State of Okla. v. United States

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 23a0035p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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STATE OF OKLAHOMA; OKLAHOMA HORSE RACING COMMISSION;
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TULSA COUNTY PUBLIC FACILITIES AUTHORITY, dba Fair Meadows
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Racing and Sports Bar; STATE OF WEST VIRGINIA; WEST VIRGINIA
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RACING COMMISSION; HANOVER SHOE FARMS, INC.; OKLAHOMA
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QUARTER HORSE RACING ASSOCIATION; GLOBAL GAMING RP, > No. 22-5487
LLC, dba Remington Park; WILL ROGERS DOWNS, LLC; UNITED │
STATES TROTTING ASSOCIATION; STATE OF LOUISIANA, │
Plaintiffs-Appellants, │
│
│
v. │
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UNITED STATES OF AMERICA; HORSERACING INTEGRITY AND │
SAFETY AUTHORITY, INC.; LEONARD S. COLEMAN, JR.; NANCY M. │
COX; FEDERAL TRADE COMMISSION; REBECCA KELLY SLAUGHTER, │
in her official capacity as Acting Chair of the Federal Trade │
Commission; NOAH JOSHUA PHILLIPS, in his official capacity as │
Commissioner of the Federal Trade Commission; ALVARO │
BEDOYA, in his official capacity as Commissioner of the Federal │
Trade Commission; CHRISTINE S. WILSON, in her official capacity │
as Commissioner of the Federal Trade Commission; STEVE │
BESHEAR; ADOLPHO A. BIRCH, JR.; ELLEN MCCLAIN; CHARLES P. │
SCHEELER; JOSEPH DEFRANCIS; SUSAN STOVER; BILL THOMASON; │
D.G. VAN CLIEF; LINA KHAN, │
Defendants-Appellees. │
│
┘
Appeal from the United States District Court for the Eastern District of Kentucky at Lexington.
No. 5:21-cv-00104—Joseph M. Hood, District Judge.
Argued: December 7, 2022
Decided and Filed: March 3, 2023
Before: SUTTON, Chief Judge; COLE and GRIFFIN, Circuit Judges.
No. 22-5487 State of Okla., et al. v. United States, et al. Page 2
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COUNSEL
ARGUED: Matthew D. McGill, GIBSON, DUNN & CRUTCHER LLP, Washington, D.C., for
Appellants. Courtney L. Dixon, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Federal Appellees. Pratik A. Shah, AKIN GUMP STRAUSS HAUER &
FELD LLP, Washington, D.C., for Horseracing Authority Appellees. ON BRIEF: Matthew D.
McGill, Lochlan F. Shelfer, GIBSON, DUNN & CRUTCHER LLP, Washington, D.C., Zach
West, Bryan Cleveland, OFFICE OF THE OKLAHOMA ATTORNEY GENERAL, Oklahoma
City, Oklahoma, Lindsay S. See, OFFICE OF THE WEST VIRGINIA ATTORNEY
GENERAL, Charleston, West Virginia, Joseph Bocock, BOCOCK LAW PLLC, Oklahoma City,
Oklahoma, Todd Hembree, CHEROKEE NATION BUSINESS, Catoosa, Oklahoma, Elizabeth
B. Murrill, LOUISIANA DEPARTMENT OF JUSTICE, Baton Rouge, Louisiana, Michael
Burrage, WHITTEN BURRAGE, Oklahoma City, Oklahoma, Jared C. Easterling, GREEN
LAW FIRM PC, Ada, Oklahoma, for Appellants. Courtney L. Dixon, Joseph F. Busa, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Federal Appellees. Pratik A.
Shah, Lide E. Paterno, AKIN GUMP STRAUSS HAUER & FELD LLP, Washington, D.C.,
John C. Roach, RANSDELL ROACH & ROYSE, Lexington, Kentucky, for Horseracing
Authority Appellees. Benjamin M. Flowers, OFFICE OF THE OHIO ATTORNEY GENERAL,
Columbus, Ohio, Paul E. Salamanca, Lexington, Kentucky, April A. Wimberg, DENTONS
BINGHAM GREENEBAUM LLP, Louisville, Kentucky, Gregory G. Garre, Blake E. Stafford,
LATHAM & WATKINS LLP, Washington, D.C., for Amici Curiae.
SUTTON, C.J., delivered the opinion of the court in which GRIFFIN and COLE, JJ.,
joined. COLE, J. (pp. 20–31), delivered a separate concurring opinion.
_________________
OPINION
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SUTTON, Chief Judge. Sometimes government works. In 2020, when Congress enacted
the Horseracing Safety and Integrity Act to create a national framework to regulate thoroughbred
horseracing, it generated several non-delegation and anti-commandeering challenges to the
validity of the Act. The lead challenge—the non-delegation challenge—turned on the reality that
the Act replaced several state regulatory authorities with a private corporation, the Horseracing
Authority, which became the Act’s primary rule-maker and which was not subordinate to the
relevant public agency, the Federal Trade Commission, in critical ways. The Fifth Circuit
declared the Act unconstitutional because it gave “a private entity the last word” on federal law.
No. 22-5487 State of Okla., et al. v. United States, et al. Page 3
Nat’l Horsemen’s Benevolent & Protective Ass’n v. Black, 53 F.4th 869, 872, 888–89 (5th Cir.
2022).
In response, Congress amended the Act to give the Federal Trade Commission discretion
to “abrogate, add to, and modify” any rules that bind the industry. Consolidated Appropriations
Act of 2023, Pub. L. No. 117-328, 136 Stat. 4459 (2022). The Constitution anticipates, though it
does not require, constructive exchanges between Congress and the federal courts. See
Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635 (1952) (Jackson, J., concurring)
(explaining that “interdependence” and “reciprocity” should characterize the relationship
between the branches as much as “separateness” and “autonomy”). A productive dialogue
occurred in this instance, and it ameliorated the concerns underlying the non-delegation
challenge. As amended, the Horseracing Act gives the FTC the final say over implementation of
the Act relative to the Horseracing Authority, allowing us to uphold the Act as constitutional in
the face of this non-delegation challenge as well as the anti-commandeering challenge.
I.
Unlike other sports, no one authority traditionally has regulated horseracing. Instead, 38
state regulatory schemes have supplied an array of protocols and safety requirements. Kjirsten
Lee, Transgressing Trainers and Enhanced Equines, 11 J. Animal & Nat. Res. L. 23, 26 (2015).
Most Americans know horseracing through occasional high-visibility races, say the Kentucky
Derby on the first Saturday of May, or high-visibility books, say Seabiscuit. But as the partly
and fully initiated alike can appreciate, the sport comes with risk. Racing a dozen or more
jockeys atop large horses around a mile or more track, all with prize money and gambling
positions at stake, creates plenty of danger. Over the last seventy years or so, fatal accidents for
jockeys during horseraces have exceeded that of drivers in NASCAR races. Peta L. Hitchens et
al., Jockey Falls, Injuries, and Fatalities Associated with Thoroughbred and Quarter Horse
Racing in California 2007–2011, at 3, Orthopedic J. Sports Med. (2013) (129 jockeys killed
between 1940 and 2012); How Many NASCAR Drivers Have Died Racing?, Motor Racing
Sports, https://tinyurl.com/2d3xnazy (last visited Feb. 6, 2023) (82 NASCAR drivers killed
between 1950 and 2021). Faring no better, almost 500 thoroughbreds died in 2018 alone due to
No. 22-5487 State of Okla., et al. v. United States, et al. Page 4
racing injuries. Why Horse Racing Is So Dangerous, Nat’l Geographic (Jan. 21, 2020),
https://tinyurl.com/ycyf5rhv.
Whether it’s the risk of pushing horses past their limits or the risks associated with unsafe
tracks and doping, or other health and safety issues facing horses and jockeys, no one doubts the
imperative for oversight. The question, as is so often the case, is whether the regulation should
be national or local.
In 2020, Congress answered national but did so in conventional and unconventional
ways. Conventionally, it enacted the Horseracing Integrity and Safety Act to nationalize
regulatory authority over thoroughbred racing. 15 U.S.C. §§ 3051–60. Less conventionally, it
chose to use a private nonprofit corporation—the Horseracing Integrity and Safety Authority—to
do some of the regulating.
The Act charges the Horseracing Authority with “developing and implementing a
horseracing anti-doping and medication control program and a racetrack safety program.” Id.§ 3052(a). The Authority’s jurisdiction also includes the “safety, welfare, and integrity” of
covered thoroughbreds, jockeys, and horseraces. Id. § 3054(a)(2)(A). The Authority may
expand the Act’s coverage to other breeds upon request by a state racing commission or a breed
governing organization. Id. § 3054(l).
The Horseracing Authority funds its operations through fees on the horseracing industry.
Each year, it calculates its budget and apportions amounts owed by each State. Id.
§ 3052(f)(1)(C). The States have two options. They may collect the fees themselves from
covered entities and remit the fees to the Authority. Id. § 3052(f)(2)(D). Or they may allow the
Authority to collect the fees directly. Id. § 3052(f)(3)(A)–(C).
The Act empowers the Horseracing Authority to promulgate rules on a variety of
subjects: prohibited medications, laboratory protocols and accreditation, racetrack standards and
protocols, injury analysis, enforcement, and fee assessments. Id. § 3053(a). The Authority also
develops procedures for its investigatory and subpoena powers. Id. § 3054(c). Once issued, the
rules preempt state law. Id. § 3054(b).
No. 22-5487 State of Okla., et al. v. United States, et al. Page 5
The Horseracing Authority implements the rules, monitors compliance, and investigates
potential rule infractions. Id. § 3054(c), (h), (i). The Act directs “the Authority and Federal or
State law enforcement authorities” to “cooperate and share information” whenever a covered
person may have violated federal or state law in addition to one of the Authority’s rules. Id.
§ 3060(b). After investigating, the Authority may enforce the rules through internal
adjudications or civil lawsuits. Id. §§ 3054(j), 3057(c).
Under the Horseracing Act as originally passed, the Federal Trade Commission played a
limited role. The FTC published the Authority’s proposed rules for public comment. Id.
§ 3053(b)(1). After the comment period, the FTC had to approve the rules if they were
“consistent” with the Act and with other “applicable rules approved by the Commission.” Id.
§ 3053(b)–(c). The FTC also could issue an “interim” rule if it had “good cause” to do so and if
the rule was “necessary to protect” the welfare of horses or the integrity of the sport. Id.
§ 3053(e) (2020); see 5 U.S.C. § 553(b)(B).
This framework prompted legal challenges. In a case filed in federal court in Texas,
several claimants argued that the Act violated the Constitution by delegating unmonitored
lawmaking power to a private entity. The Fifth Circuit agreed, reasoning that the FTC’s
oversight was insufficient because the FTC could not modify the rules or otherwise question the
Horseracing Authority’s policy choices. Black, 53 F.4th at 872–73, 886–87. Our court faced a
similar challenge. Oklahoma, West Virginia, Louisiana, their racing commissions, and other
entities (collectively, Oklahoma) claimed that the Act unlawfully delegated federal power to a
private entity and unlawfully commandeered the States. The district court dismissed
Oklahoma’s claims.
After the Fifth Circuit issued its decision and after we heard oral argument in our case,
Congress enacted, and the President signed into law, an amendment to the Act that increased the
FTC’s oversight role. The amendment eliminated the FTC’s interim-rule authority and instead
gave sweeping power to the FTC to create rules that “abrogate, add to, and modify the rules of
the Authority.” 15 U.S.C. § 3503(e) (as amended). Oklahoma maintains that the Act remains
unconstitutional.
No. 22-5487 State of Okla., et al. v. United States, et al. Page 6
II.
Mootness. First things first: Does the amendment to the Act transform this live
controversy into a moot one? When Congress amends a statute, it is true, pending claims
challenging the law sometimes become moot. See City of Pontiac Retired Emps. Ass’n v.
Schimmel, 751 F.3d 427, 430 (6th Cir. 2014) (en banc) (per curiam). Not invariably, however.
If the revised statute continues to place a non-trivial burden on the plaintiff that arises from the
same theory of unconstitutionality set forth in the complaint, the case remains live. Kenjoh
Outdoor, LLC v. Marchbanks, 23 F.4th 686, 692–93 (6th Cir. 2022). A similar conclusion
applies if the amendment does not affect other features of the challenge. Both exceptions apply
here.
The amendment to § 3053(e) of the Horseracing Act does not moot Oklahoma’s non-
delegation claim. While significant to the outcome of the case, this singular amendment changes
little about the Act’s basic structure. The revised Act “operates in the same fundamental ways,”
with the Authority proposing and enforcing rules and with the FTC overseeing all of them, the
key difference being that the FTC has far more oversight authority than it had before. Id. at 693.
The revised Act likewise presents fundamentally the “same controversy,” with Oklahoma
continuing to argue that the Act gives too much unsubordinated power to a private entity. Id.;
see Cam I, Inc. v. Louisville/Jefferson Cnty. Metro Gov’t, 460 F.3d 717, 720 (6th Cir. 2006).
Nor does the Act moot Oklahoma’s anti-commandeering claim. In reality, the amendment does
not change that dispute in any material way.
Remand. One other preliminary point remains. If the legislature changes a law while a
live challenge to it remains on appeal, appellate courts may remand the case for the district court
to take the first look at the revised law. Hadix v. Johnson, 144 F.3d 925, 934 (6th Cir. 1998),
abrogated on other grounds, 530 U.S. 327 (2000). The option is discretionary, not mandatory.
In this instance, we see “little to be gained” from a remand because Oklahoma brings facial
challenges that raise only legal issues and because the parties and panel have already devoted
considerable time and resources to the dispute. Id. at 935; see Phelps-Roper v. Troutman,
712 F.3d 412, 417 (8th Cir. 2013) (per curiam). Fortifying this conclusion is the reality that the
challengers have asked us to proceed to the merits.
No. 22-5487 State of Okla., et al. v. United States, et al. Page 7
III.
A.
Non-delegation. Through the United States Constitution, the People separated the
powers of the National Government into three branches. They vested the legislative power in
Congress, the executive in the President, and the judicial in the federal courts. U.S. Const. art. I,
§ 1; id. art. II, § 1; id. art. III, § 1. The People also constrained each branch’s use of its power
through counterweights in the other branches. To preserve this balance, the Constitution bars
further delegations of power between the branches. Whitman v. Am. Trucking Ass’ns, 531 U.S.
457, 472 (2001).
What about delegations to private entities? Surely, if the Vesting Clauses bar the three
branches from exchanging powers among themselves, those Clauses bar unchecked
reassignments of power to a non-federal entity. Just as it is a central tenet of liberty that the
government may not permit a private person to take property from another private person,
Calder v. Bull, 3 U.S. (Dall.) 386, 388–89 (1798) (Chase, J.), or allow private individuals to
regulate other private individuals, Washington ex rel. Seattle Title Tr. Co. v. Roberge, 278 U.S.
116, 122 (1928), it follows that the government may not empower a private entity to exercise
unchecked legislative or executive power. Those who govern the People must be accountable to
the People. Completely transferring unchecked federal power to a private entity that is not
elected, nominated, removable, or impeachable undercuts representative government at every
turn.
Precedent confirms that unchecked delegations to private entities at a minimum violate
core separation-of-power guarantees. Consider A.L.A. Schechter Poultry Corp. v. United States,
295 U.S. 495 (1935). A federal statute gave the President discretion to create codes of fair
competition based on proposals from private entities. Id. at 542. Rejecting the government’s
view that private participation cured any surplus delegation to the President, the Court explained
that transforming private groups into legislatures was “utterly inconsistent” with the
constitutional design. Id. at 537.
No. 22-5487 State of Okla., et al. v. United States, et al. Page 8
The Court applied the same standard to the Bituminous Coal Act. In Carter v. Carter
Coal Co., the Court concluded that, by empowering coal producers to set wages and to control
the businesses of others, the Act amounted to a “delegation in its most obnoxious form” because
such regulation “is necessarily a governmental function.” 298 U.S. 238, 310–11 (1936).
Appreciating the problem, Congress amended the Act the next year to give the Coal
Commission, a government entity, the power to set prices. See Sunshine Anthracite Coal Co. v.
Adkins, 310 U.S. 381, 388 (1940). After Congress subordinated the private coal producers to a
public body (the Coal Commission) that could modify or reject their proposals, the Court
determined that the statute did not impermissibly delegate “legislative authority to the industry.”
Id. at 399.
Taken together, these cases draw a line between impermissible delegation of unchecked
lawmaking power to private entities and permissible participation by private entities in
developing government standards and rules. Adkins shows that a private entity may aid a public
federal entity that retains authority over the implementation of federal law. Id. at 388. But if a
private entity creates the law or retains full discretion over any regulations, Carter Coal and
Schechter tell us the answer: that it is an unconstitutional exercise of federal power. See Carter
Coal, 298 U.S. at 311; Schechter, 295 U.S. at 537.
Decisions from the courts of appeals hold this line. Private entities may serve as advisors
that propose regulations. See Sierra Club v. Lynn, 502 F.2d 43, 59 (5th Cir. 1974); Cospito v.
Heckler, 742 F.2d 72, 87–89 (3d Cir. 1984); Todd & Co. v. SEC, 557 F.2d 1008, 1012–13 (3d
Cir. 1977). And they may undertake ministerial functions, such as fee collection. See Pittston
Co. v. United States, 368 F.3d 385, 395–97 (4th Cir. 2004); United States v. Frame, 885 F.2d
1119, 1128–29 (3d Cir. 1989), abrogated on other grounds, 521 U.S. 457 (1997). But a private
entity may not be the principal decisionmaker in the use of federal power, Pittston Co., 368 F.3d
at 395–97, may not create federal law, Texas v. Rettig, 987 F.3d 518, 533 (5th Cir. 2021), may
not wield equal power with a federal agency, Ass’n of Am. R.R. v. U.S. Dep’t of Transp. (Amtrak
I), 721 F.3d 666, 671–73 (D.C. Cir. 2013), vacated on other grounds, 575 U.S. 43 (2015), or
regulate unilaterally, Black, 54 F.4th at 872.
No. 22-5487 State of Okla., et al. v. United States, et al. Page 9
An illuminating example comes from securities law. The Securities and Exchange
Commission regulates the securities industry with the assistance of private, self-regulatory
organizations called SROs. The SROs propose rules for the industry, and they initially enforce
the rules through internal adjudication. The SEC oversees both the rulemaking and the
enforcement. As to the rules, the SEC approves proposed rules if they are consistent with the
Maloney Act, and may “abrogate, add to, and delete from” an SRO’s rules “as the Commission
deems necessary or appropriate.” 15 U.S.C. § 78s(b)(2)(C), (c). As to enforcement, the SEC
applies fresh review to the SRO’s decisions and actions. Id. § 78s(e); see Sartain v. SEC, 601
F.2d 1366, 1369–71 (9th Cir. 1979). In case after case, the courts have upheld this arrangement,
reasoning that the SEC’s ultimate control over the rules and their enforcement makes the SROs
permissible aides and advisors. See R.H. Johnson & Co. v. SEC, 198 F.2d 690, 695 (2d Cir.
1952); Todd & Co., 557 F.2d at 1012–13; First Jersey Secs., Inc. v. Bergen, 605 F.2d 690, 697
(3d Cir. 1979); Sorrell v. SEC, 679 F.2d 1323, 1325–26 (9th Cir. 1982); see also Amtrak I, 721
F.3d at 671 n.5 (describing the SROs’ role as “purely advisory or ministerial”).
These sources all suggest that, at a minimum, a private entity must be subordinate to a
federal actor in order to withstand a non-delegation challenge. Whether subordination always
suffices to withstand a challenge raises complex separation of powers questions. Simplifying
matters for today, if not for a future day, the parties accept this framing of the appeal. As the
case comes to us, then, the determinative question is whether the Horseracing Authority is
inferior to the FTC.
B.
The Horseracing Authority is subordinate to the agency. The Authority wields materially
different power from the FTC, yields to FTC supervision, and lacks the final say over the content
and enforcement of the law—all tried and true hallmarks of an inferior body.
Rulemaking. As amended, the Horseracing Act gives the FTC supervision over the rules
that govern the horseracing industry. At the outset, the Horseracing Authority drafts rules on
racetrack safety and anti-doping matters, and the FTC must approve those proposals if they are
consistent with the Act. 15 U.S.C. § 3053(c)(2). But, critically, as the FTC “deems necessary or
No. 22-5487 State of Okla., et al. v. United States, et al. Page 10
appropriate,” it “may abrogate, add to, and modify the rules.” Id. § 3053(e) (as amended).
The FTC’s power to abrogate and change the Authority’s rules creates “a clear hierarchy.”
Black, 53 F.4th at 888–89.
Section 3053(e)’s amended text grants the FTC a comprehensive oversight role. The Act
provides that the FTC may act as it “finds necessary or appropriate to ensure the fair
administration of the Authority, to conform the rules of the Authority to requirements of this Act
and applicable rules approved by the Commission, or otherwise in furtherance of the purposes of
this Act.” 15 U.S.C. § 3053(e) (as amended). The final catchall indicates that § 3053(e) spans
the Horseracing Authority’s jurisdiction. The parties are one in agreeing that this section allows
the FTC to modify rules “if it wishes.” Appellants’ Suppl. Br. 1.
A comparison with § 3053(e)’s pre-amendment language reenforces the point. Before
the amendment, § 3053(e) allowed the FTC to adopt interim rules only if “necessary,” and only
if good cause existed to bypass the Administrative Procedure Act’s notice and comment
procedures. 15 U.S.C. § 3053(e) (2020). The Fifth Circuit concluded that the ability to “make
temporary rules on a break-glass-in-case-of-an-emergency basis” did not give the FTC sufficient
control. Black, 53 F.4th at 883. The FTC could overrule the Authority only in rare, extreme
cases, making it the inferior, not the superior, rule-maker. The amended section, by contrast,
requires no emergency, no good cause, no necessity. The FTC now may create new rules or
modify existing rules as it deems “appropriate to” advance “the purposes of [the] Act.”
15 U.S.C. § 3053(e) (as amended). That amounts to true oversight authority.
With § 3053(e)’s broad power to write and rewrite the rules comes policymaking
discretion. See Cospito, 742 F.2d at 88–89. When the FTC decides to act—whether by
abrogating one of the Horseracing Authority’s rules or introducing its own—the FTC makes a
policy choice and necessarily scrutinizes the Authority’s policies. That is no less true when the
FTC decides not to act. In either setting, the FTC may “unilaterally change regulations,” Amtrak
I, 721 F.3d at 671, and “is free to prescribe” the rules, showing that it “retains ultimate
authority,” Cospito, 742 F.2d at 88. In a recent rule, the FTC recognized as much,
explaining that its new “rulemaking power” allows it to “exercise its own policy choices.”
No. 22-5487 State of Okla., et al. v. United States, et al. Page 11
Order Ratifying Previous Commission Orders 3, Fed. Trade Comm’n (Jan. 3, 2023),
https://tinyurl.com/dkenwspt.
In full, § 3053(e)’s amended text gives the FTC ultimate discretion over the content of
the rules that govern the horseracing industry and the Horseracing Authority’s implementation of
those rules. By the same token, ultimate “law-making is not entrusted to the [Authority].”
Adkins, 310 U.S. at 399; see Frame, 885 F.2d at 1129. That makes the FTC the primary rule-
maker, and leaves the Authority as the secondary, the inferior, the subordinate one. See Adkins,
310 U.S. at 388.
Accountability considerations lead to the same destination. Before the amendment, the
Fifth Circuit determined that the FTC could not question the Horseracing Authority’s policy
choices or modify its rules. Black, 53 F.4th at 886–87. It followed that the Authority, a private
entity beyond public control, alone was responsible for the exercise of government power in this
area. Not so anymore. With its new ability to have “the final word on the substance of the
rules,” the FTC bears ultimate responsibility. Id. at 887; cf. Lynn, 502 F.2d at 59. The People
may rightly blame or praise the FTC for how adroitly (or, let’s hope not, ineptly) it “ensure[s] the
fair administration of the Authority” and advances “the purposes of [the] Act.” 15 U.S.C.
§ 3053(e) (as amended).
Enforcement. A similar conclusion applies to enforcement of the Act. The Horseracing
Authority’s enforcement duties are extensive, granted. The Authority implements the Act,
investigates potential rule violations, and enforces the rules through internal adjudications and
external civil lawsuits. Even so, the FTC’s rulemaking and rule revision power gives it
“pervasive” oversight and control of the Authority’s enforcement activities, just as it does in the
rulemaking context. Adkins, 310 U.S. at 388.
Take an example to illustrate the point. Imagine that the Horseracing Authority began
enforcing its rule without giving thought to the procedural rights of jockeys, trainers, and other
industry participants. Section 3053(e) gives the FTC the tools to step in. To ensure a fair
enforcement process, the FTC could issue rules protecting covered persons from overbroad
subpoenas or onerous searches. The FTC could require that the Authority provide a suspect with
No. 22-5487 State of Okla., et al. v. United States, et al. Page 12
a full adversary proceeding and with free counsel. And the FTC could require that the Authority
meet a burden of production before bringing a lawsuit or preclear the decision with the FTC. In
these ways as well as others, the FTC may control the Authority’s enforcement activities and
ensure that the FTC, not the Authority, ultimately decides how the Act is enforced.
Topping this oversight off, the FTC has full authority to review the Horseracing
Authority’s enforcement actions. 15 U.S.C. § 3058(c)(1)–(2). After an independent review, the
FTC may reverse the Authority’s decision. Id. § 3058(c)(3). As with rulemaking, so with
adjudication: The Authority’s adjudication decisions are not final until the FTC has the
opportunity to review them. See Cospito, 742 F.2d at 88; Todd & Co., 557 F.2d at 1012–14. All
told, the Horseracing Authority is “subject to [the FTC’s] pervasive surveillance and authority,”
revealing that the Authority “operate[s] as an aid to the [FTC],” nothing more. Adkins, 310 U.S.
at 388.
Whether the FTC becomes a demanding taskmaster or a lenient one, the FTC could
subordinate every aspect of the Authority’s enforcement “to ensure the fair administration of the
Authority . . . or otherwise in furtherance of the purposes of [the] Act.” 15 U.S.C. § 3053(e) (as
amended). That potential suffices to defeat a facial challenge, where Oklahoma must show that
the Act is unconstitutional in all its applications. United States v. Salerno, 481 U.S. 739, 745
(1987).
C.
In seeking to head off this conclusion, Oklahoma points out that the amendment does not
change one feature of the Act—that the FTC has power only to review proposed rules by the
Authority for “consistency” with the Act, a standard of review that, it says, does not pick up
policy disagreements. 15 U.S.C. § 3053(c). Maybe so. But even if that is the case, the FTC’s
later authority to modify any rules for any reason at all, including policy disagreements, ensures
that the FTC retains ultimately authority over the implementation of the Horseracing Act. The
FTC’s review authority in this respect parallels similar authority exercised by the SEC under the
Maloney Act. Compare 15 U.S.C. § 78s(c) (providing that the SEC “may abrogate, add to, and
delete from . . . the rules of [the private entity] as the Commission deems necessary or
No. 22-5487 State of Okla., et al. v. United States, et al. Page 13
appropriate”), with 15 U.S.C. § 3053(e) (as amended) (providing that the FTC “may abrogate,
add to, and modify the rules of the Authority . . . as the Commission finds necessary or
appropriate”). The same is true in the Coal Act. See Bituminous Coal Act of 1937, Pub. L. No.
75-48, § 4, 50 Stat. 72, 78 (providing that the Coal Commission could “approve, disapprove, or
modify” proposals).
Before the amendment, Oklahoma observed that the SEC’s modification power gives the
SEC “largely unbounded authority to craft [the private entity’s] regulations as it sees fit.” Reply
Br. 7. The same is now true under the Horseracing Act. The lack of a modification power,
moreover, was the “key distinction” the Fifth Circuit identified between the Maloney and
Horseracing Acts. Black, 53 F.4th at 887. The amendment to § 3053(e) eliminates that
distinction. Even if other less-material distinctions between the two laws remain, the FTC’s new
discretion to adopt and modify rules correctly places the private Horseracing Authority in a
subordinate position to the public FTC. All of this explains why every court of appeals to
address the validity of such delegations under the Maloney Act and the Coal Act, as noted, has
upheld them.
Oklahoma worries that the Horseracing Authority’s rules could govern a dispute until the
FTC undoes rules it dislikes. It’s true that the FTC’s modification authority under § 3053(e), as
it currently exists, customarily would run through ordinary rulemaking. But that current reality
need not be a future reality. For one, the threat of modification is not likely to miss the attention
of the Authority. For another, the FTC has power to initiate new rules, not just to modify rules it
does not like. To the extent this timing gap creates a problem, the FTC is free to resolve it ahead
of time. It might, for example, adopt a rule that all newly enacted rules do not take effect for 180
days, thereby giving the FTC time to review rules and prepare preemptive modifications.
This argument overlooks another reality. When the FTC reviews the Horseracing
Authority’s proposed rules, it asks not just whether they are “consistent” with the Act; it also
asks whether they are “consistent” with other “applicable rules approved by the Commission.”
Id. § 3053(c)(2). Any risk of a policymaking gap between initial consistency review and initial
full review will diminish over time as the FTC chooses to exercise—or not to exercise—its
No. 22-5487 State of Okla., et al. v. United States, et al. Page 14
complete authority to initiate new rules or modify old ones. Over time, the FTC’s threshold
consistency review will account for its own full-throated rulemaking power.
Oklahoma notes that the FTC’s duty under the Administrative Procedure Act to explain
any changes to the rules limits its hand. But that just means it may not arbitrarily alter the rules.
The APA does not limit the FTC’s authority to disagree with the Horseracing Authority over a
policy choice delegated to the agency by Congress. The FTC “need not demonstrate to a court’s
satisfaction that the reasons for the new policy are better than the reasons for the old.” FCC v.
Fox Television Stations, Inc., 556 U.S. 502, 515 (2009). It is enough that “there are good
reasons” for the new policy “and that the agency believes it to be better.” Id.No matter, Oklahoma adds: The Horseracing Authority’s ability to expand its
jurisdiction to breeds other than thoroughbreds escapes the FTC’s review. Not so. The FTC’s
§ 3053(e) power allows it to revoke the Authority’s decision or place procedural and substantive
conditions on any such decision.
Oklahoma points to the Horseracing Authority’s ability to enforce the Act through civil
lawsuits, asserting that the ability cannot reside outside the executive branch. “Difficult and
fundamental questions,” we agree, arise when private entities enforce federal law. Friends of the
Earth, Inc. v. Laidlaw Env’t Servs. (TOC), Inc., 528 U.S. 167, 197 (2000) (Kennedy, J.,
concurring). But this is not an as-applied challenge to an individual enforcement action; it is a
facial challenge to the Act. The FTC’s ultimate authority over all rules promulgated under the
Act, which would include any rules related to enforcement, offers a potent answer to this concern
in the context of a facial challenge. The Authority’s enforcement through internal adjudication
and external lawsuits is subordinate to the FTC. The other reality is that the parties simply have
not engaged with this feature of the Act, including briefing with respect to founding-era or
contemporary analogs showing the role private entities may, and may not, play in law
enforcement. That omission is understandable. From the start, Oklahoma litigated this claim as
one turning on “governmental oversight” of and “accountability” for the Horseracing Authority’s
activities, not as a categorical Article II inquiry or as a question of historical meaning. R.53
¶ 150; R.98 at 23–24. We thus will decide the case as it comes to us, and save resolution of such
No. 22-5487 State of Okla., et al. v. United States, et al. Page 15
questions, if such questions there be, for a day when the Authority’s actions and the FTC’s
oversight appear in concrete detail, presumably in the context of an actual enforcement action.
IV.
Oklahoma separately claims that two provisions of the Horseracing Act, § 3060(b) and
§ 3052(f), violate the anti-commandeering guarantee of the Tenth Amendment. Oklahoma lacks
standing to challenge the first provision, and the second one does not count as a cognizable form
of commandeering.
A.
Oklahoma initially sets its sights on § 3060(b), which requires state authorities to
“cooperate and share information” with the Horseracing Authority or federal agencies. Right or
wrong about whether this requirement amounts to commandeering, Oklahoma and the other
State plaintiffs lack standing to challenge it.
Standing arises from the Constitution’s mandate that federal courts decide only “Cases”
or “Controversies.” U.S. Const. art. III, § 2, cl. 1. A plaintiff must establish standing for each
claim he presses and each statutory provision he challenges. TransUnion LLC v. Ramirez, 141 S.
Ct. 2190, 2207–08 (2021). To do that, he must point to an injury that is traceable to the
defendant’s conduct and that a judicial decision can redress. Lujan v. Defs. of Wildlife, 504 U.S.
555, 560–61 (1992). In a pre-enforcement challenge like this one, a plaintiff must also allege a
“credible threat” of future enforcement. Susan B. Anthony List v. Driehaus, 573 U.S. 149, 159
(2014).
Oklahoma has not carried this burden. Even if Oklahoma is correct that § 3060(b)
unlawfully orders the States to cooperate, the provision does not contain a penalty or
enforcement mechanism. And Oklahoma does not point to any actual or threatened enforcement
actions. An unenforceable statutory duty does not give rise to Article III standing, California v.
Texas, 141 S. Ct. 2104, 2113–14 (2021), and “mere conjecture” about possible enforcement is
not any better, Clapper v. Amnesty Int’l USA, 568 U.S. 398, 420 (2013).
No. 22-5487 State of Okla., et al. v. United States, et al. Page 16
Oklahoma asserts in response that wrongdoing will “frequently” implicate both federal
and state law, and thus trigger the duty to cooperate. R.86 at 10. But the question is not how
often the opportunity for cooperation may arise; it is whether the defendants can or will mandate
cooperation when that time comes. Even so, Oklahoma notes, the Horseracing Authority may
penalize States that refuse to cooperate. But the Authority’s sanction power extends only to
covered persons, a term that does not include States. 15 U.S.C. §§ 3051(5), 3054(d), 3057(a)(1);
see Gregory v. Ashcroft, 501 U.S. 452, 464 (1991). The same is true of the Authority’s ability to
initiate civil lawsuits. 15 U.S.C. § 3054(j).
Absent a credible allegation that the Horseracing Authority or the FTC can or will
enforce § 3060(b), Oklahoma lacks standing to challenge it. California, 141 S. Ct. at 2115.
B.
Oklahoma separately claims that § 3052(f) puts the States to an unconstitutionally
coercive choice. While § 3052(f)’s threat of preemption gives Oklahoma standing, Kentucky v.
Biden, 23 F.4th 585, 597–601 (6th Cir. 2022), the provision does not commandeer the States.
Congress may not require the States, separate sovereigns all, to implement federal
programs. Printz v. United States, 521 U.S. 898, 925 (1997). Nor may the federal government
issue “orders directly to the States” to carry out this or that federal program. Murphy v. NCAA,
138 S. Ct. 1461, 1475 (2018). At the same time, Congress may “encourage a State to regulate”
or “hold out incentives” in hopes of “influencing a State’s policy choices.” New York v. United
States, 505 U.S. 144, 166 (1992).
One option in this last respect is that Congress may encourage the States through
conditional preemption. Hodel v. Va. Surface Mining & Reclamation Ass’n, Inc., 452 U.S. 264,
290 (1981). Instead of preempting state law altogether, Congress may offer States a regulatory
role contingent on following federal standards. New York, 505 U.S. at 167–68. The choice
brings consequences. If a State participates, it often has discretion in how it implements the
program. See Hodel, 452 U.S. at 289. If a State decides not to participate, the State’s activities
are preempted. By offering States such a non-coercive choice—regulate or be preempted—
No. 22-5487 State of Okla., et al. v. United States, et al. Page 17
Congress has not violated any constitutional imperatives. Murphy, 138 S. Ct. at 1479; New York,
505 U.S. at 167; Hodel, 452 U.S. at 288–91; FERC v. Mississippi, 456 U.S. 742, 769 (1982).
That’s how § 3052(f) operates. It presents States with a choice, not a command. States
may elect to collect fees from the industry and remit the money to the Horseracing Authority or
States may refuse. That’s their call. If a State participates, it gains discretion over how the fees
are collected. 15 U.S.C. § 3052(f)(2)(D). If a State refuses, the Authority collects the fees itself,
and the State “shall not impose or collect from any person a fee or tax relating to anti-doping and
medication control or racetrack safety matters.” Id. § 3052(f)(3)(D).
This scheme fits comfortably within the conditional preemption framework.
Section 3052(f) “simply establish[es] requirements for continued state activity in an otherwise
pre-emptible field.” FERC, 456 U.S. at 769; see Printz, 521 U.S. at 925–26. And because
Congress may regulate horseracing under its commerce power, there is nothing unconstitutional
about Congress “offer[ing] States the choice of regulating that activity according to federal
standards or having state law pre-empted.” New York, 505 U.S. at 173–74.
Section 3052(f) also lacks the hallmark of commandeering: a “direct” order to the States.
Murphy, 138 S. Ct. at 1476. Section 3052(f)’s statement that a State “shall not impose or
collect” certain fees may sound like a command, true enough. Id. § 3052(f)(3)(D). But
preemption often carries that tone, as similar language in other statutes confirms. See, e.g., 42
U.S.C. § 7543(a) (1988) (“No State . . . shall adopt or attempt to enforce any standard relating to
control of emissions . . . .”); 49 U.S.C. § 40116(b) (“[A] State . . . may not levy or collect a tax
[or] fee . . . on an individual traveling in air commerce . . . .”). Because Congress often speaks in
this manner, “it is a mistake to be confused” by preemption provisions that “appear to operate
directly on the States.” Murphy, 138 S. Ct. at 1480. Congress in this instance offers the States a
choice, as Oklahoma all but concedes. Reply Br. 2, 25, 26, 27 (referring to § 3052(f) as a “threat
of preemption”). A choice is not a command. See Printz, 521 U.S. at 925–26.
All of this is not to say “that the choice put to the States—that of either abandoning
regulation” or assisting the Authority—is an easy one or a good one as a matter of policy.
No. 22-5487 State of Okla., et al. v. United States, et al. Page 18
FERC, 456 U.S. at 766. Fraught though it may be, Congress has not commandeered the States
by putting them to this choice.
Oklahoma’s principal counterargument is that a choice between collecting fees and losing
fee collecting authority is illegitimate, coercive, or punitive. We don’t think so.
Oklahoma begins by arguing that § 3052(f)’s choice—collect fees for the Horseracing
Authority or stop collecting entirely—commandeers the States because Congress may not force
the States to adopt either alternative. See New York, 505 U.S. at 175–76. Congress may not
force a State to collect fees, true. Printz, 521 U.S. at 933. But Congress may use its commerce
power to preempt the field of horseracing, preventing States from imposing fees. See FERC, 456
U.S. at 764; Gonzales v. Raich, 545 U.S. 1, 22 (2005). Threatening to do so, it follows, is a
“conditional exercise of [a] congressional power.” New York, 505 U.S. at 176.
Oklahoma’s response that a “threat of preemption,” Reply Br. 25, is coercive runs
aground on contrary precedent. The Court has rejected the argument “that the threat of federal
usurpation of their regulatory roles coerces the States.” Hodel, 452 U.S. at 289; New York, 505
U.S. at 176.
Even so, Oklahoma continues, threatening a State’s taxing authority is especially
coercive. We fail to see how. The validity of conditional preemption does not fluctuate with the
power that is threatened. See Hodel, 452 U.S. at 290–91. This would not be the first time a
State’s taxing power was preempted. See Aloha Airlines, Inc. v. Dir. of Tax’n, 464 U.S. 7, 14
n.10 (1983); Exxon Corp. v. Hunt, 475 U.S. 355, 360–63 (1986).
Oklahoma presses the point that Congress’s financial incentives may become so
overwhelming that a State effectively cannot refuse. See South Dakota v. Dole, 483 U.S. 203,
211–12 (1987). Grafting this principle on conditional preemption raises legal and factual
problems. Legally, it is bereft of support; no case evaluates conditional preemption by looking
to a State’s monetary incentives. Factually, Oklahoma falters because it does not quantify its
expected loss. See NFIB v. Sebelius, 567 U.S. 519, 580–82 (2012) (opinion of Roberts, C.J.)
(comparing an incentive to a State’s budget). Without knowing how much money is at stake,
how are we to say the sum is too high?
No. 22-5487 State of Okla., et al. v. United States, et al. Page 19
Oklahoma adds that the threat is punitive because it serves no purpose other than to
obtain compliance. Conditional preemption, however, amounts to a “permissible method of
encouraging a State to conform to federal policy.” New York, 505 U.S. at 168; see FERC, 456
U.S. at 766. And a State that sees itself as a sovereign sometimes must act like one. Another
reason is not difficult to find anyway. The fee provisions ensure that a single entity—whether a
State or the Authority—imposes fees on the horseracing industry for all anti-doping and
racetrack safety matters. Eliminating “double taxation” and fostering uniformity are adequate
grounds to preempt parallel collection regimes. Aloha Airlines, 464 U.S. at 9–10; see Coventry
Health Care of Mo., Inc. v. Nevis, 581 U.S. 87, 97–99 (2017); Gade v. Nat’l Solid Waste Mgmt.
Ass’n, 505 U.S. 88, 99 (1992) (plurality).
Oklahoma next argues that Congress failed to “appropriate the funds needed to
administer the program” by forcing States to pay for collecting fees even if they refuse to act as
the Authority’s fee collector. Murphy, 138 S. Ct. at 1477. Not so. Private parties pay for the
Authority’s operations. 15 U.S.C. § 3052(f)(2)(D), (3)(B). And if a State does not collect fees
under the Act, the Authority incurs the cost of doing so. Even if States suffer a pocket-book loss
from preemption, that does not force them to pay for the program. See Hodel, 452 U.S. at 288.
Oklahoma also worries that the scheme blurs accountability. Conditional preemption,
however, leaves a State and its citizens with “the ultimate decision as to whether or not the State
will comply.” New York, 505 U.S. at 168. The ability to choose ensures that state and federal
entities are accountable for their roles. See id.We affirm.
No. 22-5487 State of Okla., et al. v. United States, et al. Page 20
_________________
CONCURRENCE
_________________
COLE, Circuit Judge, concurring. While I agree with the majority’s conclusions that the
Act is facially constitutional, and its analysis in full in Part IV, I write separately because I depart
slightly from its framing of the issue and its analysis of the private nondelegation doctrine.
I. ISSUE ON APPEAL
As a threshold matter, I note what is before us on appeal. In 2020, with wide bipartisan
support, Congress passed, and then-President Trump signed into law, the Horseracing Integrity
and Safety Act (“HISA” or “the Act”). Pub. L. No. 116-260, §§ 1201–12, 134 Stat. 1182, 3252–
75 (2020) (codified at 15 U.S.C. §§ 3051–60). Petitioners challenged the Act’s constitutionality
and appealed the district court’s dismissal of the case for failure to state a claim. A few weeks
after this panel heard oral argument in the appeal, Congress amended the Act. See Consolidated
Appropriations Act of 2023, Pub. L. No. 117-328, 126 Stat. 4459, 5231–32 (2022) (codified as
amended at 15 U.S.C. § 3053(e)). Congress amended section 3053(e), which now provides that:
The Commission, by rule, in accordance with section 553 of title 5, United States
Code, may abrogate, add to, and modify the rules of the Authority promulgated in
accordance with this Act 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 Act and applicable rules approved by the
Commission, or otherwise in furtherance of the purposes of this Act.
15 U.S.C. § 3053(e). Under the current form of the statute, the Federal Trade Commission
(“FTC”) can, in certain circumstances delineated in the Act, and through proper rule-making
procedures as required by the Administrative Procedure Act, “abrogate, add to, and modify”
existing rules promulgated by the Horseracing Integrity and Safety Authority (“Authority”). Id.Today, our review is cabined to the statute as amended, withholding judgment on the
previous version or other circuits’ handling of the original statute. To the extent that the
cogent majority opinion goes further—opining in dicta that the original statute was
unconstitutional—I note that not only does such analysis not carry the force of law, but also that
No. 22-5487 State of Okla., et al. v. United States, et al. Page 21
I disagree, as I believe the original statute was constitutional because the private Authority has
always been subordinate to the FTC.
II. PRIVATE NONDELEGATION DOCTRINE
The nondelegation doctrines broadly refer to judicially imposed limits on Congress’s
ability to constitutionally delegate authority to others. Specifically, Congress cannot delegate its
legislative authority to an executive agency unless the statute contains an “intelligible principle”
guiding the agency. See Gundy v. United States, 139 S. Ct. 2116, 2123 (2019) (plurality
opinion); see also Mistretta v. United States, 488 U.S. 361, 372 (1989). This is the public
nondelegation doctrine. The private nondelegation doctrine refers to constitutional concerns that
arise where a private entity—rather than a government entity—wields significant power to
execute a statutory scheme. See Carter v. Carter Coal Co., 298 U.S. 238 (1936). Only the latter
of these, private nondelegation, is at issue here.
I agree with the majority that the Act is constitutional under the private nondelegation
doctrine, and also that the main test for this issue is whether the private entity is subordinate to
the federal agency. But I write separately because I diverge from the majority’s analysis in two
ways: (1) the source of the private nondelegation doctrine, and (2) the precise framing of the
private nondelegation question.
A. Source of Private Nondelegation Doctrine
The private nondelegation doctrine is rooted in both due process and separation of
powers concerns. Indeed, the earliest invocations of the private nondelegation doctrine arose in
the context of local regulations. See Washington ex rel. Seattle Title Tr. Co. v. Roberge, 278
U.S. 116, 121–22 (1928); Thomas Cusack Co. v. City of Chicago, 242 U.S. 526, 530 (1917);
Eubank v. City of Richmond, 226 U.S. 137, 143–44 (1912). In these cases, localities granted
private homeowners the power to create zoning laws for their neighborhood, and the Supreme
Court found these ordinances violated property owners’ federal due process rights. Eubank,
226 U.S. at 143–44. “The Court was concerned that private property owners, with their own
interests at stake, had been given total, standardless control over an important aspect of their
No. 22-5487 State of Okla., et al. v. United States, et al. Page 22
neighbors’ property.” Rice v. Vill. of Johnstown, 30 F.4th 584, 589 (6th Cir. 2022) (citing
Eubank, 226 U.S. at 143).
The separation of powers concerns, meanwhile, stem from the Vesting Clauses, inasmuch
as the Constitution vests each of the three branches of government with specific powers and
responsibilities. Article I of the Constitution grants Congress legislative power, Article II grants
the President executive power, and Article III grants the federal courts judicial power.
“Accompanying that assignment of power to Congress is a bar on its further delegation.” Gundy,
139 S. Ct. at 2123; see Mistretta, 488 U.S. at 371 (“The nondelegation doctrine is rooted in the
principle of separation of powers that underlies our tripartite system of Government.”).
Therefore, when a statute confers “the power to regulate the affairs of an unwilling minority”
onto a private entity, that “is legislative delegation in its most obnoxious form[.]” Carter Coal,
298 U.S. at 311. But when the private entity “operate[s] as an aid to the [agency]” and is
“subject to [the agency’s] pervasive surveillance and authority, . . . law-making is not entrusted
to the [private entity]” and so such a “statutory scheme is unquestionably valid.” Sunshine
Anthracite Coal Co. v. Adkins, 310 U.S. 381, 388, 399 (1940).
Notably, in its federal private nondelegation cases, the Supreme Court has blurred the
lines between the two rationales, opting not to definitively root the private nondelegation
doctrine in one or the other, and often referring to both. For instance, in Carter v. Carter Coal,
the first case applying the private nondelegation doctrine to a federal statute, the Court ruled that
a portion of the Bituminous Coal Conservation Act of 1935 was unconstitutional under the
private nondelegation doctrine. 298 U.S. at 311. In invalidating the statute, the Court found the
delegation at issue “so clearly arbitrary, and so clearly a denial of rights safeguarded by the due
process clause of the Fifth Amendment, that it is unnecessary to do more than refer to decisions
of this court which foreclose the question.” Id. at 311–12 (first citing Schechter Poultry Corp. v.
United States, 295 U.S. 495, 537 (1935); then citing Eubank, 226 U.S. at 143; and then citing
Roberge, 278 U.S. at 121–22).
In so holding, the Court cited two of the zoning cases premised on the due process
concerns of the private nondelegation doctrine, and also Schecter Poultry, addressing the
separation of powers argument. By doing so, the Court maintained the public versus private
No. 22-5487 State of Okla., et al. v. United States, et al. Page 23
division as opposed to a rationale-based division and endorsed both of the rationales
underpinning the private nondelegation doctrine. See Carter Coal, 298 U.S. at 311.
The Fifth Circuit, when it ruled recently on the original version of the Act, recognized
this ambiguity. See Nat’l Horsemen’s Benevolent & Protective Ass’n v. Black, 53 F.4th 869, 881
n.23 (5th Cir. 2022). “Courts and commentators,” it wrote, “differ over the locus of the
constitutional violation.” Id. (citing several articles and cases). Compare U.S. Dep’t of Transp.
v. Ass’n of Am. R.R.s, 575 U.S. 43, 46 (2014) (“This argument [regarding private nondelegation]
rests on the Fifth Amendment Due Process Clause and the constitutional provisions regarding
separation of powers.”), with id. at 87–88 (“[O]ur so-called ‘private nondelegation doctrine’
flows logically from the three Vesting Clauses.”) (Thomas, J., concurring). But the Fifth Circuit
concluded it “need not weigh in” to resolve the question at hand. Black, 53 F.4th at 881 n.23.
“Whatever the constitutional derivation, all parties and the district court agree that the outcome
turns on whether the private entity is subordinate to the agency.” Id.; see also Ass’n of Am. R.R.s
v. U.S. Dep’t of Transp. (Amtrak I), 721 F.3d 666, 671 n.3 (D.C. Cir. 2013), vacated on other
grounds, 575 U.S. 43 (2015) (“While the distinction [between the due process clause and
Vesting Clauses] evokes scholarly interest, . . . our own precedent describes the problem as one
of unconstitutional delegation.”). When presented with the same ambiguity, the D.C. Circuit
also did not decide the issue because the doctrine turns on unconstitutional delegation, regardless
of its textual roots, and “neither court nor scholar has suggested a change in the label would
effect a change in the inquiry.” Amtrak I, 721 F.3d at 671 n.3.
Moreover, if we root the private nondelegation doctrine solely in separation of powers
concerns, we circumvent our own court’s private nondelegation doctrine cases—many of which
focus on local regulations, not federal ones, and are grounded in due process rights, as opposed
to separation of powers principles. See Rice, 30 F.4th at 589–91; Kiser v. Kamdar, 831 F.3d 784,
791–92 (6th Cir. 2016); Stevens v. City of Columbus, No. 21-3755, 2022 WL 2966396, at *9 (6th
Cir. July 27, 2022).
Whatever the exact underpinning of the private nondelegation doctrine, what is clear is
that the statute is constitutional if the Authority remains subordinate to the FTC. See Adkins, 310
U.S. at 388, 399 (holding a statute constitutional where the private entity is “an aid” to the
No. 22-5487 State of Okla., et al. v. United States, et al. Page 24
agency and is “subject” to the agency’s “pervasive surveillance and authority”); Carter Coal,
298 U.S. at 310–11 (invalidating a statute where private entities were granted the power to
establish the maximum hours of labor without any governmental oversight or approval).
That is the beginning and end of the inquiry as to whether a statute is constitutional under
the private nondelegation doctrine. The Supreme Court has never suggested that this is the
minimum finding, or that subordination on its own may not suffice to withstand a challenge to a
statute on private nondelegation grounds. And so the parties could not have framed the appeal in
a different way, because the only private nondelegation test is that of subordination.
Now that the framing and source of the nondelegation doctrine is clear, I apply the
existing precedent to HISA, finding that HISA as a whole is facially constitutional because the
Authority is subordinate to the FTC in several ways.
B. HISA’s Constitutionality
1. Rulemaking Authority
Oklahoma raises several concerns with the Act and its different components. I agree in
full with the majority’s discussion of section 3053(e)’s amended text, and its conclusion that the
amended text indicates that the Authority remains subordinate to the FTC. I diverge in that I find
the rest of the Act to be nearly identical to the previously upheld Maloney Act and Coal Act.
I also find that the amended text supports the Authority’s subordination but does not alone
ensure the Act’s constitutionality.
To begin, the Authority does not have independent rulemaking power—only the FTC can
promulgate regulations with the force of law:
A proposed rule or proposed modification to a rule cannot take effect unless
approved by the Commission. The Commission is authorized to grant such
approval if the proposed rule or modification of a rule is consistent with the
requirements in this legislation and any applicable rules approved by the
Commission. The Commission is granted the authority to prescribe rules and
interim final rules to carry out their responsibilities under this section using the
rulemaking process under the Administrative Procedure Act.
H.R. Rep. No. 116-554, at 25 (2020).
No. 22-5487 State of Okla., et al. v. United States, et al. Page 25
Like the private entities in the Maloney Act, known as self-regulatory organizations
(“SROs”), and the private entity in Adkins, the Authority may only “propose[]” rules to the
Commission. 15 U.S.C. § 3053(a). The Authority’s rule cannot go into effect “unless the
proposed rule . . . has been approved by the Commission.” Id. § 3053(b)(2); accord Adkins, 310
U.S. at 388 (upholding statute where boards “propose[d]” prices that only took effect once the
agency “fix[ed]” them); 15 U.S.C. § 78s(b)(1) (writing that private entities in the securities arena
may “propose[]” rules but, generally, “[n]o proposed rule change shall take effect unless
approved by the [SEC]”). Here, a rule only goes into effect once the FTC has approved it, and to
approve it, the FTC must first ensure that the rule “is consistent with” HISA and other
“applicable rules approved by the [FTC].” 15 U.S.C. § 3053(c)(2).
This consistency review is no mere rubber stamp. The FTC, under the express terms of
the Act, must review the Authority’s proposed rules to ensure they are consistent with “the
safety, welfare, and integrity of covered horses, covered persons, and covered horseraces[.]” Id.§ 3054(a)(2)(A). There are certain categories of rules for which Congress explicitly laid out
clear boundaries for both the Authority and the FTC, and such rules provide “clearly defined
policy” for the Authority and FTC to effectuate. (See D. Ct. Opinion, R. 105, PageID 1496.)
But even for the ones with fewer constraints, all promulgated rules must abide by Congress’s
explicit imperative to create rules for “the safety, welfare, and integrity” of covered entities. Id.
§ 3054(a)(2)(A). “[T]o the extent HISA affords rulemaking discretion to advance Congress’s
broader objectives, such as the requirement that safety standards be ‘consistent with the humane
treatment of covered horses,’ the FTC (not the Authority) ultimately exercises that statutorily
conferred discretion—all of which is bound up with ‘the policy implications of rules proposed.’”
(Authority Br. 41 (citations omitted).)
HISA is remarkably similar to the constitutional Maloney Act, and was so even when
assessed irrespective of the amendment. The Maloney Act provides the following parameters
regarding the SEC’s approval of an SRO’s rules. The SEC “shall approve”—meaning it must
approve—a rule “if it finds that such proposed rule change is consistent with the requirements of
this chapter and the rules and regulations issued under this chapter that are applicable to such
organization.” 15 U.S.C. § 78s(b)(2)(C)(i) (emphasis added). Likewise, HISA provides that the
No. 22-5487 State of Okla., et al. v. United States, et al. Page 26
FTC “shall approve a proposed rule or modification if the Commission finds that the proposed
rule or modification is consistent with—(A) this chapter; and (B) applicable rules approved by
the Commission.” Id. § 3053(c)(2) (emphasis added).
Both the Maloney Act and HISA therefore provide for analogous consistency review: the
reviewing agency must approve rules that are consistent with both the statute and previously
issued rules. The Supreme Court held that the SEC “has broad authority to oversee and to
regulate the rules adopted by the SROs” because rules are not enacted “unless the SEC finds that
the proposed rule is consistent with the requirements of the Exchange Act, 15 U.S.C. § 78s(b)[.]”
Shearson/Am. Exp., Inc. v. McMahon, 482 U.S. 220, 233–34 (1987). If that is true for 15 U.S.C.
§ 78s(b), then that must also be true of 15 U.S.C. § 3053(c)(2).
And neither agency’s review of the respective private entity ends there. Each act also
provides additional requirements for the consistency review of proposed rules in specific
instances. In the Maloney Act, specifically relating to rules proposed by one specific subset of
SROs, the SEC’s consistency review includes that the rules be “designed[,] . . . in general, to
protect investors and the public interest[,]” as well as not be “designed to permit unfair
discrimination . . . among participants[.]” Id. § 78q-1(b)(3)(F); see also Susquehanna Int’l Grp.,
LLP v. SEC, 866 F.3d 442, 446 (D.C. Cir. 2017). In the context of another subset of SROs, the
SEC must ensure that the proposed rules meet various textual standards, including that they “are
designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with persons,” and additional
standards. 15 U.S.C. § 78f(b)(5).
In HISA, the Authority proposes rules or modifications to rules “relating to” eleven
buckets of issues that it then “submits” to the FTC. Id. § 3053(a). Some of these include “a list
of permitted and prohibited medications”; “standards for racing surface quality maintenance”;
and “a description of safety, performance, and anti-doping and medication control rule violations
applicable to covered horses and covered persons[.]” Id. But in addition to these categories, the
Authority may also propose “rule[s], standard[s], or procedure[s] . . . to carry out the horseracing
anti-doping and medication control program or the racetrack safety program.” Id. § 3053(d)(1).
For these programs, HISA contains additional requirements and considerations that the FTC
No. 22-5487 State of Okla., et al. v. United States, et al. Page 27
includes as part of its consistency review. See, e.g., id. § 3055(b) (listing seven categories of
horse-welfare considerations); id. § 3055(g)(3)(b).
Both HISA and the Maloney Act therefore provide for similarly broad consistency
review, with additional requirements for specific subsets of rules, such that consistency review
on its own can ensure that a private authority remains subordinate to a federal agency.
HISA also matches the aforementioned Coal Act’s constitutional agency review of
private entities’ proposed rules. The statute, which the Supreme Court upheld as
“unquestionably valid,” Adkins, 310 U.S. at 399, granted the Coal Commission the power to
“approve, disapprove, or modify” the private coal boards’ “proposed minimum prices to conform
to the requirements of this subsection,” Bituminous Coal Act of 1937, § 4, pt. II(a), 50 Stat. 72,
78 (emphasis added). Whether providing that the rule must be consistent with a statute, which
both the Maloney Act and HISA require, or that the rule must conform to the requirements of a
statute, as the Bituminous Coal Act requires, all three statutes properly and constitutionally
subordinate the private entity to the federal agency.
And all three statutes provide the agency with independent rulemaking power. The
Maloney Act provides that the SEC “may abrogate, add to, and delete from (hereinafter in this
subsection collectively referred to as ‘amend’) the rules of a[n SRO] . . . as the [SEC] deems
necessary or appropriate to insure the fair administration of the [SRO], to conform its rules to
requirements of this chapter and the rules and regulations thereunder applicable to such
organization, or otherwise in furtherance of the purposes of this chapter[.]” 15 U.S.C. § 78s(c).
Such review is textually cabined to “Amendment by Commission of rules of self-regulatory
organizations,” so it applies only to previously enacted rules, not the SRO’s proposed rules or its
proposed changes to previously promulgated rules. Id.
Further still, the Maloney Act provides a separate set of requirements for the SEC to
approve an SRO’s new rule or rule change. See id. § 78s(b). Under this subsection, the SEC
may either “approve or disapprove the propos[al,]” or it may “institute proceedings under
subparagraph (B) to determine whether the propos[al] should be disapproved.” Id.
§ 78s(b)(2)(A)(i). Subparagraph B requires that the SEC “shall provide” the SRO with “notice
No. 22-5487 State of Okla., et al. v. United States, et al. Page 28
of the grounds for disapproval under consideration” and the chance for a hearing on the rule. Id.
§ 78s(b)(2)(B)(i). The other portion of subparagraph B makes clear that within the mandated
time frame, the SEC must “issue an order approving or disapproving the” proposed rule. Id.
§ 78s(b)(2)(B)(ii)(I). Notably missing from these procedures? The SEC’s ability to itself
modify an SRO’s proposed rule.
The Coal Act also provided the Coal Commission limited modification power. Much like
the review described in the Maloney Act, the Coal Commission’s power to modify rules was not
all-encompassing: it could only be done to conform the proposal to the requirements of the
statute. § 4, 50 Stat. at 78. The importance of this power is that the Coal Commission could
ensure that proposed rules that did not align with, or were inconsistent with, the statute’s purpose
did not become promulgated rules with the power of law.
Both before and after the amendment, the FTC has had, and continues to have,
independent rulemaking power. Prior to the amendment, section 3053(e) provided that the FTC
could issue an interim final rule, which carries the power of law, under the standards articulated
in the Administrative Procedures Act, 5 U.S.C. § 553(b)(B)—if “necessary to protect” “(1) the
health and safety of covered horses; or (2) the integrity of covered horseraces and wagering on
those horseraces.” 15 U.S.C. § 3053(e) (2020). 5 U.S.C. § 553(b)(B), known as the APA’s
good-cause provision, allows agencies to issue rules where regular notice-and-comment
procedures are “impracticable, unnecessary, or contrary to the public interest.” This section
provided the FTC with broad rulemaking power without the need for notice-and-comment
rulemaking that could be used beyond the emergency context, such as when notice and comment
was “unnecessary”—for example, if there had already been sufficient notice-and-comment
procedures regarding various alternative options presented in a proposed rule. See 16 C.F.R. §
1.142(a)(3) (requiring the Authority to include a discussion of “any reasonable alternatives” to
the proposed rule and explain why the specific proposal was chosen); Mobil Oil Corp. v. United
States EPA, 35 F.3d 579, 584 (D.C. Cir. 1994) (“If the original record is still fresh, a new round
of notice and comment might be unnecessary.”); Priests for Life v. United States Dep’t of Health
& Human Servs., 772 F.3d 229, 276 (D.C. Cir. 2014) (similar), vacated on other grounds by
Zubik v. Burwell, 578 U.S. 403 (2016).
No. 22-5487 State of Okla., et al. v. United States, et al. Page 29
Now, with the amendment, the FTC can utilize proper procedures under the APA,
including either regular notice-and-comment procedures or the good-cause provision, to
“abrogate, add to, and modify the rules of the Authority” whenever the FTC “finds necessary or
appropriate to ensure the fair administration of the Authority, to conform the rules of the
Authority to the requirements of this Act and applicable rules approved by the Commission, or
otherwise in furtherance of the purposes of this Act.” 15 U.S.C. § 3053(3). Just as the Maloney
Act and the Coal Act allow the agency to amend the private entity’s proposed rules in certain
circumstances, so does HISA. Ultimately, none of Oklahoma’s arguments regarding the
unlawfulness of HISA’s rulemaking structure carry substantial weight.
One final note about the private nondelegation doctrine and the cases that have
formulated the subordination test. I have noted the numerous ways in which HISA—both with
and without the amendment—is nearly identical to the unquestionably constitutional Maloney
Act. But even if there are slight differences between the two statutes, no case has ever said that
the Maloney Act in its current form is a floor for private nondelegation purposes. In other
words, it is not true that a statute must be identical to the Maloney Act, or provide more
oversight than the SEC, to be a constitutional delegation. The private entity simply must be
subordinate to the agency. The Authority is subordinate to the FTC, and so HISA remains
facially constitutional.
2. Enforcement Authority
Oklahoma also challenges HISA’s enforcement structure. The Supreme Court has not
ruled on this precise issue, but other circuit courts have relied upon Supreme Court precedent to
do so in a way that supports the enforcement structure’s constitutionality. Courts’ review of the
Maloney Act is once again instructive. All circuits that have ruled on the issue have held that the
Maloney Act’s enforcement scheme is constitutional where, as here, a private entity (the
National Association of Securities Dealers (“NASD”)) brought enforcement actions against
covered entities. See, e.g., Sorrell v. SEC, 679 F.2d 1323 (9th Cir. 1982); First Jersey Sec., Inc.
v. Bergen, 605 F.2d 690 (3d Cir. 1979), cert. denied, 444 U.S. 1074 (1980); R.H. Johnson & Co.
v. SEC, 198 F.2d 690 (2d Cir. 1952), cert. denied, 344 U.S. 855 (1952).
No. 22-5487 State of Okla., et al. v. United States, et al. Page 30
The Second Circuit held that because of “the [SEC’s] review of any disciplinary action”
taken by the NASD, there is “no merit in the contention that the Act unconstitutionally delegates
power to the association.” R.H. Johnson & Co., 198 F.2d at 695. The Ninth Circuit, citing to
Second and Third Circuit decisions upholding the constitutionality of NASD’s enforcement
powers, noted that “[petitioner’s] claim of unconstitutional delegation appears to rest on his
mistaken idea that the SEC does not engage in an independent review of NASD decisions. As
we stated in Sartain v. SEC, 601 F.2d 1366, 1371 n.2 (9th Cir. 1979), SEC review is de novo.”
Sorrell, 679 F.2d at 1326 n.2. The unanimous principle from the circuit decisions—which the
Supreme Court has not disturbed despite repeated opportunities to do so—is that so long as the
agency retains de novo review of a private entity’s enforcement proceedings, there is no
unconstitutional delegation of legislative or executive power, even if the agency does not review
the private entity’s initial decision to bring an enforcement action. The consistency of this
principle reinforces the constitutionality of HISA’s enforcement scheme.
In fact, the enforcement scheme in HISA is even more constitutionally sound than that
found in the Maloney Act. The Maloney Act was amended in 1975, and, in relation to the
enforcement scheme, the amendment may have constrained the SEC’s power to review the
disciplinary proceedings the NASD pursued. See Bergen, 605 F.2d at 697. Nonetheless, this did
not change the court’s analysis:
We need not now decide whether this statutory change effects a significant
alteration in the SEC’s power to review NASD disciplinary proceedings. It
suffices to say that to the extent the amendment restricts the SEC’s ability to
receive additional evidence not presented below, this does not alter our conclusion
in Todd [Todd & Co., Inc. v. SEC, 557 F.2d 1008 (3d Cir. 1977)] that there is no
unconstitutional delegation of legislative authority.
Bergen, 605 F.2d at 697. HISA, unlike the Maloney Act, unambiguously empowers the FTC to
obtain additional evidence not in the record below and to review the proceeding de novo. See
15 U.S.C. § 3058(c)(3)(C). The enforcement scheme in HISA, including two levels of de novo
review and allowing the FTC to review evidence not in the record, ensures that HISA is soundly
in the company of previously upheld enforcement mechanisms, and is thus not an
unconstitutional delegation of power to a private authority.
No. 22-5487 State of Okla., et al. v. United States, et al. Page 31
* * *
Although the majority and I take different paths in our analysis, I fully agree that HISA is
constitutional under Supreme Court precedent as well as the majority of federal court caselaw.