House Edge

Last October, the NTRA released its manifold initiatives for industry reform, sparking a considerable amount of commentary as to whether these initiatives would be implemented and enforced on a uniform and national basis. The NTRA provided a very logical three-phase implementation program, but the first phase, as with every first step, could prove to be a little sticky.

The initiatives include broad improvements to the current drug testing scheme, including requiring out-of-competition testing for blood dopers like EPO. But Phase I of the program puts the onus of this new testing program on the racetracks themselves. Last fall we learned that the American Graded Stakes Committee, for example, is more than willing to use its clout to mandate certain changes at tracks, so as long as the industry is behind the move to Phase I, it seems the tracks will have no choice but to implement it. But do racetracks really have the authority to regulate prohibited substances at a standard over and above that of the state racing commission?

Racetracks do have ways to enforce their own rules, some of which are even recognized by states’ racing statutes. For instance, racetracks have a common law right to exclude patrons, typically because patrons are unruly or have participated in something illegal. A lot of states, like Kentucky, expressly provide in their statutes that this common law right is not abrogated by the racing commission’s own right to exclude. Tracks also have contract rights, governed by the common law of contracts, built into things like stall applications and entry forms. In other words, trainers and owners that want to race agree to play by the rules when they sign the bottom line.

A serious question arises, however, when a track applies its rights to individuals who are licensed by the state: does the track have the right to take away the licensee’s property right in training? And if a track does exercise that right, is the track, in effect, a state actor, violating Constitutionally-protected Due Process rights? And even if the track is determined to be a private actor, there are still questions of whether it would be violating anti-trust laws, or simply subjecting itself to tort liability.

The Red Mile, which began its own out-of-competition EPO testing initiative last fall, has provided a case study in what can go wrong when a racetrack implements a testing program outside of a racing commission’s authority. According to Janet Patton of the Herald Leader, the Red Mile received “presumptive positives” for the horses of four trainers, but there was some kind of miscommunication between the testing lab and the Red Mile. The Red Mile informed the trainers of the positives, and despite efforts to keep the results confidential, the names leaked out. Meanwhile, the trainers requested that the split samples be sent to a different lab – at their own expense – and those results returned negative for blood doping. The trainers are now suing the Red Mile for defamation.

Here’s where it gets tricky. The trainers allege that the track failed to follow KHRC testing protocol, which is odd, considering that the testing was done outside of any KHRC regulation. Even trickier is the fact that the blood samples were drawn by state vets. Which is the exact muddy situation that brings state action into question, regardless of whether the final results were positive or negative.

The Red Mile incident ended with four false positives and a defamation claim – no antitrust allegations, no due process claims. And the false positives and leaked names are the result of bureaucratic details that need smoothing out. The trainers’ attorney claims that all the trainers really want from the track is reimbursement for the testing costs and a public apology. What’s notable is that the trainers are not questioning the right of the track to do out-of-competition EPO testing on their horses. And so, despite the less-than-ideal result, I would argue that this is actually a case of house rules working. The trainers signed an agreement along with their stall contracts, and their agreement to be bound by the track’s rules stuck.

At the end of the day, the house may not always win; but with the right procedures in place, it can maintain an edge, an edge that might allow it to confront new regulatory challenges faster than racing commissions, with their lack of funding and excess of red tape, are able.