JOSEPH KELLY DOUGLAS ANDERSON v. HORSERACING INTEGRITY AND SAFETY AUTHORITY INC LISA LAZARUS CHARLES SHEELER STEVE BESHEAR ADOLPHO BIRCH LEONARD COLEMAN JR JOSEPH DE FRANCIS TERRI MAZUR SUSAN STOVER BILL THOMASON VAN CLIEF FEDERAL TRADE COMMISSION ANDREW FERGUSON REBECCA KELLY SLAUGHTER MELISSA HOLYOAK ALVARO BEDOYA (2026)

ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

The Horseracing Integrity and Safety Act, 15 U.S.C. §§ 3051 et seq. (the “Act”), created a “private, independent, self-regulatory, nonprofit corporation” to develop and implement anti-doping and safety rules within the horseracing industry. Plaintiffs argue that the Act violates the public and private non-delegation doctrines because Congress gave too much power to the private entity and/or insufficient guidance for how to exercise that power. These arguments fail under recent (and not-so-recent) Supreme Court and Eighth Circuit precedent because the Act gives sufficient oversight authority to the Federal Trade Commission (“FTC”) and provides an “intelligible principle” for the FTC to follow in exercising that authority.

Plaintiffs also argue, in the alternative, that a recent rule promulgated by the FTC violates the Administrative Procedure Act (“APA”) because the FTC Order adopting the rule gave too much deference to the private entity. In one narrow respect, the Court agrees. The Court will not, however, set aside the rule altogether, but rather will remand without vacatur to give the FTC the chance to clarify what it meant. For these reasons, and as explained in full below, the Court GRANTS IN PART and DENIES IN PART the parties' respective Motions for Summary Judgment. (ECF ¹ 32; ECF 39; ECF 40.)

I. Background.

When cross-motions for summary judgment are filed, the Court ordinarily would view the facts in the light most favorable to the plaintiff on the defendant's motion and in the light most favorable to the defendant on the plaintiff's motion. See Thompson-Harbach v. USAA Fed. Sav. Bank, 359 F. Supp. 3d 606, 614 (N.D. Iowa 2019). The parties agree here, however, that there are no disputed issues of fact. Indeed, for the most part, there are no “facts” at issue at all, but rather legal questions arising out of legislative and regulatory actions. This Background section therefore will focus on the relevant legal and regulatory background.

A. Statutory and Regulatory Background.

In 2020, Congress enacted the Act to address concerns about the integrity of the horseracing industry and safety of its participants. Among other things, the Act established a “private, independent, self-regulatory, nonprofit corporation” called the Horseracing Integrity and Safety Authority (the “Authority”). 15 U.S.C. § 3052(a). The Authority is charged with “developing and implementing a horseracing anti-doping and medication control program and a racetrack safety program for covered horses, covered persons, and covered horseraces.” Id. The Authority is subject to oversight by the FTC. Id. § 3053.

Rather than fund the Authority through appropriations, Congress created a framework for the entity to fund itself through the assessment of fees against industry participants or, if willing, the states. Id. § 3052(f). The framework has two parts. First, if a state racing commission is willing to pay its share of the fees, it may do so “according to a schedule established in rule developed by the Authority and approved by the [FTC].” Id. § 3052(f)(2)(B). Second, if a state racing commission is not willing to pay its share of the fees, the Act does not compel it to do so. Instead, the Authority must allocate those fees “equitably” among “covered persons involved with covered horseraces pursuant to such rules as the Authority may promulgate.” Id. § 3052(f)(3)(A)–(B). “Covered persons described in subparagraph (B) shall be required to remit such fees to the Authority.” Id. § 3052(f)(3)(C)(ii).

The state racing commission in Iowa is the Iowa Racing and Gaming Commission. It has chosen, consistent with § 30529(f)(2)(B), not to pay fees to fund the Authority. The fees are therefore allocated to “covered persons” in Iowa under § 3052(f)(3). Plaintiffs are Iowa horse owners who are covered persons under the Act. (ECF 1, ¶¶ 6–7.)

The method of allocating fees to covered persons is determined through rulemaking governed by 15 U.S.C. § 3053(a). As originally enacted, the Act directed the Authority to propose rules to the FTC, which was required to approve them if they were “consistent” with the broad principles underlying the Act. In 2022, however, the United States Court of Appeals for the Fifth Circuit struck down the Act as facially unconstitutional under the private non-delegation doctrine. Nat'l Horsemen's Benevolent & Protective Ass'n v. Black (Black I), 53 F.4th 869, 872 (5th Cir. 2022). The Fifth Circuit held that by requiring the FTC to approve rules if they were “consistent” with the Act, the Act gave the Authority too much power. Id. “The Authority, rather than the FTC, has been given final say over [the Act's] programs.” Id. Because the Authority is a private entity, the Fifth Circuit concluded that this structure violated the private non-delegation doctrine. Id. Which is to say, it violated “the settled constitutional principle that forbids private entities from exercising unchecked government power.” Id. at 873.

In response to Black I, Congress amended the Act in December 2022 to add a provision, now codified at 15 U.S.C. § 3053(e), stating:

The [FTC], by rule in accordance with section 553 of Title 5, may abrogate, add to, and modify the rules of the Authority promulgated in accordance with this chapter as the Commission finds necessary or appropriate to ensure the fair administration of the Authority, to conform the rules of the Authority to requirements of this chapter and applicable rules approved by the Commission, or otherwise in furtherance of the purposes of this chapter.

Plaintiffs implicitly admit that this amendment solved the problem that prompted the Fifth Circuit in Black I to strike down the Act as facially unconstitutional under the private non-delegation doctrine. Plaintiffs argue, however, that the Act remains unconstitutional as applied under the private non-delegation doctrine. (ECF 32-1, pp. 18–21.) They further argue that the Act is facially unconstitutional under the public non-delegation doctrine. (Id., pp. 21–24.) Finally, irrespective of constitutional issues, they argue the FTC and Authority engaged in arbitrary and capricious action under the APA. (Id., pp. 24–26.)

B. The Original Assessment Methodology Rule.

Plaintiffs' arguments revolve around a rule proposed by the Authority, and approved by the FTC, for the assessment of fees to covered persons like Plaintiffs. The original version of the rule, referred to interchangeably as the “Assessment Methodology Rule” and “Cost Methodology Rule,” was proposed by the Authority in January 2022, before Black I was decided. See HISA Assessment Methodology Rule, 87 Fed. Reg. 9349 (Feb. 18, 2022). The Assessment Methodology Rule required covered racetracks like Iowa-based Prairie Meadows to provide the Authority with a proposal for how to make assessments among “covered persons.” See FTC, Order Approving the Assessment Methodology Rule Proposed by the Horseracing Integrity and Safety Authority, p. 21 (Apr. 1, 2022).² “If a racetrack fails to timely submit a proposal or the Authority finds the proposal inequitable, the Authority determines the equitable allocation for the racetrack.” Id. The FTC approved the Assessment Methodology Rule, while also stating that it “planned to issue guidance on the subject” soon. See id. at 23.

Based on input from Prairie Meadows, and in accordance with the original rule, the Authority decided to allocate Iowa's portion of the Authority's funding “50-50 between the track and horsemen” for 2023. (ECF 32-2, p. 5.) Plaintiffs note that the word “horsemen” is undefined. (ECF 32-1, p. 13.) The Authority agreed to the same 50-50 split for 2024. (ECF 32-2, pp. 6, 9.) In early 2024, the Authority began invoicing two entities for fifty percent of the assessment each: Prairie Meadows and the Iowa Horsemen's Benevolent and Protective Association (“Iowa HBPA”), which represents owners and trainers at Prairie Meadows. (Id., pp. 10–11; ECF 32-1, p. 14.) Plaintiffs assert that the invoices to the Iowa HBPA were improper because it is not itself a covered person under the Act, nor does it have funds to pay the assessment. (ECF 32-1, p. 14.) In any event, the Authority and the Iowa HBPA tried without success to negotiate an arrangement for the Iowa HBPA and/or its members to pay the allocated portion of the assessment. (ECF 32-2, pp. 13, 78–79.) One of the open issues was whether Prairie Meadows would institute a per-start fee on horseracing participants. (Id.) After negotiations failed, Plaintiffs filed this action in July 2024 because they feared the Authority would order Prairie Meadows to institute a per-start fee on themselves and other industry participants. (ECF 1.)

C. The Modified Assessment Methodology Rule.

In response to Plaintiffs' lawsuit, the Authority proposed, and the FTC published, a Notice of a proposed amendment (the “FTC Notice”) to the original rule. 89 Fed. Reg. 84600 (Oct. 23, 2024).³ The proposed new rule—which this Order will refer to as the “Modified Assessment Methodology Rule”—would assess fees to covered persons according to the following formula: Racetrack, 50%; Owners, 43.50%; Trainers, 5.00%; and Jockeys, 1.50%. Id. at 84603. “In addition, the proposed rule permits the applicable horsemen's group to agree to pay the applicable starter fee for the owners, trainers and jockeys from the purse account or other sources and that such payments be deemed to be equitably allocated among the owners, trainers and jockeys.” Id.

The FTC Notice summarized an ongoing debate regarding whether the allocation of fees should be based on how often industry participants reasonably would be expected to enter horse races (sometimes called “Projected Starts”) or how much money the participants would be expected to earn from these races (“Projected Purses Paid”). Id. at 84601–02. According to the FTC Notice, the modifications “seek to eliminate consideration of the Projected Purses Paid from the current assessment equation and instead base assessments solely on Projected Starts.” Id. at 84601. “In addition, the proposed rule modifications establish by rule the equitable allocation among Covered Persons of the applicable fee per racing start for the Assessment Calculation for each Racetrack.” Id. at 84601. One impetus for making these changes, according to the FTC Notice, was litigation challenging whether “paid purses” was an appropriate metric for determining how to allocate the assessment. Id. at 84603. By focusing on starts, rather than purses, “the proposed modification will remove the threat and cost of litigation on this issue.” Id. The FTC Notice further explained that “the Authority's expenses after the initial implementation period have turned out to be closely correlated to starts and not to purse amounts or the grade of a race. Therefore, the Authority has determined that going forward the most appropriate and equitable approach is to base the assessments solely on Projected Starts, and the modifications in Rule 8520(c)(2) implement that approach.” Id.

As to the allocation of the assessment among covered persons, the FTC Notice explained that the proposed allocation “is a reasonable estimation of the overall percentage amount Owners, Trainers, and Jockeys receive out of the purse funds.” Id. at 84603 n.20. The proposed Rule also would allow the “applicable horsemen's group to agree to pay the applicable starter fee for the owners, trainers and jockeys from the purse account or other sources and that such payments shall be deemed to be equitably allocated among the owners, trainers and jockeys.” Id. at 84603.

The FTC approved the Modified Assessment Methodology Rule on December 23, 2024. See FTC, Order Approving the Assessment Methodology Rule Modification Proposed by the Horseracing Integrity and Safety Authority, at 2 (Dec. 23, 2024) (the “FTC Order”).⁴ The substance of the FTC Order will be discussed where relevant below.

D. Procedural History.

Plaintiffs sue two groups of Defendants: (i) the Authority and its Directors (the “Authority Defendants”); and (ii) the FTC and its Commissioners (the “FTC Defendants”). Plaintiffs' Amended Complaint contains eight causes of action: Count I, Violation of the United States Constitution (Non-Delegation Doctrine); Count II, Violation of the United States Constitution (Private Non-Delegation Doctrine); Count III, Violation of the Fifth Amendment, Due Process; Count IV, Violation of Article II, § 2 of the Constitution (Appointments Clause); Count V, Violation of the APA (2023 and 2024 Assessments); Count VI, Violation of the APA (Modified Assessment Methodology Rule); Count VII, Ultra Vires; Count VIII, Due Process (Assessment of Attorney Fees). (ECF 25.)

Plaintiffs moved for summary judgment on Counts I, II, VI, and VIII (ECF 32) but later agreed to withdraw Count VIII after agreeing it was not ripe (ECF 42). The FTC Defendants and Authority Defendants collectively moved for summary judgment on all Counts (ECF 39; ECF 40), with all parties later agreeing to the dismissal of Counts III, V, and VII without prejudice (ECF 42, p. 13). The Court therefore will address Counts I, II, VI on the merits and dismiss Counts III, V, VI, and VIII without prejudice. As for Count IV (which was inadvertently labeled “Count VI” in the Amended Complaint (ECF 25, p. 23)), it was raised in the alternative if the Court concluded that the Authority was a governmental entity, rather than a private entity (id., ¶ 94). The parties appear to agree that the Authority is a private entity and thus Count IV is a nullity and also will be dismissed.

II. Legal Analysis: Public and Private Non-Delegation Doctrines.

A. Summary Judgment Standard.

Summary judgment is appropriate when, viewing the evidence in the light most favorable to the nonmoving party, “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also Smith v. Ashland, Inc., 250 F.3d 1167, 1171 (8th Cir. 2001). “When cross-motions for summary judgment are presented to the Court, the standard summary judgment principles apply with equal force.” Wright v. Keokuk Cnty. Health Ctr., 399 F. Supp. 2d 938, 945–46 (S.D. Iowa 2005). “[T]he court views the record in the light most favorable to plaintiff when considering defendant's motion, and the court views the record in the light most favorable to defendant when considering plaintiff's motion.” Thompson-Harbach, 359 F. Supp. 3d at 614.

B. The Public and Private Non-Delegation Doctrines.

“The nondelegation doctrine bars Congress from transferring its legislative power to another branch of Government.” Gundy v. United States, 588 U.S. 128, 132 (2019). “Legislative power, we have held, belongs to the legislative branch, and to no other.” FCC v. Consumers' Research, 606 U.S. 656, 672 (2025). “At the same time, we have recognized that Congress may ‘seek[ ] assistance from its coordinate branches to secure the ‘effect intended by its acts of legislation.’ ” Id. (quoting J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 406 (1928)). “And in particular, Congress may ‘vest[ ] discretion’ in executive agencies to implement and apply the laws it has enacted—for example, by deciding on ‘the details of [their] execution.’ ” Id. (quoting J.W. Hampton, 276 U.S. at 406).

Congress goes too far, however, when it delegates authority to another branch of Government without setting out “an ‘intelligible principle’ to guide what it has given the agency to do.” Id. at 673. (quoting J.W. Hampton, 276 U.S. at 409). The degree of permissible agency discretion varies according to the scope of the power it has been delegated, but, as a general matter, Congress must establish “both ‘the general policy’ that the agency must pursue and ‘the boundaries of [its] delegated authority.’ ” Id. (quoting Am. Power & Light Co. v. SEC, 329 U.S. 90, 105 (1946)). “And similarly, we have asked if Congress has provided sufficient standards to enable both ‘the courts and the public [to] ascertain whether the agency’ has followed the law.” Id. (quoting OPP Cotton Mills, Inc. v. Adm'r of Wage & Hour Div., Dep't of Lab., 312 U.S. 126, 144 (1941)). “If Congress has done so—as we have almost always found—then we will not disturb its grant of authority.” Id.

Case law recognizes two kinds of nondelegation issues. In cases involving what is sometimes called the “public” non-delegation doctrine, Congress gives power to a different branch (usually, the Executive), with that branch then exercising the power itself. See, e.g., Gundy, 588 U.S. at 132–35 (evaluating whether Congress impermissibly delegated legislative authority to the Attorney General when it enacted the Sex Offender Registration and Notification Act). By contrast, in cases involving the “private” non-delegation doctrine, Congress goes a step further by delegating authority to private actors. See Carter v. Carter Coal Co., 298 U.S. 238, 311 (1936) (striking down federal law that allowed private actors to set industry-wide wage and hour requirements).

In Federal Communications Commission v. Consumers' Research, the Supreme Court rejected public and private non-delegation doctrine challenges to legislation directing the Federal Communications Commission (“FCC”) to collect money from interstate telecommunications service providers for subsidy programs designed to improve access to telecommunications services for consumers in underserved communities. 606 U.S. at 684–87. Among other things, Consumers' Research declined to create a more onerous standard for non-delegation cases that involve revenue-raising legislation than it had in other settings. Id. at 674. It instead re-affirmed the holding of earlier Supreme Court cases that “nothing in the Constitution's text or structure ․ distinguishes Congress' power to tax from its other enumerated powers in terms of the scope and degree of discretionary authority that Congress may delegate to the Executive.” Id. at 674–75 (cleaned up). “So whether or not a tax is at issue—so say our cases—the usual nondelegation standard applies. And that standard is, again, trained on intelligible principles, not on numeric caps and ‘mathematical formula[s].’ ” Id. (quoting United States v. Rock Royal Co-op., Inc., 307 U.S. 533, 577 (1939)). Holding otherwise “would throw a host of federal statutes into doubt,” including statutes funding the Federal Reserve Board, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation. Id. at 675–76.

Consumers' Research then went on to apply the traditional “intelligible principle” test, concluding that Congress “imposed ascertainable and meaningful guideposts for the FCC to follow when carrying out its delegated function of collecting and spending contributions from carriers.” Id. at 681. It held that the congressional directive to the FCC to collect “sufficient” money to support the subsidy programs provided enough guidance, in context, to fall in line with other cases in which federal laws survived non-delegation challenges. Id. at 683–84. Consumers' Research also rejected the challengers' argument that the law impermissibly delegated authority to a private, non-profit corporation to determine how much individual carriers paid into the fund. Id. at 692–93. It explained that the private entity did nothing more than provide “advice and assistance” to the FCC, with the FCC alone having decision-making authority. Id. “In every way that matters to the constitutional inquiry, the [FCC], not the [private entity], is in control.” Id. at 695.

C. Plaintiffs' Public and Private Non-Delegation Challenges Fail.

At the time Plaintiffs filed this case, the Eighth Circuit had never addressed the facial constitutionality of the Act. Things are different now. In September 2024, the Eighth Circuit held that neither the rulemaking structure nor the enforcement provisions of the Act violate the private or public nondelegation doctrines. See Walmsley v. FTC, 117 F.4th 1032 (8th Cir. 2024), cert. granted, judgment vacated, 145 S. Ct. 2870, 222 L. Ed. 2d 1124 (2025). The Eighth Circuit reached this holding because, among other things, the Act makes the Authority subordinate to the FTC for purposes of both rulemaking and enforcement and provides an “intelligible principle” for the FTC to follow in exercising its discretion. See id. at 1039–40. The Sixth Circuit reached the same conclusion at around the same time. See Oklahoma v. United States (Oklahoma I), 62 F.4th 221 (6th Cir. 2023), cert. granted, judgment vacated, 145 S. Ct. 2836 (2025). The Fifth Circuit likewise concluded that the rulemaking structure of the Act did not violate the non-delegation doctrine, although it split from the Sixth and Eighth Circuits by declaring the Act's enforcement provisions unconstitutional. See Nat'l Horsemen's Benevolent & Protective Ass'n v. Black (Black II), 107 F.4th 415, 426, 429–30, 435 (5th Cir. 2024), cert. granted, judgment vacated sub nom. Horseracing Integrity & Safety Auth., Inc. v. Nat'l Horsemen's Benevolent & Protective Ass'n, 145 S. Ct. 2836, 222 L. Ed. 2d 1125 (2025).

The Supreme Court later granted petitions for writs of certiorari from the Fifth, Sixth, and Eighth Circuit cases, vacated the judgments, and remanded for further consideration in light of Consumers Research. See, e.g., Walmsley, 145 S. Ct. 2870. There is no reason to believe, however, that the Supreme Court took this action—sometimes called a “GVR”—due to dissatisfaction with how those appellate courts had evaluated the constitutionality of the rulemaking structure. After all, Consumers Research reversed a Fifth Circuit decision striking down an analogous delegation of authority to a private entity under the Communications Act of 1934. 606 U.S. at 698. It would be odd to conclude the Supreme Court GVR'ed Walmsley, Oklahoma I, and Black II because it believed those cases should have reached the opposite result. Instead, in context, the more likely reason for the GVR is to allow the Fifth Circuit to reconsider the portion of Black II in which it struck down the enforcement provisions of the Act. To that end, the Sixth Circuit, on remand, has already reaffirmed its conclusion that the rulemaking structure and enforcement provisions of the Act are constitutional. See Oklahoma v. United States (Oklahoma II), 163 F.4th 294 (6th Cir. 2025). The Eighth Circuit is likely to do the same.⁵

Granted, the challenge Plaintiffs are making to the Act here is different than the ones at issue in Walmsley, Oklahoma I, and Black II. There, among other things, the plaintiffs challenged the overarching rulemaking structure of the Act. Plaintiffs' challenge here is narrower and focuses on Congress's directive to the FTC and Authority to “allocate equitably ․ among covered persons” the fees assessed to each state under 15 U.S.C. § 3052(f)(3)(B). Plaintiffs argue that the words “allocate equitably” are so vague as to fall short of providing an “intelligible principle” for the FTC and Authority to follow. For two reasons, the Court disagrees.

First, as recognized in Walmsley, “[t]he Supreme Court has upheld delegations made with comparable or lesser guidance.” 117 F.4th at 1040. In American Power & Light Co. v. Securities and Exchange Commission, 329 U.S. 90, 104 (1946), for example, the Supreme Court rejected a non-delegation challenge to a statute directing the Securities and Exchange Commission to ensure that regulated holding companies did not “unduly or unnecessarily complicate[ ] the [corporate] structure” or “unfairly or inequitably distribute voting power among security holders.” Similarly, Yakus v. United States, 321 U.S. 414, 423–24 (1944), rejected a non-delegation challenge to a statute giving an agency the authority to set “fair and equitable” prices to control inflation. And National Broadcasting Co. v. United States, 319 U.S. 190, 216–17 (1943) rejected a non-delegation challenge to a statute giving the Federal Communications Commission the power to regulate radio communications “in the public interest.” Finally, but most recently, Consumers' Research upheld a law directing the FCC to collect “sufficient” revenue to ensure funding for subsidy programs. 606 U.S. at 691. The phrase “allocate equitably” is not materially different than the language deemed sufficient to pass constitutional muster in these cases.

Second, and relatedly, one of the primary reasons these earlier cases rejected non-delegation challenges was because there was surrounding statutory and industry context to limit and guide the agencies in exercising their authority. See, e.g., Am. Power & Light Co., 329 U.S. at 104 (“[T]hese standards need not be tested in isolation. They derive much meaningful content from the purpose of the Act, its factual background and the statutory context in which they appear.”) The same is true here. For example, the fact that the Act requires an equitable allocation among “covered persons” is significant because it limits the universe of people and entities to whom the FTC and Authority can assess fees. See 15 U.S.C. § 3051(6) (“The term ‘covered persons’ means all trainers, owners, breeders, jockeys, racetracks, veterinarians, persons (legal and natural) licensed by a State racing commission and the agents, assigns, and employees of such persons and other horse support personnel who are engaged in the care, training, or racing of covered horses.”).

The Act also limits how much the FTC and Authority can assess to covered persons in the sense that it limits the Authority's purpose to “developing and implementing a horseracing anti-doping and medication control program and a racetrack safety program for covered horses, covered persons, and covered horseraces.” 15 U.S.C. § 3052(a). By circumscribing the scope of the Authority's activities in this way, Congress has established a limit on how much funding the entity will need. In this regard, the Act is akin to the law upheld in Consumers' Research, which directed the FCC to collect “sufficient” revenue to fund subsidy programs. 606 U.S. at 681–84. The Supreme Court explained that the word “sufficient,” when considered in context, served as both a “floor” and “ceiling” on how much the FCC could assess to telecommunications carriers. Id. at 681. The same is true here.

The Act's use of the word “equitable” also provides meaningful guidance when evaluated in context. The FTC and Authority surely understand, for example, that they should not assess one hundred percent of the fees to covered persons like jockeys or grooms, who generally would be expected to have lower earnings and fewer resources than racetracks or owners. Such an allocation would not be “equitable” under any reasonable use of the word. See Equitable, BLACK'S LAW DICTIONARY (12th ed. 2024) (“Just; consistent with principles of justice and right.”). Similarly—and, again, in context—it appears that there is a relatively limited universe of ways for the FTC and Authority to allocate fees, with the record showing that the FTC, the Authority, and industry participants focused on proposals allocating fees based either on projected starts, projected purses paid, or some combination of the two. In other words, it has been obvious from Day One that an “equitable” allocation should be tethered either to how often the covered persons participate in horseracing or how much they earn while doing so.

The bottom line is that this is not a situation where Congress has given the FTC and Authority boundless discretion to do whatever they want with respect to assessing and allocating fees. Instead, Congress “imposed ascertainable and meaningful guideposts” for them to follow. Consumers' Research, 606 U.S. at 681. It follows—especially in light of Consumers' Research and Walmsley—that the provisions of the Act governing the equitable allocation of fees are not unconstitutional under the public or private non-delegation doctrines.

Plaintiffs also argue that the FTC erred when it approved the Modified Assessment Methodology Rule by failing to recognize the scope of its power to reject or modify that Rule. In Plaintiffs' words, the FTC “act[ed] as the inferior agent to the [Authority].” (ECF 42, p. 9.) Plaintiffs characterize this as an “as applied” constitutional challenge under the private non-delegation doctrine. The Court believes, however, that it is better understood as a request for judicial review of the FTC's action under the APA, 5 U.S.C. § 706. Which is to say, if the FTC “misread the statute and misunderstood the scope of its discretion,” the Court should “set aside its decision as arbitrary and capricious.” Red River Valley Sugarbeet Growers Ass'n v. Regan, 85 F.4th 881, 887 (8th Cir. 2023) (internal punctuation omitted) (quoting Dep't of Homeland Sec. v. Regents of the Univ. of Cal., 591 U.S. 1, 26 (2020) and 5 U.S.C. § 706(2)(A). This will be addressed in the next section.

III. Legal Analysis: Administrative Procedures Act.

A. Legal Standards.

“[J]udicial review of administrative decisions is governed by the APA.” El Dorado Chem. Co. v. EPA, 763 F.3d 950, 955 (8th Cir. 2014). “Under the APA, review of an agency decision is limited.” Mandan, Hidatsa & Arikara Nation v. U.S. Dep't of the Interior, 95 F.4th 573, 579 (8th Cir. 2024). The Court may set aside agency action only if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). One way agency action can be arbitrary and capricious is if the agency “misread[s] the statute and misunderst[ands] the scope of its discretion.” Regan, 85 F.4th at 887. In addition, but more generally, agency action is arbitrary and capricious if:

the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Mandan, Hidatsa & Arikara Nation, 95 F.4th at 580 (quoting Missouri ex rel. Bailey v. U.S. Dep't of Interior, Bureau of Reclamation, 73 F.4th 570, 577–78 (8th Cir. 2023). “Arbitrary and capricious review, at its core, measures if an agency action was irrational.” Id. “The scope of this review is narrow, and reviewing courts must exercise appropriate deference to agency decisionmaking and not substitute their own judgment for that of the agency.” Food & Drug Admin. v. Wages & White Lion Invs., L.L.C., 604 U.S. 542, 567 (2025) (internal punctuation omitted).

B. The FTC Order Will Be Remanded Without Vacatur Because the FTC May Have Given Improper Deference to the Authority in One Narrow Area.

The FTC Order establishes the following “default allocation” for the Authority's fees: “50% from Racetracks, 43.50% from Owners, 5.00% from Trainers, and 1.50% from Jockeys.” See FTC Order at 20. Plaintiffs argue that this portion of the FTC Order violated the APA because (i) the FTC misunderstood the scope of its authority and treated itself as subordinate to the Authority; and (ii) acted in an arbitrary and capricious manner by failing to allocate any portion of the fees to breeders and other covered persons under the Act. The Court agrees with the first argument and therefore will not definitively address the second.

The first argument arises out of the FTC Order's repeated statement that the proposed modification of the Assessment Methodology Rule was “consistent with” the Act. See, e.g., FTC Order at 2 (“[T]he Commission finds that the Authority's proposed modification of the Assessment Methodology Rule is consistent with the Act and the Commission's rules and therefore approves the proposed rule modification, which will take effect on January 22, 2025.”). Plaintiffs argue that this language indicates the FTC was deferring to the Authority to make decisions rather than exercising its own, independent judgment.

For the most part, the FTC Order's use of the words “consistent with” is not problematic. 15 U.S.C. § 3053(c)(2) states that the FTC “shall approve a proposed order or modification if the [FTC] finds that the proposed rule or modification is consistent with—(A) this chapter; and (B) applicable rules approved by the Commission” (emphasis added). In this regard, the FTC Order's use of the words “consistent with” simply tracks the language of the Act itself. This is fine so long as the FTC Order also recognizes the FTC's own “full-throated rulemaking power,” Oklahoma II, 163 F.4th at 310, which it does. For example, the FTC Order recognized that rules proposed by the Authority “take effect only if approved by the [FTC],” FTC Order at 1, and that the proposed rule must be consistent not only with the Act, but also with the FTC's own rules, id. at 2; see also Oklahoma II, 163 F.4th at 310 (attaching significance to the FTC's power to review for adherence to its own rules). The FTC Order also scrutinized arguments for and against the Authority's proposed rule, including through discussion of public comments and statutory text. See, e.g., FTC Order at 14, 19–20 (evaluating the proposed rule, Authority's statement, public comments, the Authority's response, and the statutory text). Finally, but most importantly, the amendment to the Act unambiguously describes the FTC's power to “abrogate, add to, and modify the rules ․ as the [FTC] finds necessary or appropriate to ensure the fair administration of the Authority, to conform the rules of the Authority to requirements of this chapter and applicable rules approved by the [FTC], or otherwise in furtherance of the purposes of this chapter.” In these circumstances, the FTC Order reflects the agency's awareness that it “retain[ed] ultimate authority” over the rulemaking process. Oklahoma II, 163 F.4th at 309. The fact that it chose to adopt the Authority's proposed rule without change is an exercise of that authority, not an abdication of it. See id. (recognizing that policymaking choices are reflected in action and inaction alike).

There is just one exception. When approving the Authority's decision to exclude breeders, veterinarians, and other “covered persons” from the proposed fee assessment, the FTC Order stated: “The Commission further concludes that limiting the allocations to Racetracks, Owners, Trainers, and Jockeys is consistent with the discretion afforded to the Authority under the Act to determine what is equitable.” FTC Order at 21 (emphasis added). As Plaintiffs correctly argue, this language implies that the FTC believed it should perform deferential review under an abuse-of-discretion-type standard. This does not accurately reflect the way power is divided between the FTC and Authority under the Act. Indeed, Defendants have not cited, and the Court cannot independently locate, an APA case where a private entity proposed a rule that the agency then approved under an abuse-of-discretion standard. Cf. Black I, 53 F.4th at 884 (“The FTC's limited review of proposed rules falls short of the ‘pervasive surveillance and authority’ an agency must exercise over a private entity.” (quoting Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 388 (1940))). It follows, in this one narrow respect, that the FTC appears to have “misread the statute and misunderstood the scope of its discretion.” Regan, 85 F.4th at 887 (internal punctuation omitted). This is arbitrary and capricious. See id.

In fairness, other portions of the same section of the FTC Order suggest the agency did not misunderstand the scope of its authority after all. The Order went into detail explaining why the relevant portion of the proposed rule was “consistent with the Act,” notwithstanding the two objections it received. See FTC Order at 18–21. This included an extended discussion of why it was appropriate to exclude some covered persons from the allocation altogether, with the FTC Order explaining that the exclusion of “low-wage workers (like grooms), who may not receive a share of any winnings, is a reasonable approach and consistent with notions of fairness, the touchstone of equitability.” FTC Order at 20. It also explained the exclusion of veterinarians, stating that there is a “current shortage of equine veterinarians” and thus “allocating fees to that group could pose a risk to racetrack safety if it disincentivizes them from continuing to treat Covered Horses.” Id. Finally, the FTC Order explained that not all breeders are “involved with covered horseraces” because some may cease their relationship with horses before the horses become covered by the Act. Id. at 21. In other words, there was uncertainty about “whether it is appropriate and legally permissible to include breeders in the allocation.” Id. By scrutinizing the proposed rule in this way, the FTC seemed to be bringing independent judgment to the analysis in a way that did not miss relevant factors or information. See South Dakota v. U.S. Dep't of Interior, 423 F.3d 790, 800 (8th Cir. 2005) (“We will not try to identify failures in clarity or detail, and will reverse only when there is no rational basis for the policy choice․ [T]he agency need not exhaustively analyze every factor ․” (internal punctuation and citations omitted)).

Even so, the sentence describing the default allocation as being “consistent with the discretion afforded to the Authority under the Act” is head-scratching enough to make it appropriate to require the FTC to do more to explain itself. If this was simply imprecise language, and the FTC was independently endorsing the Authority's conclusion with full awareness of its power to reject or modify it, the FTC should say so. Conversely, if the FTC truly believed that it was required to defer to the Authority under an abuse-of-discretion-type standard, the FTC needs to take a second (and non-deferential) look. Either way, something more is necessary.

The only remaining question is whether the Court should vacate the FTC Order altogether or merely remand without vacatur. Vacatur is the “normal remedy.” Allina Health Servs. v. Sebelius, 746 F.3d 1102, 1110 (D.C. Cir. 2014). But in “limited circumstances,” courts have discretion to “remand without vacating the agency's actions.” Am. Great Lakes Ports Ass'n v. Schultz, 962 F.3d 510, 518 (D.C. Cir. 2020). In deciding between these options, the Court must consider the severity of the agency's error and whether vacatur would produce “disruptive consequences.” Allina Health Servs., 746 F.3d at 1110.

This is one of the “limited circumstances” in which remand without vacatur is appropriate. As explained above, on the whole, the FTC Order evaluated the proposed allocation in a reasonably thorough way that took into account relevant information and factors. Thus, there is a “strong possibility” that the FTC Order is guilty of nothing more than using imprecise language. See United States Sugar Corp. v. EPA, 830 F.3d 579, 652 (D.C. Cir.), on reh'g en banc, 671 F. App'x 822 (D.C. Cir. 2016), and on reh'g en banc in part, 671 F. App'x 824 (D.C. Cir. 2016) (holding that remand without vacatur was appropriate where “strong possibility” existed that agency could correct the error in its analysis). It would not be appropriate in these circumstances to vacate the Order altogether and force horseracing industry participants to unwind the last fifteen months of activity and revert to the preexisting state of affairs. See id.; A.P. Bell Fish Co. v. Raimondo, 94 F.4th 60, 65 (D.C. Cir. 2024) (remanding without vacatur in similar circumstances).

IV. Conclusion.

The Court GRANTS IN PART and DENIES IN PART the parties' respective Motions for Summary Judgment. (ECF 32; ECF 39; ECF 40.) Counts I and II are DISMISSED WITH PREJUDICE because the Act is not unconstitutional under the public or private non-delegation doctrines. Counts III, V, VII, and VIII are DISMISSED WITHOUT PREJUDICE by agreement of the parties. Count IV is DISMISSED AS MOOT. As to Count VI, the Order Approving the Assessment Methodology Rule Modification Proposed by the Horseracing Integrity and Safety Authority (FTC Dec. 23, 2024) is REMANDED WITHOUT VACATUR to the FTC. The Clerk of Court is directed to enter Judgment for Defendants on Counts I–V and VII–VIII, enter Judgment for Plaintiffs on Count VI, and close the case.

IT IS SO ORDERED.

FOOTNOTES

1.   All references to “ECF” are to the docket on the Electronic Case Filing system. References to page numbers are to the numbering in the upper-righthand corner of each page, as auto-populated by the ECF system. These numbers often do not match the pagination used by the parties at the bottom of each page.

2.   https://www.ftc.gov/system/files/ftc_gov/pdf/Order%20re%20HISA%20Assessment%20Methodology.pdf.

3.   https://www.govinfo.gov/content/pkg/FR-2024-10-23/pdf/2024-24567.pdf.

4.   https://www.ftc.gov/system/files/ftc_gov/pdf/P222100HISAAssessmentRuleOrder12232024.pdf.

5.   At oral argument, the Court discussed reserving ruling on the pending motions for summary judgment until the Eighth Circuit issues a new decision on remand in Walmsley. Upon further reflection, however, the Court believes the better course of action is to move forward with this ruling. If the Eighth Circuit issues a new decision in Walmsley that unexpectedly changes the playing field, the parties of course can address it on appeal or in a motion to reconsider.

STEPHEN H. LOCHER U.S. DISTRICT JUDGE