BUSINESS

Churchill Downs says Texas law banning out-of-state wagering unconsitutional

TAGs: Churchill Downs, churchill downs incorporated, texas, texas racing commission, Twinspires, twinspires.com

churchill-downs-texasKentucky Gov. Steve Beshear has appointed David Williams, president of the Republican-controlled state senate, to a judgeship in south-central Kentucky. Williams and Beshear have butted heads numerous times in the past, including over the failed attempts to pass a constitutional amendment that would allow casino gambling in the state. A spokesman for Churchill Downs Inc. (CDI), which wouldn’t mind adding an acre or two of casino gambling options to its Louisville, Kentucky track, said he hoped Williams’ absence would lessen future resistance to the casino gambling amendment, but noted that Williams was hardly the only Republican in the Kentucky senate that was agin’ gambling expansion.

CDI is likely grateful that Williams isn’t presiding over a lawsuit the company filed last month against representatives of the the Texas Racing Commission (TRC) in US District Court in Austin, Texas. (Read CDI’s complaint here.) CDI is taking issue with the TRC’s recent decision to begin enforcing a previously-ignored provision in the 1986 Texas Racing Act that barred Texans from betting their money on a bob-tailed nag unless they do so in person. Obviously, this enforcement conflicts with CDI’s desire to continue offer wagering options to Texans via their TwinSpires.com advance deposit wagering site. CDI is challenging the Texas law on the basis that it violates the dormant Commerce Clause, in that the TRC restriction is a form of protectionism designed to favor Texas racetrack betting operations at the expense of those located out of state.

CDI claims the only current remedies to Texas’ out-of-state ban would be to establish operations within Texas (assuming the state would issue them a license) or rely on some partnership with a local competitor. “This is tantamount to forcing Pepsi to sell its soda only through Coke vending machines, only if Coke consents, and only if Pepsi agrees to endure whatever marketing conditions Coke might demand and pay whatever fee Coke might impose. The resulting competitive disadvantage to Pepsi is obvious. And Texas law is no different.” CDI further argues that Texas wouldn’t dare impose a law that required in-person purchases of books in order to favor local businesses at the expense of Amazon.com.

CDI notes that Texas’ rationale for enforcing the long-ignored in-person stipulation stemmed from a desire to “cover anticipated budget shortfalls.” CDI acknowledges that raising revenue “is a valid government function. But it is not a valid justification for discriminating against out-of-state businesses and their in-state customers.” CDI is asking for a permanent injunction preventing the TRC from enforcing the relevant provisions of the Racing Act plus “reasonable attorneys’ fees.”

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