As Horse Racing’s Best Betting Days Approach, Trouble is Brewing

Horse racing can be the forgotten child of legalized gambling at times.

However, as the heady betting days of the Breeders’ Cup approach, it’s clear there are several points of concern surrounding the sport of kings on and off the track. While they may not impact or diminish this year's Breeders' Cup, there is the possibility for longer-term disruption and turmoil.

The Breeders’ Cup is a great event for the industry: two days of the best horses running in ultra-competitive races. It’s also a great event for bettors, who can get big prices on live longshots up and down the program. 

Still, some very prediction market-y litigation, the possible threat posed by actual prediction markets, and a class-action lawsuit from allegedly fed-up bettors are also part of the backdrop for the 42nd Breeders’ Cup World Championships, which start Friday at Del Mar. 

It’s possible by the time the next Breeders’ Cup rolls around, betting on horse racing could be different, perhaps in some subtle and not-so-subtle ways.

Depending on how judges see it, horse racing could even be explicitly legal to wager on in states where online sports betting sites in the U.S. dare not tread yet, such as Utah and Texas. 

#BreedersCup Champ Fierceness spotting at @delmarracing! pic.twitter.com/eckUBZyYSP

— Breeders' Cup (@BreedersCup) October 27, 2025

That could be a longshot possibility in and of itself, but it was raised last week in a courtroom in Cincinnati. That's where lawyers for authorities in Michigan and the online racebook operator TwinSpires went before judges of the U.S. Court of Appeals for the Sixth Circuit to make oral arguments in their case. 

The legal fight revolves around whether Michigan can impose state-level licensing requirements on Churchill Downs Inc.-owned TwinSpires when it comes to accepting interstate wagers on horse racing from Michigan residents. Or, said differently, that someone in Michigan could use TwinSpires to bet on a race like the Kentucky Derby. 

As TwinSpires sees it, the provisions of the federal Interstate Horseracing Act (IHA) preempt those state licensing requirements in a state where a bet is made. Michigan, understandably, sees it differently. But what became clearer last Thursday was the case’s potential effects on states beyond just Michigan. 

Even in Utah?

According to TwinSpires, the IHA sets out that a "betting platform" can accept interstate pari-mutuel wagers on horse racing if they obtain consent from the track where the race is run, the state racing commission regulating that track, and the state racing commission in the state where the wager is accepted. TwinSpires says the last consent is being obtained from regulators in Oregon, where its wagering “hub” is located.

“So long as the betting platform obtains the three consents, it may accept interstate wagers,” TwinSpires said in a brief to the appeals court. “Michigan’s attempt to add an additional consent through its licensing requirements is preempted [by the IHA].” 

Michigan, TwinSpires argues, is trying to add a fourth "required consent," that of the state where the wager is placed, via a license from the Michigan Gaming Control Board and a partnership with a Michigan track. And that, in TwinSpires’ view, shouldn’t fly, not in Michigan or any other state.

“We are saying that Utah would not have the right, under our reading of the IHA, to prohibit interstate wagers placed by Utah residents on races that … aren’t occurring in Utah,” said Tom Dupree, a lawyer appearing on behalf of TwinSpires.

Take my bet away

Now, TwinSpires is not live and taking bets in all 50 U.S. states, with Dupree noting there are various business, regulatory, and legal reasons that go into these decisions. 

Still, the Michigan side very much had something to say about TwinSpires' take.

“The implication of their argument is breathtaking,” Michigan Assistant Attorney General Mark Sands said later in the hearing. “For the first time, they argue that this court should hold that every state in the union must participate in interstate horse racing.”

The Michigan side in the case – Michigan Gaming Control Board executive director Henry Williams and Attorney General Dana Nessel – argues that, among other things, TwinSpires “misconstrues the scope” of the IHA.

That law “applies only to wagers that are lawful in each state involved in the wager,” the Michigan side said in its brief to the appeals court.

“A wager placed by a person in Michigan that violates Michigan law is not an ‘interstate off-track wager’ encompassed by the IHA,” read the brief. “Second, TwinSpires wrongly claims that the IHA exclusively regulates interstate pari-mutuel wagering on horseraces, but the statute neither occupies the field nor conflicts with Michigan’s gambling regulations.”

Nevertheless, TwinSpires was granted a preliminary injunction by a district court in February, which was then appealed by the Michigan side. TwinSpires wants the district court’s judgment upheld, while Michigan wants it reversed. 

I think the stakes of this are summed up nicely by one of the allegations made against TwinSpires by Michigan, which is that the company is "claiming it only needs consent from Oregon to conduct interstate off-track wagering in Michigan and every other state in the union." https://t.co/5akpFGccGe

— Geoff Zochodne (@GeoffZochodne) February 12, 2025

The Michigan side points to one of the first sections of the IHA, which reads that “the States should have the primary responsibility for determining what forms of gambling may legally take place within their borders.”

Also cited by the state is the definition of “interstate off-track wager” in the law, which “means a legal wager placed or accepted in one State.”

There is a “threshold question,” Sands said. 

“Is interstate horse racing legal in all of the relevant states?” he told the court. “And if it is, then you get into whether it is permitted under the Interstate Horseracing Act.”

However, if TwinSpires’ position is taken to its “extreme,” Sands said, then a state like Utah, which has no legalized gambling, could have to allow online betting on horse races run outside the state “as long as Kentucky and Oregon agree.”

“That’s inconsistent with the very first section of the IHA,” he added. “It’s inconsistent with the entire body of federal gaming law.”

Yet TwinSpires is pointing to the “consents” the law says it must obtain. As a legal matter, the racebook operator sees a wager made in Michigan, on a race run outside the state and accepted in another state, as basically occurring outside of Michigan. 

Congress, Dupree said, “wanted to allow a national market for interstate horse racing and it wanted to specifically define the roles that relevant states play.”

Defending @BreedersCup Classic champion SIERRA LEONE was jogging on the track this morning at @DelMarRacing. Will he become the 2nd horse to win a 2nd Classic?? pic.twitter.com/MegbrnMQkV

— FanDuel Racing (@FanDuel_Racing) October 27, 2025

The case is very much ongoing, but the scope of what it could mean came clearer into focus last week: the potential for online betting on horse racing in all 50 states, not just those that have legalized it.

So, the case argued in Cincinnati on Thursday could have the potential to upset the established order of regulation for betting on horse racing in the U.S. In this, it bears a resemblance to the ongoing fight over prediction markets and their sports event contracts, which hinges on whether state or federal law governs the matter.

Those prediction markets, regulated by the federal Commodity Futures Trading Commission (CFTC), are currently offering de facto sports betting in all 50 states. They are also relying on federal law to do so in the face of legal objections from state gambling regulators. 

For example, here is what Kalshi, a prediction market, said in July in another appeals court: "Federal law accordingly preempts state regulation of trading on Kalshi, as confirmed by every conceivable marker of legislative intent."

Interestingly, while prediction markets such as Kalshi have been happy to disrupt the state-regulated status quo for sports betting thus far, they have yet to take aim at horse racing. And, during the Oct. 23 earnings call for TwinSpires-owner Churchill Downs Inc., a possible explanation was given.

CDI CEO Bill Carstanjen said during the call last week that Churchill Downs sees the “increasing availability” of online sports betting in the U.S. as a positive thing for wagering on the Kentucky Derby and other races.

While that “increasing availability” did not mention prediction markets specifically, Carstanjen was later asked for a more specific take. 

Don't even go there

The CDI CEO then said that wagering on horse racing is different from other sports in that it is governed by federal law already, the IHA. And if a prediction market were to wander into horse racing, Churchill Downs is standing by to read them the riot act. 

“We do not have a deal with any … predictive market companies to take wagers on our product,” Carstanjen said. “We are not in discussions to do that at this time, but we do plan on approaching them and explaining to them the legal construct under which wagering happens on our product. This is not a question like some of these other sports between state law and federal regulations.”

Whether that’s enough to stop a prediction market from testing the law remains to be seen; after all, they’re doing it every day with other sports. However, the IHA lays out how wagering on horse racing can happen, Carstanjen said, and Churchill Downs is prepared to go beyond mere explanation.

“To the extent people act counter to having a deal with us and act counter to the Interstate Horseracing Act, we’ll pursue all our rights and remedies under the Interstate Horseracing Act,” Carstanjen added.

So, the Kentucky Derby-owner is keeping an eye on prediction markets, and is prepared to throw them a brushback pitch if need be. If Kalshi were to "self-certify" event contracts for the Kentucky Derby, they could be in for an earful from Churchill Downs.

This is me and @elio82 talking today. We LOVE betting on horses. It’s my fav sport to bet on. I can’t do it anymore. It’s actually criminal that tracks are allowed to have their own CAW’s. The laws will eventually change just like all other sports where owners can’t bet on… https://t.co/WIeJyIq1Dy pic.twitter.com/Q7YAMwCfMl

— Dave Portnoy (@stoolpresidente) October 18, 2025

But prediction markets and prediction market-like litigation are not the only legal developments worth noting for the horse racing industry.

If you don’t bet on horse races every day, the following may be news to you. However, for everyday horseplayers, significant and frustrating shifts in odds and payouts on any given race is often linked to so-called “computer-assisted wagering” groups (CAWs). 

The CAWs are big, smart, and privileged bettors, pumping massive amounts of money into pari-mutuel betting pools right up until the gates open. This, bettors complain, has led to maddening swings in the odds.

The CAW effect has long been complained about online, but recently, the voices are getting louder and more influential. For example, Barstool Sports founder Dave Portnoy has made his complaints about CAW play and its effects on his bets well-known of late. 

What can be done, though? Some tracks have cut CAWs off from their win pools at two minutes before a race goes off. That way, odds should be relatively more stable when the horses are running.

Special treatment (allegedly)

Some folks want to see more done. And now those efforts may be spilling into the courts, just as everyone is settling in for another Breeders' Cup.

On Friday, a class-action lawsuit was announced by law firm Hagens Berman, accusing "major horseracing entities of colluding via computer-assisted, algorithmic betting that has disadvantaged everyday bettors in a rigged system that favors the wealthy."

The lawsuit was filed in the U.S. District Court for the Eastern District of New York against track owners Stronach Group Inc., Churchill Downs Inc. and the New York Racing Association (NYRA), who, the suit says, own or co-own CAW platforms.

While the class-action lawsuit is still in its very early stages (none of the claims have been tested in court), it’s clear CAW-related concerns are growing louder, particularly among everyday bettors. The Breeders’ Cup races may not be affected by major odds swings given the large amount of money that will be bet on them, but they will be run with those CAW-related complaints still ringing in the background. 

And, according to the lawsuit, an “Insider Betting Group,” using CAW strategies, allegedly gets “special terms and access” to betting pools that ordinary bettors do not.

“For savvy quantitative and algorithmic groups, racing provides an outstanding opportunity to derive significant profit at the expense of the average bettor,” reads the lawsuit. “These profits are the result of a scheme that has as its victim – the average public bettor – and has resulted in the transfer of billions to a small group of bettors and the operators of racetracks and betting platforms.” 

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