Williams & Stack, 2011

13.                Furosemide reduces accumulated oxygen deficit in horses during brief intense exertion
Hinchcliff, McKeever, Muir and Sams       May 1996

14.                Effects of furosemide on the racing times of Thoroughbreds
Sweeney, Soma, et. al.                May 1990

15.                HAVEMEYER FOUNDATION EQUINE WORKSHOP, March, 2006

16.                Workshop: EIPH Findings, Parts I-III
January 1992

  1. Letter from Thomas Tobin, DVM re bone weakening. 12/7/2011

  1. Fracture risk in patients treated with loop diuretics
Rejnmark, et. al.     November 2005
  1. Dr. McNamara Letter to NYSRWB  5/5/12

  1. Summary of Bleeder Data from Hong Kong Jockey Club
Dr. Brian Stewart DVM, June, 2011

Drugs in U.S. Racing – 2010/The Facts


23.                WADA, Therapeutic Use Exemptions





28.                FEI 2011 Equine Prohibited Substance List


30.                McKinsey & Co., Consumer Perceptions About Medication and Integrity, October 2011

31.                Outlawing Lasix won’t stop the bleeding
6/24/11 by Steven Crist

32.                Brisnet-Handicapping Insights
9/16/11 by Dick Powell

33.                Would medication ban be form of class warfare?
8/1/11 by Steve Montemarano (posted on Paulick Report)

34.                Medication Committee Corner: Are We Winning the War the Lasix War
The Horsemen’s Journal – Fall 2011 – Kent Stirling

35.                Ignoring scientific research on Salix could prove costly
Kent Stirling

36.                Banning Lasix is Wrong for the Horses
Chris Wittstruck, USTA, May, 2012

[1] Open Letter from NYSRWB, April 30, 2012 (Exhibit 1).
[2] NYSRWB, Advance Notice of Proposed Rulemaking, April 30, 2012 (Exhibit 2). 
[3] See Exhibit 3.
[4] Derksen, Williams and Stack, Exercise-Induced Pulmonary Hemorrhage in Horses: the Role of Pulmonary Veins,, Compendium: Continuing Education for Veterinarians, April, 2011 (Exhibit 12).
[5] Testimony of Dr. Alice Stack, DVM, at Kentucky Horse racing Commission, Race Day Medication Committee, November 14, 2011, p.8 (Exhibit 10).
[6] Hinchcliff, Morley & Guthrie, Efficacy of furosemide for prevention of exercise-induced pulmonary hemorrhage in thoroughbred racehorses, 235 JAVMA 76 (July 1, 2009) (hereafter, “South African Study”) (Exhibit 4). This research study, the most complete to date on the effects of Lasix (furosemide), was sponsored by the Grayson-Jockey Club Research Foundation and the Racing Medication and Testing Consortium, among others. It is the first, and thus far the only, study of the effects of Lasix to adhere to generally accepted scientific methodology based on a comparison of the effects of a medication (Lasix) with the effects of a placebo. Earlier studies, using less precise methodologies, had estimated the incidence of EIPH at anywhere from 44% to 75%. See, e.g., Mason, Collins and Watkins, Effects of bedding on exercise-induced pulmonary hemorrhage in racehorses in Hong Kong,  Vet. Rec. 1984; 115: 268-269; Raphel and Soma, Exercise-Induced pulmonary hemorrhage in thoroughbreds after racing and breezing, Am. J. Vet. Research 1982:43: 1123-1127.
[7] Derksen, et al., supra Note 4.
[8] Stack, supra Note 5, at p. 10.
[9] Id. At 80.
[10] Dr. Brian McNamara, submission to NYSRWB, May 8, 2012. (Exhibit 19).
[11] Supra, Note 6.
[12] Stack, supra Note 5.
[13] See Exhibit 5.
[14] See Note 6.
[15] See Exhibit 5; See also testimony of Dr. Rick Sams, DVM Kentucky Horse racing Commission, Race Day Medication Committee, November 14, 2011, p.87 (Exhibit 10).
[16] Association of Racing Commissioners International, Drugs in U.S. Racing 2010: the Facts, (September 2011). See Exhibit 21.
[17] See, e.g., the lists of permitted and prohibited substances of WADA (Exhibit 22), WADA’s standards for “therapeutic use exemptions” (Exhibit 23), US Anti-Doping Agency  athlete handbook (Exhibit 24), major league baseball’s joint drug treatment and prevention program (Exhibit 25), the National Football League’s list of prohibited substances (Exhibit 26), RCI’s Uniform Classification Guidelines for Foreign Substances (Exhibit 27), European Horserace Scientific Liaison Committee, list of detection times (Exhibit 29), and the FEI Equine Prohibited Substances List (Exhibit 28).
[18] See Exhibit 29.
[19] Ed Martin, RCI "Drugs in U.S. Racing – 2010. Exhibit 22.
[20] Stack, supra Note 5, at p. 61.
[21] Zorn, Update: the Cost of Thoroughbred Ownership in New York, Business of Racing blog, March 1, 2012; available at
[22] In addition to commissions for the trainer and jockey, and the $20 Lasix administration fee, NYRA charges owners the following amounts:
A.      Backstretch insurance (BEST): $12.50 per start
B.      Jockey Club: $2.50 per start
C.      Jockey insurance: 0.9% of the purse, plus $840 per owner per year.
D.      Backstretch pension fund: 1.0% of the purse
E.       NYTHA: 2.0% of the purse
F.       NYSRWB Fee: $10 per start.
Trainers generally charge 10-13% of all purse money won by a horse, in addition to their “day rate” of $90 and up. Jockeys are paid 9.167% of the owner’s share of a win purse and 5% of the owner’s share of the purse for a second or third-place finish. Jockeys not finishing in the money generally receive $100 per ride.
[23] See Note 13 above.
[24] Id.
[25] See Nicky Henderson [trainer for Her Majesty the Queen] tells vets’ inquiry ‘plenty’ used banned drug, The Guardian, 2/15/2011, in response to positive test for transexamic acid in one of Henderson’s horses.
[26] See Exhibit 20.
[27] For visible evidence of epistaxis-related fatalities on the track, see Exhibit 9.
[28] McKinsey & Co., Consumer perceptions about medication and integrity, (October 2011). See Exhibit 30.
[29] E.g., “which of these statements about raceday medication do you strongly agree with;” “How has the thoroughbred industry dealt with performance-enhancing drugs?” “How likely would you be to support federal legislation to end raceday medication?”
[30] See below, at page 20.
[31] See Exhibit 3.
[32] Stack, supra Note 5, at p. 40.
[33] Id.
[34] See South African Study, supra Note 6.
[35] See Exhibit 21.
[36] Stack, supra Note 5, at p. 59.
[37] See Exhibit 3.