Federal Judge Vacates HISA Fee Rule, Ruling Methodology Arbitrary and Capricious

Churchill Downs Incorporated faced a $5.27 million ultimatum and the threatened suspension of racing at four of its tracks before Judge Benjamin Beaton of the U.S. District Court for the Western District of Kentucky handed the company a significant legal victory on April 1, declaring that HISA's purse-weighted fee assessment methodology was "arbitrary and capricious, and therefore unlawful" in a ruling that shields CDI from three years of disputed billing.

The fee formula at the center of the dispute calculated assessments by blending two variables: the number of racing starts at a covered entity and the total purse money distributed at that venue. That dual-factor structure meant high-purse operations like Churchill Downs bore a disproportionately heavier financial burden than lower-purse tracks running comparable race volumes. Beaton ruled the approach violated the congressional mandate governing HISA's funding, which requires costs to be allocated to states proportionately according to each state's actual share of drug-testing and track-safety expenses, not by purse size. "The Authority's interstate purse-weighted assessment formula is unlawful," Beaton wrote, adding that the formula as applied in HISA's 2022, 2023, and 2024 assessment cycles "may not be enforced against Churchill." The Federal Trade Commission, which oversees HISA rulemaking, had approved the formula during those years but failed to adequately explain its rationale, a deficiency that proved fatal under Administrative Procedure Act review.

CDI had accumulated more than $6.3 million in disputed fees at its Louisville flagship alone through 2025 and was the only racetrack operator under HISA's jurisdiction to pay zero in assessments that year. HISA's enforcement panel had ordered CDI to settle approximately $5.27 million or face racing suspensions at Churchill Downs, Turfway Park, Ellis Park, and Presque Isle Downs. A partial settlement was quietly reached on March 24, just eight days before Beaton's ruling; neither party disclosed terms, and HISA did not respond to questions about whether the judgment affects that agreement.

CDI and the New York Racing Association filed the federal lawsuit jointly in December 2024. NYRA settled its portion on undisclosed terms in early 2025, leaving Churchill to carry the litigation alone. Bill Carstanjen, CDI's chief executive, called Wednesday's decision validation of that decision to press forward. "It's unfortunate that HISA wasted so much time and resources, forcing us to go to such lengths to prove a very clear point," Carstanjen said. "This is indicative of HISA's ongoing fiscal mismanagement, which is a distraction from our joint mission of equine health and safety."

HISA insisted the ruling is narrow in scope. A spokesperson said the decision "rejects a prohibition on using factors beyond racing starts in fee assessments, rejects Churchill's equitable and contract-based theories, and declines to vacate the prior purse-weighted assessment rule." The authority already transitioned to a starts-only assessment model effective January 2026 following FTC approval, and Beaton cited that shift as a reason to limit relief to a declaratory judgment rather than broader remedies, noting no likelihood the purse-weighted approach will resurface.

That still leaves the industry facing unresolved financial exposure. Whether other covered persons who paid under the purse-weighted formula can seek similar relief remains untested. HISA must now decide whether to appeal Beaton's reasoning or accept the declaratory record as settled. If the ruling holds, Congress faces mounting pressure to codify a clearer, statutory funding standard before the next fee dispute forces a fresh round of litigation that racing's integrity program can ill afford.